The financial services industry has experienced a firehose effect that has required accelerating strategic initiatives, flexing to accommodate physical workforce alternatives, and ensuring Third Party Risk Management (TPRM) Program resiliency. The momentum has not let up and managing the 2020 pandemic related events will continue to transform the industry faster than many anticipated when it comes to the delivery of products, services, and secure employee practices (such as remote work).
Across the industry, robust self-service channels, digital interactions, and practical in-person support demonstrate that customer centric successes are setting new expectations and standards that are very high. Friction remains present, but lessons are being learned and well-deserved kudos have been rolling in for the people behind the scenes and on the front lines of banks and credit unions.
Financial institutions have been enthusiastically contacting customers and prospects with confidence during the pandemic — determined to get out in front of challenges and to be a substantial part of the solution. Transparency has been a strong foundation for managing difficult circumstances and financial institutions continue to do an extraordinary job of serving customers, members, communities, and employees. At the same time, there are questions that must be asked and answers that must be validated to ensure that transparency is sustainable and reputational risk is kept in check.
Professional practices, behavior, and communication styles have been altered during the pandemic. Likewise, customer behavior and expectations continue to change as well. Remote work across the world appears to be increasing everyone’s comfort level with a more casual business environment. But beware! Compliance with formal policy and best practice/procedure may be suffering due to increasingly flexible workarounds and unsupervised relationships with third party service providers.
While attention was drawn elsewhere, third party relationships may have become distant, inconsistent, less cooperative, or slow to deliver on Service Level Agreement (SLA) performance metrics. As regulatory agencies begin shifting examinations and supervision protocol back to business as usual (including full scope examinations; on-site visits; and in-person observations), documented activities that banks and credit unions have been conducting during 2020 need to reflect regulator expectations. Practices that were adapted for the pandemic operating environment will be reviewed — and there are no free passes in TPRM.
For example, in the excerpts below, regulatory supervision continues to highlight financial consumer protection, complaint volumes, and related compliance standards:
- Consumer Financial Protection Bureau Issues Consumer Complaint Bulletin (May 21, 2020): “The Bureau also received its highest complaint volumes in its history in March and April at 36,700 and 42,500, respectively. In 2019, the monthly average for complaints was 29,000. The bulletin attributes the higher numbers to factors such as market conditions and more public awareness of the complaint system.”
- Bureau of Consumer Financial Protection’s (CFPB or Bureau) Consumer Response 2019 Annual Report: “…credit or consumer reporting, debt collection, credit card, mortgage, and checking or savings accounts were the most complained about consumer financial product and service categories in 2019. Collectively, these products comprised approximately 89% of all complaints the Bureau received.”
Banks and credit unions commonly provide these types of products and services through partnerships with third party service providers and the outsourced relationship is often invisible to the client base. However, without effective TPRM, client satisfaction, consumer data protection, and the reputation of the financial institution itself is directly linked to actions taken (or not taken) by the third party vendor. Banks and credit unions receive both the kudos AND the complaints. Kudos are great. Complaints serve as a warning system. Increased complaint volumes related to financial products and services can signal issues that are directly caused by the outsourced vendor relationship.
Now is the time to re-assess the effectiveness of your TPRM program and take action:
- During the pandemic, have your outsourced partners kept pace with your strategic and risk management expectations?
- Now that re-opening efforts are shifting your focus from non-stop client support and triage back to operational efficiency, organizational changes, and the reprioritizing of delayed projects, are your outsourced functions creating unexpected challenges?
- Have your agreed upon vendor service level metrics been sufficiently maintained in 2020?
- Have your normal vendor due diligence and monitoring practices been replaced by blind spots?
- Are your clients or employees calling out substandard interactions with outsourced partners, inferior vendor performance, service disruptions, or problematic product/service delivery?
- Are your internal and/or external complaint volumes increasing?
- Is TPRM factored into your consumer complaint trends, review, remediation, and response?
- Do you know how each of your third party service providers handle concerns, issues, and complaint activity relevant to the products and services they provide to your organization?
Financial institutions are all about relationships with clients, members, and communities. The current environment is also requiring sharp attention to operational efficiencies and cost savings — and your outsourced partners need to be a part of the conversation. New disruptions should be anticipated as staff begins to return to corporate offices and operations/contact centers. When (not IF) outsourced partners and third party products and services encounter problems, customers and members will look to their financial institution first and foremost. You are it. Your reputation is closely linked to the quality of your TPRM practices and how you assess, monitor, and manage the risk, contracts, and SLA requirements that are associated with your outsourced service providers. Your employees, customers, and communities are counting on you — and your response is more important than ever.