With the new regulatory thrust posing substantial challenges for financial institutions, companies of today have started emphasizing on improving their third party risk management capabilities. To know more about the best practices that your competitors are following, download the full article.
Why is Third Party Risk Management Important?
All major financial regulators in the United States such as Federal Reserve, Federals Open Market Committee, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision have started taking a keen interest in guarding financial consumers. The recent Economic Growth, Regulatory Relief, and Consumer Protection Act passed by the US government has increased regulatory scrutiny for financial institutions with more than $250 million in assets. This increase in the federal oversight apart from the Dodd-Frank Wall Street Reform has left no scope for financial firms to outsource the responsibility of consumer protection to their third parties.
Moreover, the Consumer Financial Protection Bureau, which was created for providing financial security to consumers, has registered thousands of complaints covering different issues. It has fined some of the well-reputed firms to settle charges of deceptive marketing practices on behalf of third-party suppliers.
At SpendEdge, we understand the risks that third parties bring along with them. And to help firms address those risks, we have answered questions such as “why is third party risk management important?” and “how to mitigate third party risk?”. We have also listed some of the best practices in third party risk management in our new free resource, which is now available for free download.
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Best Practices in Third Party Risk Management
SpendEdge has analyzed some of the best practices to help financial institutions improve third party risk management and meet regulatory compliance. They include:
- Detailed insights into third parties: A third party risk assessment is the first step towards managing third party risk. Companies need to collate a list of third parties engaging with the institution. Enterprise-wide surveys and a third party risk management framework can prove to be of great help in gaining such insights.
- A checklist of customer risks posed by third parties: The third party risk management process cannot be effective until a firm understands the risks run by third parties. Adopting a master risk register that complies with the CFPB can improve third party risk management capabilities substantially.
- Segregation of risks: Firms can categorize supplier relationships based on the level of risk posed to customers by implementing third party risk management framework. Even a simple process of “high”, “medium” and “low” risk categories can prove significant to them.
- To know more about best practices in third party risk management, request more information.
- Gain vital insights to build a single repository for all third parties.
- Understand the relevance of due diligence tests.
- Determine the impact of changing regulatory norms across business units.
- Analyze the role of risk-based segmentation for firms.
- Scrutinize third parties to ensure compliance with regulations that govern their activities.
Not complying with the regulatory norms can result in heavy penalties for companies. Request a free proposal to gain a comprehensive overview of our solutions portfolio for third party risk management.
SpendEdge delivers robust, real-time procurement market intelligence solutions to help sourcing and procurement professionals to improve third party risk management capabilities. Our innovative procurement solutions help enterprises to transform the structural capabilities of businesses and improve execution efficiency. Our state-of-the-art third party risk management solutions also help enterprises to transform structural capabilities, improve execution efficiency, and achieve better cost savings. We provide businesses with actionable insights and techniques to improve their procurement capabilities.