More and more financial institutions are following their peers in other industries by outsourcing IT services to the cloud and other third-party vendors. This move makes sense, as it provides flexibility for the financial firm and frees up resources for improvement.
The governing body that oversees these financial institutions and their third-party outsourcing is the Financial Conduct Authority (FCA), a membership-based financial regulatory body in the United Kingdom. It ensures financial institutions follow a certain set of operating standards deemed safe by the FCA.
And although the FCA is on board with the financial industry outsourcing tasks to the cloud, it’s also cautious about the potential risks it introduces. Because of this, it’s created the FCA FG 16/5 standard to identify, monitor, and prevent risks when it comes to financial institutions outsourcing to third parties.
FCA FG 16/5 and Vendor Risk Management
The FCA FG 16/5 was added to the general requirements of the existing systems and controls (SYSC) sections of the FCA. With that in mind, it complements the existing rules, including the GDPR. In fact, FG 16/5 completes the directions for vendor risk management (VRM) for cloud outsourcing agreements, such as:
- – A framework for deciding to outsource and choosing third-party vendors
- – How to execute vendor risk assessments for chosen partners
- – Requirements for tracking vendor activities consistently and preventing risks
Overall, the FCA FG 16/5 guidelines require financial firms to provide proper vendor risk management, oversight of a service provider, data security, and effective access to data. All of this takes time, man hours, and attention to detail. Manual errors aren’t an option, so automation is a must.
How to Automate Compliance
Automating compliance with FCA FG 16/5 with vendor risk management software is a no-brainer. The leading providers in IT VRM have the experience, technology, and services to cover all the bases for this important standard. Because it’s almost an exact science, financial institutions can rest easy knowing they’re in full compliance with FCA FG 16/5 guidance at all times.
VRM software supplies comprehensive tools for policy management, as well as analysis, auditing, and reporting. Information security teams can easily verify third-party compliance with security, privacy, and legal specifications.
With access to a library of questionnaires and vendor assessments, financial institutions will be alerted to any potential red flags with vendors before signing a contract. This could be anything from data breaches, to cyber weaknesses, to financial problems. Potential risks can be pinpointed well before they happen, escalated to the proper decision makers, and addressed immediately.
Financial institutions who don’t opt to automate compliance with vendor risk management software face expensive, time-consuming, and error-ridden processes.
Getting Started with VRM Software
Unlike software for other business functions, a vendor risk management platform can be up and running in weeks. Most solutions are user-friendly, with customizable dashboards and teams of professionals standing by.
OneTrust Vendorpedia offers all of these benefits to its users because we believe in intelligence and automation to scale vendor risk management programs for financial institutions. FCA FG 16/5 compliance capabilities are built in, with vendor assessments and processes ready to use.
It’s no coincidence that we’re trusted by over 4,500 businesses across the world for vendor risk management. If you’re a financial institution that needs to get started with automating outsourcing to the cloud, start a free 14-day trial with OneTrust Vendorpedia today. Or reach out to request a demo with one of our VRM experts.