of speed and technology, it would be nearly impossible to be successful and competitive without outsourcing to third-party vendors. Financial institutions may rely on outsourcing for a range of products, services and other activities. Outsourcing allows financial institutions a number of significant benefits, including faster and more efficient access to technologies, human capital, delivery channels, products and services, and markets. It can also mean a more costeffective operational existence overall. Despite the option to outsource certain functions and activities, financial institutions must still adhere to the risk management and compliance expectations. The use of third-party relationships does not alleviate the need for sound risk management within an organization. In fact, it’s quite the opposite when it comes to thirdparty relationships. Third-party relationships, especially those involving new technologies, could present an even higher or more elevated risk for financial institutions. A phrase we commonly use in the compliance industry is, “You can contract away the function, but you can’t contract away the compliance responsibility.” Financial institutions must understand their responsibilities to ensure safe and sound third-party relationships and practices in conjunction with the compliance of all applicable laws and regulations, including those which are intended to protect consumers. The New Interagency Guidance On June 6, 2023, the federal banking agencies issued Interagency Guidance on Third-Party Relationships: Risk Management. Much of what is outlined in the new interagency guidance is already somewhat familiar to the agencies. The core concepts of the interagency guidance remain consistent with the individual agency guidance that existed prior. The new interagency guidance provides consistency and an interagency approach to managing third-party risk. This is especially important for those relationships which involve critical third parties and relationships that are customer-facing or may otherwise be impactful to consumers. The new interagency guidance was developed to align with the expectations and best practices in other areas of risk management. It creates a vendor management lifecycle which includes six steps: 1. Planning for a relationship 2. Due diligence and third-party selection 3. Contract negation 4. Oversight and accountability 5. Ongoing monitoring 6. Termination Member FDIC Traci Oliver Eric Hallman Tara Koester Bankers’ Bank of the West We champion Community Banking bbwest.com | 800-873-4722 www.bbwest.com YOUR NEBRASKA RELATIONSHIP MANAGERS As a bankers’ bank we strive to help with every level of service and expertise. That is why we service anything from loan participations, merchant services, ATM/debit and much more, because we aim to answer your questions with, “…yes, we can do that too!” 14 Nebraska Banker
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