For the highly regulated financial services industry, checking boxes and driving full speed ahead comes naturally. To avoid unnecessary risk, guardrails tend to be in place, visible, and pointing institutions in the right direction. But the test always comes when unplanned detours present hazards that can knock an organization off course. Redefining familiar checklists, determining which boxes have real value over time, and shuffling those boxes to flex with sudden change becomes a bit more complicated.
As expected, financial institutions steadily forge ahead in this time of intense uncertainty. They are providing critical services to clients, members, prospects, and communities by realigning employee activities. Banks and credit unions were quickly overwhelmed with U.S. Small Business Administration Paycheck Protection Program applications and inquiries. In response, many loan processing groups are being reinforced by pulling in staff from various other departments — including Third Party Risk Management (TPRM) teams. The shift in staff focus is understandable and obviously important work.
Regulatory agencies are the gatekeepers that financial institutions look to for guidance, rules, laws, and checklists full of do’s and don’ts. Recently, some regulatory pressure has been loosened as the industry maneuvers the twists and turns experienced in this Covid-19 environment. For example, many regulatory examination schedules have been suspended for an undetermined amount of time and final examination reports are being delayed.
Although helpful in the near term, it is certainly NOT a free pass to relax TPRM policy, procedure, or best practice. Now is NOT the time to relegate TPRM to the bottom of your checklist. There are some TPRM boxes that if left unchecked will result in defective practices, or even worse, gaping holes in your due diligence that is required to effectively monitor your outsourced service providers. Critical Service Level Agreement metrics may be deteriorating and go unnoticed. And in the long term, demonstrating that your Board approved policies were reasonably followed during crisis may be difficult, if not impossible.
When we get to the other side of the Covid-19 pandemic and the regulatory tempo resumes, count on a careful ‘look-back’ to be conducted by your internal audit and external examiners. The results of your TPRM activities that are being performed right now (or NOT being performed) may be closely scrutinized. When the current crisis is finally in our rear-view mirror, as with all hindsight, lessons will be learned, TPRM gaps will be clearly seen, and the need for improvement will be critically acknowledged. That’s what examiners and auditors do.
How that plays out for your institution can be determined by the actions taken (and documented) in this current and very challenging situation. Financial institutions can control how painful the TPRM review process becomes. Regulatory oversight often initially presents itself as guardrails that help financial institutions stay in their lane, navigate roadblocks, and remain on course to successfully reach the intended destination. Work closely with your external examiners, internal auditors, and your TPRM partners. Watch where they are headed and be there armed and ready to demonstrate your commitment to clients, employees, communities, AND the strength of your organizational policies.
Third Party Risk Management is not just about vendors. It is about building a strong framework of partnerships that produce quality results, ensure transparency, demand accountability, inspire collaboration, and create open lines of communication. That’s what we do.
To our clients, we appreciate your business and partnership with us. We are right here in the middle of this challenge, clearing the road ahead — with AND for you. Every day we are demonstrating that we remain more than ready and able to help you, our partners, in ways that you expected and in new areas that have pleasantly surprised you. We are grateful for the opportunity to be on your TPRM team.
To everyone else that wants a solid partnership in order to move your TPRM program forward and thrive during these changing circumstances, we welcome the opportunity to help strengthen your organization on a small or large scale. Contact us today to learn more.