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5/20/14 - Oversight of Third Parties: Outsourced Activities, Retained Responsibility

Enhanced expectations for how financial firms manage their relationships with third parties and the costly consequences of failing to do so properly are prompting major changes in both the processes and business case for outsourcing. New standards from prudential regulators break new ground in setting forth a dynamic oversight model to govern the entire life cycle of a third-party relationship. 

The net effect is to ratchet up the expectations for processes designed to make sure these relationships do not threaten safety and soundness or consumer protection. Firms — large and small, bank and nonbank — cannot delegate that responsibility, and therefore bear the risk of third-party errors. Please click below to read a Sightlines InFocus by Julie Williams, Chris Lewis, and P-R Stark that discusses the new expectations, and explains what firms of all sizes should consider as they solve the puzzle of substantially upgrading oversight while preserving the economic case for outsourcing.

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