Featured Product

    OSFI Identifies Focus Areas to Strengthen Third-Party Risk Management

    September 08, 2020

    OSFI published the key findings of a study on third-party risk management. The study was conducted in 2019-20 among 55 federally regulated financial institutions, with 47% of them being deposit-taking institutions and the remaining being the insurance institutions. As a result of this study, OSFI has identified five focal points for effective management of third-party risk: risk assessment, monitoring and incident management, data security and access, continuity of critical operations, and cloud risk management. For further insights on the perspectives and work of OSFI in this area, OSFI will soon release a discussion paper on technology risk, which includes a segment on third-party risk.

    The federally regulated financial institutions frequently cite third-party risk as a top or key risk due to the increasing engagement with, and reliance on, third parties. The following are the key insights that OSFI derived from the study on the third-party risk management:

    • Risk Assessment—Prudent risk management involves focusing on the highest risks at certain providers while providing adequate oversight for providers with lower risk profiles. Developing risk management frameworks with a range of risk categories can help federally regulated financial institutions to more effectively manage the risk from third parties.
    • Monitoring and Incident Management—Establishing a process to regularly monitor risks against desired standards and measures can help federally regulated financial institutions to more effectively identify whether and when a third party is creating risk. The results highlight that 36% of the respondents indicated that they maintained a watchlist—that is, a list of third parties identified for enhanced monitoring. Reasons cited to maintain a watchlist include criticality and significance to the operations of a federally regulated financial institution and elevated risks of financial, operational, or reputational damage to the federally regulated financial institution.
    • Data Security and Access—Lack of adequate controls and monitoring of third-party access, storage, and use of federally regulated financial institution information may expose federally regulated financial institutions to higher risk of data breaches and loss of confidentiality. Security risk assessments are the first step in protecting federally regulated financial institution data as these can aid federally regulated financial institutions understanding if the risk is being sufficiently managed by the third party. The results highlight that 83% of the respondents cite information security controls and performance as the top assessment factor during the due diligence phase prior to onboarding a third party. While 86% of the respondents include information security controls and performance in due diligence refreshes, 23% perform real-time security monitoring of third parties.
    • Continuity of Critical Operations—Identifying critical third-party dependencies and conducting joint exercises with these parties can help to develop and reinforce the recovery processes, communication channels, authority levels, and trusted relationships that are necessary to work cohesively and collaboratively through a disruption. There were 17 respondents with the management of critical third parties in scope of the study. The results highlight that 53% of the respondents have business continuity plans, recovery time objectives, and service-level agreements for critical services in place with third parties while 82% have established specific recovery time objectives and recovery point objectives with third parties for critical business services. 
    • Cloud Risk Management—Cloud adoption has moved past proof-of-concept testing and toward an established or emerging practice of assessment and onboarding at federally regulated financial institutions. While managing cloud services is a shared responsibility between the federally regulated financial institution and the cloud service provider, developing cloud-specific standards may enable federally regulated financial institutions to increase interoperability and optimize cloud adoption while operating within the federally regulated financial institution's risk appetite and tolerances. There were eight respondents with cloud risk management in the scope of the study. The results provide data related to cloud adoption challenges, challenges in cloud computing operations, and cloud availability and exit strategy.

     

    Related Link: Results of Study (PDF)

     

    Keywords: Americas, Canada, Banking, Insurance, Third-Party Risk, Cloud Computing, Outsourcing Arrangements, Technology Risk, Fintech, Regtech

    Related Articles
    News

    EBA Publishes Final Regulatory Standards on STS Securitizations

    The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.

    September 20, 2022 WebPage Regulatory News
    News

    ECB Further Reviews Costs and Benefits Associated with IReF

    The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.

    September 15, 2022 WebPage Regulatory News
    News

    EBA Publishes Funding Plans Report, Receives EMAS Certification

    The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).

    September 15, 2022 WebPage Regulatory News
    News

    MAS Launches SaaS Solution to Simplify Listed Entity ESG Disclosures

    The Monetary Authority of Singapore (MAS) set out the Financial Services Industry Transformation Map 2025 and, in collaboration with the SGX Group, launched ESGenome.

    September 15, 2022 WebPage Regulatory News
    News

    BCBS to Finalize Crypto Rules by End-2022; US to Propose Basel 3 Rules

    The Basel Committee on Banking Supervision met, shortly after a gathering of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS.

    September 15, 2022 WebPage Regulatory News
    News

    IOSCO Welcomes Work on Sustainability-Related Corporate Reporting

    The International Organization of Securities Commissions (IOSCO) welcomed the work of the international audit and assurance standard setters—the International Auditing and Assurance Standards Board (IAASB)

    September 15, 2022 WebPage Regulatory News
    News

    BoE Allows One-Day Delay in Statistical Data Submissions by Banks

    The Bank of England (BoE) published a Statistical Notice (2022/18), which informs that due to the Bank Holiday granted for Her Majesty Queen Elizabeth II’s State Funeral on Monday September 19, 2022.

    September 14, 2022 WebPage Regulatory News
    News

    ACPR Amends Reporting Module Timelines Under EBA Framework 3.2

    The French Prudential Control and Resolution Authority (ACPR) announced that the European Banking Authority (EBA) has updated its filing rules and the implementation dates for certain modules of the EBA reporting framework 3.2.

    September 14, 2022 WebPage Regulatory News
    News

    ECB Paper Discusses Disclosure of Climate Risks by Credit Agencies

    The European Central Bank (ECB) published a paper that examines how credit rating agencies accepted by the Eurosystem, as part of the Eurosystem Credit Assessment Framework (ECAF)

    September 13, 2022 WebPage Regulatory News
    News

    APRA to Modernize Prudential Architecture, Reduces Liquidity Facility

    The Australian Prudential Regulation Authority (APRA) announced reduction in the aggregate Committed Liquidity Facility (CLF) for authorized deposit-taking entities to ~USD 33 billion on September 01, 2022.

    September 12, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8514