Western Banker - May/June 2014 - (Page 8)

What the Regulators are Looking for to Manage Vendor Risk By Michael Berman T he primary objective of the regulators and their examinations regarding vendor risk is to determine whether the bank's vendor relationships create more risk than the bank can identify, monitor, manage or control. These risks include both risks to the bank's business and solvency as well as the bank's protection of its customers from financial harm. The key is what processes are in place to monitor and manage this risk to the bank and to the bank's customers. In every vendor risk management program, the first step is to develop a framework that allows the bank to identify which vendors require ongoing monitoring, management and control. These vendors are commonly referred to as critical or high risk vendors. This exercise will lead to identification of the inherent risk in outsourcing certain functions and activities of the bank. With this framework in mind, the process of adding a new vendor should involve due diligence to insure that the vendor is capable of delivering the services that the bank expects. The bank should make sure the contract with each vendor minimizes the bank's risks, allows the bank to monitor this risk and provides the flexibility to respond to changes in regulations. The monitoring process for these critical vendors means having a process in place to be aware of the vendor's financial condition, regulatory enforcement actions on the vendor and information security 8 www.wib.org Western Banker http://www.wib.org

Table of Contents for the Digital Edition of Western Banker - May/June 2014

A Message from the President & CEO
What the Regulators are Looking for to Manage Vendor Risk
Fallout from the Target Data Breach
Will Your Compliance Management System Pass Muster?
Don’t Be Caught Off Guard: Prepare Your Bank for a Successful Compliance Exam
2013 Innovative Community Bank Award Winners
New Product Development – A Big Challenge and a Potentially Big Reward
Compliance Issues and Considerations in M&A Due Diligence
The Second Wave Breaks: The CFPB’S Final TILA-RESPA Integration Rule
Dodd-Frank Pre-Purchase and Monitoring Requirements for Your Bond Portfolio
Professional Development Resources
2014 Annual Conference
Index of Advertisers/ Advertiser.com
Welcome New Members

Western Banker - May/June 2014

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