SAN FRANCISCO, July 27, 2016 /PRNewswire/ -- "The regulatory bar and complexity is increasing," says Ken. "Third party risk management is still a major challenge for financial institutions as risk modelling is more of an artform rather than a science."
In the past year, third party risk management has become even more important to financial institutions. Despite further advances, institutions are still facing heightened scrutiny from regulators over their third party risk strategies. The increased digital environment, and several high-profile incidents, means it is vital for institutions to develop an effective risk management strategy to ensure they avoid potential reputational damage and further penalties.
Effective contract management is one area that is particularly important to help with managing third party risk. Institutions are having difficulty in managing data and gaining information from their third parties, particularly in ensuring everyone knows where the liability for risk lies. The sensitivity of information and increased cyber attacks mean this is vital. Ken explains: "Effective contract management is important because it establishes baseline standards for information security and the overall allocation of risk."
Contract management also helps in creating a uniform standard across the enterprise. An increasing issue is ensuring that third party risk strategies are applied consistently across the organization. This is of vital importance to guarantee all vendors are managed efficiently and to reduce further risks affecting the enterprise. Ken says that "financial institutions need to build a governance model to drive consensus across the organization about their risk appetite when outsourcing services. To consistently manage your third party risks, you need to leverage standardized contract terms and playbooks."
The 4th Edition Third Party Vendor Risk Management for Financial Institutions Conference (September 12-14, 2016 in San Francisco) continues the work of its predecessors to enable institutions to understand the latest developments in third party risk management.
Ken Smith is the Vice President of Vendor Management for First Technology Federal Credit Union the 8th largest US credit union. He has a B.A. In Political Science from the University of San Francisco, a M.B.A. in Management from Golden Gate University, a Graduate Certificate in Information Technology and is a Certified Information Security Manager.