OCC Stresses Importance of ERM in Vendor Management

iStock_000018644002XSmall-150x150.jpg?width=150On October 30, 2013 the Office of the Comptroller of the Currency (OCC) published a bulletin to the CEOs and CROs of all national banks stressing the need for an enterprise risk management approach to vendor management. In the bulletin, entitled, OCC: Third-Party Relationships: Risk Management Guidance, the office recognizes, “integrating the bank’s third-party risk management process with its enterprise risk management framework enables continuous oversight and accountability.”

How does the OCC expect risk managers to accomplish this integration? The bulletin emphasizes a risk based approach to all third-party relationships that involve critical activities. In fact, the bulletin mentions the phrase “critical activities” over 25 times throughout the 10 page briefing. A quick scan through of this phraseology reveals the expectation of an in depth ERM process.

For starters, the bulletin calls for a variety of assessments: process assessments to determine critical activities; vendor assessments for due diligence; and control testing and monitoring to manage risks from third-party vendors. Each of these assessment types will require a defined and well-articulated criteria so that they are uniform throughout your organization, enabling executives to determine priorities and set objectives.

Additionally, a relational or taxonomy-enabled approach will allow your bank to report on how third-party relationships relate to your critical activities, such as bank function (payments, clearing, etc.), shared service (information technology), or strategic imperative (reputation, cash flow predictability). Tracking these relationships in spreadsheets or on homegrown systems can be laborious and complex, and an integrated platform for both ERM and Vendor Management can greatly streamline governance activities.

While the notice is tailored to national banks, it includes a note for community banks to “adopt risk management practices commensurate with their level of risk.” The risk universe in a community bank is much different than for large, national institutions; however, that’s not to say the methodologies will change. A community bank can use enterprise risk management to set priorities in its vendor management process, and shave hours off due diligence and compliance activities.

For more information on how a consolidated approach to third-party vendor management and enterprise risk management can save your bank time and money, watch our video on streamlining governance.

Votes: 0
E-mail me when people leave their comments –

Steven Minsky, CEO and Founder of LogicManager, is a recognized thought leader in risk management. Steven is well known for his precinct abilities to guide organizations through future risk events. Steven is a frequent speaker in the Energy, Financial Services and Cyber industries. While the first wave of COVID-19 caught many organizations by surprise, Steven predicted the pandemic impacts in January of 2020 and swiftly published action plans to help organizations prepare.

You need to be a member of Global Risk Community to add comments!

Join Global Risk Community

    About Us

    The GlobalRisk Community is a thriving community of risk managers and associated service providers. Our purpose is to foster business, networking and educational explorations among members. Our goal is to be the worlds premier Risk forum and contribute to better understanding of the complex world of risk.

    Business Partners

    For companies wanting to create a greater visibility for their products and services among their prospects in the Risk market: Send your business partnership request by filling in the form here!

lead