In third party risk management, each passing year provides more unique perspective. In 2019, there was certainly a strong focus on data security, clarifying unclear regulations – like “abusive” in Unfair, Deceptive, Abusive Acts or Practices (UDAAP) – and more. And, there were absolutely a few lessons learned.
3 Third Party Risk Management Lessons from 2019
Here are three of the big lessons learned in 2019 and what it means for you:
1. Data breaches can happen to any vendor – even your largest ones.
Take Facebook for example. As of the third quarter in 2019, the social media platform, Facebook, had over 2 billion active users. You’d think a large company like Facebook would have the best of the best in place to combat hackers, right? Wrong. In April 2019, over 540 million records were publicly exposed due to a breach. This was just one of the multiple data security breaches Facebook became victim to last year.
What does this mean for you? Do your due diligence! Don’t assume the big-name companies have it all squared away. Keep in the back of your mind that a data breach can happen to anyone. Put precautions in place internally and request your vendors strengthen their controls, when needed. Remember, the only way you can request they strengthen their controls, however, is by doing your due diligence and knowing beforehand if their security controls are faulty in the first place.
2. Customer service is at the forefront of it all.
After some back and forth uncertainty, the Consumer Financial Protection Bureau (CFPB) announced that the CFPB consumer complaints database will remain public. This means, anyone can access the database online and read complaints. Also, anyone can access the database online and submit a complaint.
What does this mean for you? Proactively address complaints as they happen. Great customer service should always be a top of mind goal for an organization, but if you receive a complaint you should address it right away. Reach out to the customer who complained and respond to their issue – both verbally and in writing. You always want to respond in written format as well since documenting your efforts is a key part of third party risk management in every scenario, not only complaint management. Try to smooth over a complaint before it hits the CFPB consumer complaints database, as once it’s there it’ll be publicly viewable for a while. And, be on the lookout if any complaints show up on your vendors.
3. Regulatory reform isn’t on the horizon.
At least not in the immediate future. In 2018, there was a lot of talk about regulatory reform and it likely made many compliance officers excited. However, in 2019 we learned that regulatory reform isn’t likely going to happen any time soon. In fact, new regulations, like the California Consumer Privacy Act effective as of January 1st, are being announced and are more stringent than ever.
What does this mean for you? Keep doing what you’re doing. Don’t step back and let third party risk management take the backburner. Continue to review regulations, include regulations and vendor management best practices within your program practices, monitor your vendors, do your due diligence, analyze due diligence thoroughly and more. Basically, all of the third party risk efforts you’ve been doing up to this point should not stop.
Of course, the list can go on and on, but I think these are some of the most important lessons to note. Share these with your colleagues and make sure you’ve implemented processes that make it apparent to examiners, senior management, the board and stakeholders that you noticed these things happening in 2019 and you’ve learned from it and are implementing each lesson into your program.
Need a quick tool to navigate vendor risk management? Download this useful cheat sheet.