Academic journal article ABA Banking Journal

Banks Make Strides in Third Party Risk Management

Academic journal article ABA Banking Journal

Banks Make Strides in Third Party Risk Management

Article excerpt

Banks continue to make significant strides in the area of third party risk management--though many are concerned about a lack of knowledge and not having the appropriate tools to efficiently assess and manage vendor risk--according to a study by Ernst & Young. Ninety percent of the institutions surveyed said they felt neutral or negative about how well their third party risk management tools were able to help them capture and report risk, and more than four in ten said that they consider lack of knowledge across the organization as a key challenge going forward.

Despite these concerns, however, the study pointed out that many banks have adapted to regulatory changes over the past few years and begun to appropriately scale their risk management programs. Thirty-nine percent of respondents said that all of their third parties now fall within the scope of their vendor risk management program, up from just 19 percent in 2014. When determining whether to enter a relationship with a third party, more than seven in ten organizations said they conduct pre-contract regulatory compliance reviews of potential vendors.

The majority of the banks surveyed reported using either a centralized (45 percent) or hybrid (41 percent) operational model for third party risk management. …

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