Hi! Welcome to Third Party Thursdays. I'm Branan Cooper, the Chief Risk Officer here at Venminder. And we're going to talk a little bit today about defining critical vs non critical third parties.
First, you need to consider which type of third parties are important to your business. A critical third party is one that would cause a significant disruption to your business if it were to suddenly disappear. You need to go through and actually define who these are. These are not ones that are simply important to your business, these are ones that would cause material impact if they were to suddenly go away.
The business impact analysis is important. You need to consider very carefully what sort of things would happen and develop an exit strategy that contemplates both a sudden disappearance and gradual unwind of business. Developing exit strategies for all critical third parties is important. And also doing extra due diligence with a focus on info security and business continuity plans for those critical third parties.
Defining both the gradual unwind and sudden termination is very important because each of them could represent something that causes a problem for your business and ultimately to your customer.
You need to keep your board and senior management well informed of changes in critical third parties and particularly contemplate what would happen if they were to suddenly go away. As yourself 3 threshold questions:
1st: Would a sudden disruption of this third party cause material impact to my business?
2nd: Would it cause an impact to my customer?
3rd: Would the time for recovery be greater than 24 hours or one business day?
If any of these are answered "yes," that should be considered a critical third party. Typically, around your institution I think you'll find that about 10% of your third parties are critical. Again that's not to be confused with those that are important to your business, but ones that could truly disrupt your business.
I'm Branan Cooper and thanks again for watching! And don't forget to subscribe for next week's Third Party Thursday video.