TPRM FLOD Centralized-Decentralized Debate

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Global SRN is currently leading a significant market research program on the ‘Impact of Intelligent Automation and Data Analytics on TPRM Operations’.  As the leader of this program, I am in the fortunate position to consolidate the input from our 30 TPRM leaders who comprise the Advisor Team and the now 15 Community Partners. Last week I shared the insight pertaining to the skill challenge impacting TPRM operations. I want to share a second observation concerning FLOD structure.

We have received a tremendous amount of comment on the subject of TPRM FLOD structure. What should be a straight forward 3-tier structure, continues to be an area of confusion and exposure across a surprising number of those providing survey input.

Questions are typically in 2 primary areas:

If your FLOD is ‘centralized’:

  •  How do you make certain your associates are integrated and viewed as a contributor by the line of business team?
  • Are they ‘risk-skilled’ – ‘expert in the assigned LOB’ – Both?

If your FLOD is ‘decentralized’:

  • Do the associates report to the SLOD organization or LOB?
  • Is FLOD activities executed by a full-time associate or are task assigned to existing LOB staff such as vendor management?
  • How do you ensure the FLOD activities are viewed as core versus optional?

Both approaches CAN produce the desired and required results IF LOB leaders and risk leaders work together to carefully identify roles, responsibilities, task and activities. While it is no small undertaking, this extra effort always produces positive results.

 

TPRM Dilemma – Skill Gap Widening

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In my role with Global SRN, I am leading a major market research program to identify the impact Intelligent Automation and Business Analytics is having on current TPRM operations. We are very pleased to share that in all we have 30 TPRM Executives from large global financial organizations, 13 TPRM community partners and 3 academic partners helping develop, distribute and interpret the research results.

As I speak with leaders in each of these areas of the TPRM community, a consistent theme has emerged: TPRM organizations are struggling to secure the skills necessary to support todays operations and are highly concerned about the ability to identify and attract the skills necessary to transform their operations to meet business and regulatory demands. The core issue being how to evolve a community of operational risk professionals from a ‘rule-based’ orientation to a ‘judgment-based’ capability.

With the adoption of Business Analytics and Intelligent Automation, TPRM leaders will require First Line of Defense teams that understand the dynamics of their assigned Line of Business combined with analytical skills to quickly identify patterns and irregularities to take proactive measures. With the population of FLOD associates today primarily having operational risk backgrounds, there is likely a significant re-alignment on the horizon.

Global SRN TPRM Program Launch

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The team at Global SRN (www.globalsrn.org) is pleased to announce the formal kick-off of the research program ‘Impact of Intelligent Automation & Data Analytics on TPRM Operations’.  A true community effort, Global SRN has formed an Advisory Panel of leading TPRM executives along with Academic Partners such as Carnegie Mellon and Community Partners such as KPMG, EY, Grant Thornton, Rapid Ratings, Aravo, WorkFusion and other TPRM participants to develop a comprehensive insight to this emerging issue. If you’re interested in joining the team, please let me know!  

Is Intelligent Automation the Key to Unlock TPRM Value?

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There are multiple operational ‘Maturity’ assessments promoted throughout the Third Party Risk Management community. Each offers a unique perspective and definite orientation on which operational capability and maturity is measured. What most of these assessments seem to have in common, is a mature TPRM organization (Level 4 & Level 5) introduces analytics to their operation.

Currently, the data captured in TPRM & GRC platforms is basic, essential data points. Much of which has been developed to meet or satisfy regulatory requirements. What happens when we take a fresh look at the information TPRM can collect and maintain with an eye toward business value?

Collaboration between IA platform providers, GRC & TPRM platform providers, data feed and dynamic reporting partners and implementation partners offers significant potential to help TPRM and GRC leaders unlock value. Global SRN (www.globalsrn.org) has initiated a research program with Academic and Market partners to facilitate this interaction. If this is an area of interest, please leave a comment in TPRM Forum’s Contact page and we will respond.

Intelligent Automation Impact on TPRM Operations

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The Global Sourcing Research Network (www.globalsrn.org) announces the formation of the TPRM Sub-committee to support members increasing focus and engagement with vendor risk. The initial focus of the TPRM sub-committee is the introduction of a market research effort to identify emerging use case of Intelligent Automation in Third Party Risk Management operations.

As a market survey, Global SRN will engage Academic and Community partners to participate in design, execution and analysis of the results. The goal being to identify current and emerging IA use cases and document best practices to benefit TPRM operations. Potential Academic Partners include Carnegie Mellon University, NC State and others. Community Partners will feature leading Intelligent Automation firms, Governance, Compliance & Risk (GRC) platform, managed service and consortiums as well as advisory firms.

If you are interested to learn more about the Global SRN TPRM sub-committee, please visit Global SRN or TPRM Forum.

 

Is Your GRC Platform Incomplete?

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It is well documented that TPRM leaders continue to invest in GRC platforms to enable risk operations. In TPRM Forum’s recent survey, nearly 40% of TPRM leaders indicated investment in a GRC platform will be their leading action to mature and enhance capabilities.

So why are some TPRM leaders experiencing sub-optimal GRC performance?

Governance, Risk & Compliance platforms, like any sophisticated technology tool, offers significant capabilities. While user friendly, they require significant integration, workflow design and ongoing maintenance. This is not a trivial level of effort and requires the appropriate skills to realize the intended value.

TPRM Forum’s PULSE Assessment methodology documents a TPRM organizations maturity in addition to operational risk and environment complexity.  Through these efforts, TPRM Forum observes a consistent result: TPRM operations with dedicated, technically capable GRC Platform Administrators achieve greater maturity, operational capability and significantly more value from their GRC platform. Unfortunately, true dedicated GRC Platform Administrators are in the minority of TPRM operations today.

Perhaps GRC platform providers contribute to this challenge as they highlight the flexibility and ease of use of their technologies. ‘Drag-n-Drop’ workflow creation and well-designed user interfaces may mislead TPRM leaders as to the underlying complexity, creating an impression a technical role is not required. When GRC Administrator role is missing, TPRM Forum observes significantly lower levels of GRC platform utilization, integration management and maintenance challenges and continued proliferation of other solutions, limiting the GRC platforms ability to achieve comprehensive, cross-organization integration.

A GRC platform is the core underpinning of risk operations. Make certain to include budget for a technically competent platform administrator to realize the intended value and benefit.

TPRM: Level 3 Maturity & Beyond

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TPRM Forum’s recent survey of TPRM leaders identified effective collaboration of FLOD operations with Vendor Management, Strategic Sourcing and Procurement as the leading area of focus for improvement. Alignment across the cross-functional teams has the potential to achieve comprehensive vendor life cycle management and evidence support. The issue though is how to centralize and coordinate activity.

Looking specifically at the ‘monitoring’ phase of Third Party Risk & Vendor Management, we quickly see there are a number of activities, if coordinated and managed centrally, will provide regulators and audit the evidence required to substantiate effective TPRM operations. It also drives a productive level of collaboration and in essence, bonds the teams.

Third Part Risk Management ‘Monitoring’ Life Cycle Phase includes, but is not limited to, the following activities:

  • Vendor Management Organization:
    • Contract Management – collection and maintenance of the Deliverable & Obligation tracker with a structured, formal calendar of events. Artifacts stored in central, accessible location. This could include annual Insurance certificate, SOC II Type II Audit, DR Annual Test Results, Policy revisions etc.
    • 4th Party Management – definition and approval of 4th party sub-contractors and execution of proper onboarding and offboarding by the Third Party
    • Performance Management – SLA & KPI’s associated with the contracted services
    • Operational Service Management – onsite assessments of the technology services aligned to CMMi, ITIL, NIST or similar independent methodology
  • Third Party Risk Management – FLOD:
    • Inventory maintenance
    • Third Party Classification
    • Ongoing, dynamic monitoring (Business dimensions)
    • RCSA management &/or coordination
    • Concentration identification
    • Regulatory environment changes and Legal Impacts
    • Regulator response support
    • Centralized reporting/vendor profile
  • Strategic Sourcing:
    • Contract Currency – Revision and Amendment Maintenance

TPRM Forum recommends consistent, ongoing collaborative sessions between parties to ensure activities and schedules are maintained and a central, accessible repository is continually updated. This is a great opportunity to work with your GRC platform team to ensure activities and artifact collection is incorporated into workflow with artifacts accessible through a central dashboard.