A Bank Collaborates with Other Financial Institutions and Industry Specialists to Take Third-Party Risk Management (TPRM) to a New Level

In today’s complex environment—where risks span cybersecurity, resiliency, privacy, and beyond—financial institutions face growing pressure to maintain confidence in the integrity and reliability of their third parties. As banks become more dependent on external providers for critical operations, regulators increasingly expect them to collect and validate control information directly to confirm suppliers meet required standards. The ability to verify, not just assess, third-party controls is now essential to ensuring trust, compliance, and operational resilience.

Challenges with TPRM

Financial institutions today face numerous challenges with TPRM, including:

• Increased complexity in supplier vetting: The growing dependency on suppliers and the increased adoption of cloud services necessitate more rigorous assessments, which are time-consuming and resource intensive.
• Heightened regulatory scrutiny: Regulatory expectations require institutions to enhance their TPRM to ensure compliance and mitigate potential negative exposure.
• Inefficiencies in risk assessment: A fragmented approach to TPRM across various business lines leads to inconsistencies and inefficiencies in the assessment process.

A Real-life Example

This large bank partners with thousands of suppliers annually to support its diverse business processes and services. Operating in a complex regulatory environment, the organization demands rigorous assessments of third-party relationships. As it expanded its operations, its dependency on suppliers grew significantly and each one required individual vetting, making the assessment process both rigorous and time-consuming.

The increased adoption of cloud-based and Software as a Service (SaaS)/Platform as a Service (PaaS) solutions added another layer of complexity to the vetting process, as the bank needed to ensure that these outsourced services also met its stringent risk management criteria. Moreover, the organization’s third parties were primarily focused on conducting risk assessments and validation rather than continual risk mitigation, further complicating the ability to effectively manage supplier relationships.

The Quest for a Streamlined Process

To address these challenges, the bank rethought its approach to TPRM. The head of corporate third-party oversight was charged with consolidating disparate processes across business lines and departments into a unified function, creating a single view of risk across the entire third-party ecosystem. This strategic shift enabled the bank to streamline its TPRM practices and enhance overall efficiency.

Recognizing the need for a standardized approach, the bank collaborated with an industry consortium co-founded by several leading financial to help advance centralized, standardized third-party assessment practices. The bank began to leverage KY3P^® Assessments, an S&P Global offering, as part of its framework to simplify and standardize third-party risk management processes across the industry.

By using KY3P Assessments, firms can collect and maintain risk information including cybersecurity, privacy, business resiliency, and ESG.

Reaping the Benefits

With the implementation of KY3P Assessments, the bank began to incorporate standardized assessments into its larger vendor management practices. Members of the oversight team relied on KY3P Assessments to collect and validate information from some of the bank’s most well-known and widely used suppliers. By leveraging this capability, assessors were able to shift their focus from data collection to actively managing and mitigating risks associated with third-party relationships.

The Bottom Line

The leveraging of KY3P let the bank reduce the number of questions independently posed to a third party by 80% compared to its previous standalone approach. This efficiency improved operational effectiveness while enhancing the overall quality of supplier assessments, ensuring that the bank could maintain its commitment to excellence in risk management and navigate regulatory complexities.

Key features of KY3P include:

• Easy standardized and policy-driven onboarding.
• Detailed due diligence.
• Financial health risk scoring.
• Audit-ready and evidence-backed workflows.
• Issue remediation.
• Ongoing monitoring of cyber, geopolitical, and ESG risks, plus financials, adverse news, sanctions and more.
• Important real-time alerts. 

Click here for more information on KY3P.

KY3P is S&P Global's comprehensive Third-Party Risk Management solution. Built upon a robust methodology, KY3P offers a diligent and meticulous assessment approach to effectively manage third-party risks.  

The KY3P methodology is developed in close collaboration with our esteemed KY3P user community, ensuring a consistent and industry-aligned approach. 

Recognizing the diverse needs of Third-party risk management, KY3P offers flexible tools tailored to individual requirements. Our suite of solutions includes continuous monitoring of third-party vendors, customizable due diligence questionnaires, and comprehensive assessments. Additionally, we provide validated data that supports risk-based decision-making, enabling organizations to assess suppliers at varying levels of criticality. 

By leveraging KY3P, businesses gain invaluable insights that strengthen their day-to-day operations. Organizations can embed resilience into their core practices, ensuring regulatory compliance, identifying potential threats and vulnerabilities, and proactively planning for the impact of emerging risks. 

S&P Global provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation. 

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.