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EVALUATING THIRD PARTY RELATIONSHIPS OVERVIEW BENEFITS Gain - - PowerPoint PPT Presentation
EVALUATING THIRD PARTY RELATIONSHIPS OVERVIEW BENEFITS Gain - - PowerPoint PPT Presentation
EVALUATING THIRD PARTY RELATIONSHIPS OVERVIEW BENEFITS Gain expertise Gain efficiencies Reach new members Provide more products and services RISKS Reputation Risk Operational Risk Transaction Risk
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¡ Gain expertise ¡ Gain efficiencies ¡ Reach new members ¡ Provide more products and services
BENEFITS
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¡ Reputation Risk ¡ Operational Risk ¡ Transaction Risk ¡ Credit Risk ¡ Compliance Risk
RISKS
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¡ All Third Parties ¡ Board and Senior Management responsible for
- versight
¡ Vendors=division of the credit union
WHO REQUIRES OVERSIGHT?
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¡ Compliance ¡ Products ¡ Loan Servicing ¡ Doc Prep ¡ Technology
COMMON TYPES OF VENDOR RELATIONSHIPS
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¡ Riskier arrangements = more planning and due diligence ¡ Smaller credit unions = less complex arrangements ¡ Long experience can mitigate risk ¡ Documentation!!
RISK MANAGEMENT
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¡ Planning and Risk Assessment ¡ Due Diligence ¡ Ongoing Monitoring ¡ Documentation
SUMMARY OF THIRD PARTY RELATIONSHIP MANAGEMENT
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PLANNING AND RISK ASSESSMENT
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Before entering into a third party relationship, officials should: ¡ Determine whether the relationship complements their credit union’s overall mission and philosophy. ¡ Document how the relationship will relate to their credit union’s strategic plan. ¡ Design action plans to achieve short-term and long-term
- bjectives in support of strategic planning for new third party
arrangements. ¡ Assign authority and responsibility for new third party arrangements. ¡ Weigh the risks and benefits of outsourcing business functions with the risks and benefits of maintaining those functions in- house.
INTRODUCTION
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¡ Seven Risk Areas ¡ Expectations of Outsourced Functions ¡ Criticality ¡ Risk/Reward ¡ Insurance ¡ Membership Impact ¡ Exit Strategy
INITIAL RISK ASSESSMENT
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¡ Develop financial projections outlining the range of expected and possible financial
- utcomes
¡ Project a return on investment
FINANCIAL PROJECTIONS
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¡ Procedures for analyzing, selecting and administering third party relationships ¡ Staff responsibilities ¡ Authorization to sign contracts
VENDOR MANAGEMENT POLICY
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¡ Strategic ¡ Reputation ¡ Operational ¡ Transaction ¡ Credit ¡ Compliance ¡ Interest Rate ¡ Liquidity
POTENTIAL RISKS
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MONITORING
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¡ Establish ongoing expectations and limitations ¡ Compare program performance to expectations ¡ Ensure all parties are fulfilling their responsibilities
INTRODUCTION
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¡ Staff responsibilities ¡ Content and frequency of reporting ¡ Program limitations
POLICIES AND PROCEDURES
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¡ Control systems based on risk ¡ Sufficient to ensure safety and soundness
MONITORING
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