Financial institutions have significantly strengthened their approach to third-party risk management over the last decade. Banks, insurers, and asset managers have invested heavily in cybersecurity frameworks, operational resilience planning, supplier due diligence, and data governance. Despite this progress, many organizations are discovering that a substantial portion of supplier activity still sits outside these formal control structures.
This is often the reality of tail spend procurement. Tail spend — also called non-strategic spend — typically accounts for around 20% of indirect procurement expenditure but can represent the majority of an organization’s supplier base. Across thousands of low-value vendors and transactions, firms frequently struggle to maintain consistent visibility into who suppliers are, what services they provide, and whether the right controls are consistently being applied.
As geopolitical uncertainty increases and regulatory expectations continue to evolve, many financial institutions are beginning to reassess how this category is managed. In the US and UK, growing regulatory focus on cybersecurity, business continuity, and third-party risk management — including scrutiny from bodies such as the Securities and Exchange Commission — is increasing pressure for stronger controls across supplier ecosystems. In Europe, frameworks such as the Digital Operational Resilience Act are placing similar emphasis on third-party oversight and auditability.
Our customers often tell us that regulators are increasingly expecting firms to demonstrate governance and accountability across the full supplier landscape — not just the strategic few. At the same time, ongoing global political tensions and regional supply chain disruption are making it critical for financial institutions to understand not only who their suppliers are, but where operational dependencies exist across the broader vendor landscape.
Where Tail Spend Risk Often Emerges
In many organizations, procurement and risk teams understandably focus most of their efforts on core technology providers, material outsourcing partners, primary operational suppliers, and other strategic vendors. Smaller suppliers, however, often enter the organization through decentralized purchasing processes primarily to meet immediate needs and demands for speed and convenience. This can create a fragmented supplier network that is difficult to manage consistently.
Tail suppliers may sit outside standard onboarding and governance workflows, meaning documentation relating to cybersecurity standards, insurance, data handling policies, Environmental, Social, and Governance (ESG) requirements, or financial crime checks can become inconsistent or incomplete. These gaps may not affect day-to-day operations directly, but they often become more visible during audits, regulatory reviews, or incident investigations.
The challenge can be compounded by the growing complexity of modern financial services supply chains, particularly as organizations navigate regional instability amid more globalized supplier networks. Tail spend increasingly includes niche software providers, cloud-based tools, specialist consultants, data services, and regional technology vendors that may still support business-critical or regulated activities.
As firms expand their use of digital services and external providers, many are finding that risk can quietly accumulate in parts of the supplier ecosystem that historically received limited scrutiny.
Why Connected Supplier Data Matters
One of the biggest challenges organizations face is not necessarily the scale of tail spend, but the absence of a unified view of supplier activity.
In many financial institutions, information relating to tail suppliers is distributed across procurement systems, spreadsheets, email chains, finance platforms, and local business-unit workflows. This can make it difficult for procurement, compliance, finance, and risk teams to maintain a clear understanding of:
- which suppliers are being used,
- where they operate,
- what services they provide,
- whether appropriate controls are in place,
- and how those suppliers align with regulatory and operational requirements.
This is why many organizations are now investing in procurement systems of record that centralize supplier information, onboarding activity, documentation, contracts, approvals, and transaction-level data into a more connected environment.
Many of our customers say that once supplier information is brought together in a more structured way, firms are often better positioned to improve audit readiness, reduce duplication, strengthen supplier oversight, and respond more quickly to regulatory enquiries.
This becomes increasingly important as financial institutions face growing expectations around supplier transparency and accountability across multiple jurisdictions. Firms may need to identify rapidly which vendors support critical business functions, whether alternative suppliers exist, where supplier concentration risks may sit, and where potential dependencies or vulnerabilities sit within the wider supplier ecosystem.
Combining AI and Human Intelligence
Managing tail spend at scale presents a practical challenge for procurement and risk teams. Large financial institutions may work with thousands of suppliers that each require onboarding, documentation review, classification, due diligence, ESG data capture, and periodic reassessment.
Many organizations are now finding that AI can play an important role in helping manage this complexity, especially as supplier networks become larger, more globalized, and tougher to track manually. AI-powered procurement technologies can analyze large volumes of supplier and transaction data rapidly, helping firms identify anomalies, classify suppliers, surface compliance gaps, and automate parts of onboarding and other repetitive processes. In many cases, this can help reduce onboarding times and costs, improve consistency, and support faster decision-making.
That said, most financial institutions recognize that automation alone is rarely sufficient in highly regulated environments.
Supplier relationships, regulatory interpretation, commercial context, and risk assessment still require human judgment and experience. AI may help surface potential issues or identify supplier patterns, but procurement and compliance professionals are still required to interpret findings, assess materiality, and make decisions that reflect the realities of the business.
Our customers often describe the most effective operating models as those that combine AI-driven scale with human intelligence and oversight. AI can help process information efficiently across large supplier bases, while experienced procurement and risk professionals provide context, judgment, negotiation expertise, and accountability.
Moving Beyond Administrative Procurement
As regulatory pressure and supplier complexity continue to increase, many financial institutions are also reconsidering how tail spend should be managed.
Internal procurement teams are frequently expected to accelerate onboarding, strengthen compliance, support ESG reporting, and manage supplier risk — often without significant increases in resources. Managing thousands of low-value suppliers internally can create considerable administrative complexity.
As a result, some organizations are exploring specialist procurement partners that combine AI-enabled infrastructure with supplier governance, onboarding, and lifecycle management expertise. In many cases, this allows firms to bring greater consistency and structure to tail spend management without significantly expanding overhead.
The organizations making the most progress often appear to be those treating tail spend not simply as an administrative burden, but as a broader supplier-data and risk-management challenge – an opportunity even to boost efficiency, flexibility and control.
A More Strategic View of Tail Spend
Financial institutions have traditionally maintained strong visibility into their most strategic suppliers. Increasingly, however, regulators and enterprise leaders alike are recognizing that compliance and effective risk management depend on understanding the wider supplier network as well.
Against a backdrop of geopolitical uncertainty, digital dependency, and intensifying regulatory pressures, fragmented tail spend is becoming harder to ignore.
Bringing greater structure to this category — through connected supplier data, intelligent automation, and experienced human oversight — can help organizations strengthen compliance, reduce onboarding friction, maintain greater control across suppliers, and make more informed procurement decisions.
For many financial institutions, tail spend is no longer viewed as peripheral procurement activity. It is becoming an important part of third-party risk management and broader enterprise strategy.
