Connected Due Diligence: Optimizing the Management of Supply Chain Risk

by Neil Katkov, PhD, November 19, 2015
Industry Trends
Global

Abstract

Financial firms rely on an extensive array of external suppliers that provide technology, data, consulting, and professional services. With the growing dependence of financial firms on third party services, regulators are increasing their focus on third party risk.

The growing complexity of supplier relationships makes it challenging for banks to receive timely information from their many third parties to perform required ongoing risk assessments. The redundant effort is substantial from an industry perspective, as dozens of financial institutions seek essentially the same information from thousands of suppliers. This is a key reason why vendors are often hard-pressed to provide adequate information during the RFP or onboarding process. The result for financial institutions is suboptimal supplier data, whether for decisioning or third party risk management purposes.

The emergence of mutualized services in the financial services industry suggests a solution: Connected due diligence, in which an independent supplier provides a common portal to support the operational activities of multiple firms. Third parties need only populate their information once for it to be accessible by multiple financial users of the platform.

This report, commissioned by Markit, sets out the potential benefits of a mutualized third party management platform, including: efficient collection and maintenance of supplier documentation, improved supplier data, increased transparency of supplier offerings, and support for operational risk, including cybersecurity risk.

“The connected due diligence approach can help elevate the industry to a higher standard, and remove some of the risk inherent in go-it-alone standards creation,” said Neil Katkov, PhD, senior vice president, Asia, and author of the report.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
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Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

1

 

Key Research Questions

1

Connected Due Diligence for Supply Chain Risk

2

 

Combatting Redundant Effort

3

 

Connected Third Party Management

3

 

Best Practice in Operational Risk

4

 

Cybersecurity

5

 

The Third Party Management Lifecycle

5

Conclusions

7

Background

8

 

About Markit

8

Leveraging Celent’s Expertise

9

 

Support for Financial Institutions

9

 

Support for Vendors

9

Related Celent Research

10

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