Third-party risk management for financial institutions is a critical part of keeping an operation running smoothly. Most institutions are bound to need services from outside parties, and they have to be sure those organizations can deliver.
It is tempting to conduct a third-party risk assessment and not come back to the issue as long as everything is working. However, you should be looking for signs of potential issues. When necessary, you should follow up on those signals by conducting a fresh 3rd party vendor risk management review. Look for these four signs of potential trouble so you can know when to order an assessment.
Whenever you hear bad news about a vendor, such as public reports of profit misses or even investigations, start a review. You want to know that whatever might be happening won't affect your institution. Likewise, if something is going on, you want an early warning so you can begin a transition to a new vendor for the associated services.
It is also prudent to consider a third-party risk assessment when you hear bad news in the industry. Suppose a major hack affected a large number of banking systems. A vendor's clean bill of health will provide peace of mind.
Over time, government and industry agencies will change regulations. Whenever the system changes, vendor risk management for financial institutions becomes critical. You want to know your vendors are capable of complying with the changes. Also, you want evidence they have already made the adjustments or will have them in place in time to comply with the new rules. Otherwise, you might find your institution cut off from access to something essential like payment card processing because your systems are no longer compliant.
An annual review of 3rd party risk management for critical systems is a good idea. If you haven't conducted an assessment in over a year, look into it. You may want to conduct rolling reviews if you depend on multiple vendors so you will have time to read the assessments and respond to problems on a one-by-one basis.
Adoption of New Systems
Vendors and customers often adopt new systems. Even though everything seems to be fine, the smart move is to perform a third-party risk assessment. Do not mistake unbroken compatibility with a risk-free situation. Issues may be waiting to be discovered. Have a professional perform the assessment so you can be confident the changes didn't come with any accompanying problems.