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Regulations

Vendor Risk Management and the OCC

Jun 26, 2018 by Branan Cooper

As vendor risk management, also known as third party risk management or just vendor management, has become more important, there has been more regulatory guidance from all the major regulators including the OCC. Let’s discuss specifics with the OCC. 

The OCC Third Party Risk Guidance

The Office of the Comptroller of the Currency (OCC) has been known for issuing the most stringent guidance as it relates to third party risk management. Back in 2013, the OCC caught everyone's attention when they issued Bulletin 2013-29 which introduced the concept of a lifecycle approach to third party risk management. This is really the gold standard for vendor management.

The OCC drilled home the point that third party risk is not a "one and done" exercise, but one that extends from prior to the relationship, starting with vendor vetting and selection of a third party, and extends to after the relationship ends, essentially contemplating post-termination rights. They also emphasized the need for active involvement by senior management and the board. Your senior management and board should be reviewing and approving risk related procedures.

As if that wasn't enough, in 2017, the OCC issued two additional bulletins reflecting on and updating portions of the 2013 guidance. We published a detailed analysis of Bulletin 2017-7 which, in combination with Bulletin 2017-21, had a distinct shift in tone to lay responsibility directly with the board. Although these are new pieces of regulatory guidance, they all reflect back to the 2013 guidance and contemplate a full analysis of all third party relationships, with particular attention paid to vendor due diligence, ongoing monitoring and contract provisions.

A Good Vendor Management Model to Follow

With that all being said, all the major regulators still look at each other to compare guidance, and they each have a voting seat at the table of the Federal Financial Institutions Examination Council (FFIEC), which has been around since 1979. So, since the OCC is the most stringent, it’s a best practice to model your vendor risk management program after their expectations.

Have you updated your vendor risk management program recently? Download our infographic so that you can make sure it's effective.

Creating an Effective Vendor Contract Management System eBook

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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