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Consider ALL Third Party Risk Management Regulatory Guidance

Oct 24, 2018 by Branan Cooper

Last year, I spoke at a conference and, as I wrapped up, a member of the audience approached me and shared that he thought if he is doing well with complying to FDIC guidance, he shouldn’t need to worry about other regulatory guidance. He was looking for my approval. I wish I could have agreed with that, but unfortunately, it’s a very dangerous and limited outlook.

To do third party risk management well, I always recommend following not only your prudential regulator’s guidance, but other guidance as well. As I’ve learned over the years, the regulators watch one another for best practices, the latest guidance and overall expectations. Formally, they all belong to the FFIEC (Federal Financial Institutions Examination Council) and try to standardize examination practices. Informally, they look at one another just like you do to watch your competitors for new ideas.

Currently, the OCC guidance is considered the gold standard and most comprehensive regarding third party risk management, and I’m certain other regulators are looking to their organizations to aspire and manage to those standards.

No matter who your prudential regulator is, I encourage you to review the following guidance:

  • OCC Bulletin 2013-29
  • OCC Bulletin 2017-7
  • Occ Bulletin 2017-21


Third Party Risk Management Affects Many Areas of Risk

Moreover, third party risk management always intersects with other areas of your compliance management system (CMS). Third party risk certainly touches on various elements of risk that make up your organization’s enterprise risk management (ERM) protocols and while most people think of third party risk as a quirky little corner of operational risk, it goes well beyond that.

Here are a couple of reasons third party risk management affects more than just operation risk:

  1. Think of the reputation and strategic risk implications of the companies to whom you’re outsourcing. Now, imagine if there were a data breach impacting one of them and compromising your data. You’d be very shortsighted to chalk it up to something isolated from third party risk management.
  2. Additionally, per the guidance, it’s crucial to consider other areas of risk - in addition to operational, strategic and reputation - such as financial and regulatory, to name a few, when determining the regulatory risk posed to your organization.

I strongly recommend reviewing your third party risk program with your compliance and BSA officers as well as the legal department. I’m certain they'll want to make sure that their departments’ interests, and thus your organization’s interests, are reflected in your third party risk management practices.

Understandably, compliance and BSA officers will also want to verify that all best practices and necessary regulatory guidance pertaining to third party risk management is captured within your policy and program documentation as needed. It’s important to thoroughly review your documentation to verify it meets and/or exceeds regulator expectations.

To learn more about third party risk management guidance and regulations, download our eBook.

third party risk regulations

Branan Cooper

Written by Branan Cooper

Branan Cooper is the Chief Risk Officer at Venminder. Branan has nearly 30 years of experience in the financial services industry with a focus on the management of operational and regulatory processes and controls—most notably in the area of third party risk and operational compliance. Branan leads the Venminder delivery team as the third party risk management subject matter expert in residence. Branan also serves as an industry thought leader. He's a member of InfraGard and the Professional Risk Management Industry Association (PRMIA). And, he was selected in 2018 as an advisor to the Center for Financial Professionals (CEFPro) and board member for the Global Sourcing Resource Network (GSRN).

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