Managing when vendor and supplier risk becomes your own

Financial institutions are being held accountable for the actions of their suppliers. A new approach can help to identify and manage sources of third-party risk.

The rising tide of regulatory scrutiny stemming from the global financial crisis has now reached beyond banks, to the companies that supply them. Under the broad notion that activities can be outsourced, but responsibility can't, the Consumer Financial Protection Bureau (CFPB) and other regulators are holding financial institutions responsible not only for their own actions but also for those of their vendors and suppliers. This new regulatory thrust poses a big challenge for financial institutions because some of them have a limited perspective on their suppliers interactions with customers. The largest banks and credit-card companies can have close to 50,000 suppliers. But a significant number of vendor relationships are not closely managed, and some carry hidden risks ... READ MORE

Released by McKinsey - July 2013