Mention Dodd Frank 342 and you may get a blank stare, but it’s a regulation that needs some serious thought. The disproportionate impact of the economic downturn on diverse communities, minority- and women-owned businesses prompted legislators to seek stop gaps for future downturns. Congress passed Section 342 of the Dodd Frank Wall Street Reform and Consumer Protection Act creating the office of Minority and Women Inclusion (OMVI) in federal agencies that regulate the financial services industry. These agencies published The Joint Standards that provide five areas that a regulated firm may assess to improve its diversity policies and practices:
- Organizational Commitment to Diversity and Inclusion
- Workplace Profile and Employment Practices
- Procurement and Business Practices
- Practices to Promote Transparency and Organizational Diversity and Inclusion
Marketing and recruiting often are the first things companies try to affect with regard to their diversity efforts, often overlooking their vendor procurement policies and diversification of their vendor partners. The small representation of diverse vendors doesn’t match the demographic trends of women and minority owned businesses. For example, Latinas own 36 percent of U.S. businesses by minority women and one in every 10 women-owned businesses! However, becoming a preferred vendor is not as easy as applying for vendor status. Minimum net worth requirements or minimum number of years in business may make barriers of entry more cumbersome for minority or women owned firms to overcome.
Much like the benefits of a more diverse workforce or customer base, having diverse vendors can enhance your business’ bottom line and help avoid costly mistakes. Joe Nery, partner and co-founder of Nery and Richardson Law in Chicago, draws on his Hispanic heritage to help his clients. He once challenged an Illinois law that he argued posed a disparate impact on minority neighborhoods.
“I have a perspective that is unique and could be overlooked if it weren’t for my background,” Nery says. “As the demographics of our country change, more businesses will be owned by individuals of diverse backgrounds. The consumers they serve will also be diverse or located in multicultural communities. Thus, the vendors that supply these businesses must be familiar with local community customs and preferences. By employing diverse vendors that are sensitive to these nuances, companies will increase the attractiveness and eventual success rate of their products or services.”
Sara Rodriguez, owner of EKKO, a women-owned title Company in Virginia, says business is booming but like other vendors she had to go through the rigorous vendor approval process.
“It can be very expensive,” Rodriguez says. “If you can afford it, you may want to consider hiring a company that can perform due diligence to make sure you can pass all federal, state and even individual lender requirements before you even apply for the lender approval.”
For her, the benefits have outweighed the obstacles.
“I can provide services in both English and Spanish and I understand where they are coming from,” says Rodriguez. “Lenders who use our services provide better customer service.”
The advantages of applying the Joint Standards, and the positive reaction from regulators to companies that do so, should be encouraging to the financial industry. Embracing these standards from marketing, recruiting, all the way to the diversification of vendors, can give companies a competitive edge in an ever more diverse world.
For more information on how you can strengthen your diversity and inclusion plans, contact NAHREP Consulting Services at email@example.com.
This post was originally published on NAHREP Consulting Services’ blog.