In light of increased regulated scrutiny of the financial sector, we have compiled some tips to aid in third-party risk management for financial institutions.
Below are five areas to focus on for effective vendor risk management in the finance sector.
Scope
Fully define the scope of your third-party relationships by compiling a comprehensive inventory of all your vendors including partners, suppliers, associates, affiliates, and even important fourth parties.
Segmentation
Not all third vendors were created equal. Using segmentation, you can prioritize your TPRM efforts and choose how a third party should be managed from a risk-based viewpoint. You can achieve this by giving your third-party engagements a risk profile and allocating resources to the vendors associated with the highest risks.
This is especially helpful when there are many third parties involved in highly regulated industries.
Due Diligence
Vendor due diligence is the process by which an organization examines a current or potential third-party vendor’s risk as it relates to its business operations.
As outlined in the FDIC Financial Institution Letter 44-2008: Comprehensive due diligence involves a review of all available information about a potential third party, focusing on the entity’s financial condition, its specific relevant experience, its knowledge of applicable laws and regulations, its reputation, and the scope and effectiveness of its operations and controls.
Due diligence, often carried out using third-party questionnaires, will help your organization make a risk-based decision on whether to engage a current or potential vendor in a business relationship.
Risk Assessments
Performing cybersecurity risk assessments is a fundamental part of any organization’s vendor management of risks and controls. The purpose of risk assessments is to determine which vendor cyber risks pose the greatest threat to your organization’s overall security posture. Once you identify high-risk vendors, you can then work with them to ensure that all potential threats are addressed. Risk assessments also allow you to classify vendors, helping with risk prioritization.
For financial institutions to effectively monitor cyber risk, they must be able to continuously practice vendor risk monitoring to assess the cyber posture of their vendors. With Centraleyes, organizations can proactively manage third-party and even fourth-party risk. Our cybersecurity solutions help you gain an unparalleled view of your vendor ecosystem so you can quickly and easily identify and protect yourself from cyber risks.
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