<img src="https://ws.zoominfo.com/pixel/pIUYSip8PKsGpxhxzC1V" width="1" height="1" style="display: none;">

Assess Vendor Reputation Risk - Before You Have to Rebuild Yours

author Michael Berman
2 min read
Dec 13, 2016

Vendor risk management is an ongoing process—one that begins with due diligence before a contract is signed and continues with monitoring throughout the length of the relationship. This blog series on the Top 10 risks will help you more effectively address how third-party vendor risk throughout every department in your financial institution.

#8 - Reputation Risk

Ben Franklin once wrote that “Glass, china and reputation are easily cracked, and never well mended.”

It’s a lesson that many financial institutions have learned the hard way as they’ve entrusted their reputation to third-party service providers whose mistakes have caused material damage. Whether it’s lawsuits, outages, fraud or data breaches, consumers notice bad headlines and take their business elsewhere.

Consider the headache $18.4 billion-asset First National Bank of Omaha faced earlier this year when it came out that its credit card add-on vendor charged customers for credit monitoring services they didn’t receive.

Neither customers nor regulators differentiated between the bank and its vendor—blaming the bank for ripping off customers. Not only did the bank pay millions in penalties to the CFPB and OCC, the bad publicity of newspaper headlines costs the bank in customer goodwill. Who knows when the bank will regain this loss of public trust?

Vendor mistakes like this can hurt a financial institution’s reputation, according to the FDIC and OCC, when they cause:

  • dissatisfied customers/poor service
  • frequent or prolonged service disruptions
  • interactions not consistent with institution policies
  • inappropriate sales recommendations
  • security breaches resulting in the disclosure of customer information
  • violations of consumer law and regulation
  • negative publicity involving the third party

While there’s no guarantee that vendor actions won’t damage an institution’s reputation, thorough due diligence can help an institution gauge the risk a particular vendor poses and mitigate those risks. It just takes some digging. The good news is that almost all of those sources are publicly available and easy to find if you know where to look.

It also helps that that many of these reputation risks overlap with other common risks including operational risk, transaction risk, compliance risk, cyber risk and cloud risk. FIs that use a comprehensive approach to vendor management will be best able to leverage existing work in these areas to quickly, efficiently and thoroughly assess reputation risk.

 

Related: Vendor Risk Countdown: Top 10 Risks Third-Party Vendors Pose to Your Financial Institution

Subscribe to the Nsight Blog

All Topics Risk & Compliance Product Insight Banks Lending Compliance Credit Unions Risk Management Fair Lending Nfairlending Cluster: Risk Management Compliance Lending Compliance Management Integrated Risk Blog Nrisk Regulatory Compliance Management News & Updates HMDA Risk Mortgage Lenders Ncomply Vendor Management Business Resiliency CRA Lending Compliance Blog Vendor CFPB Ncontinuity Third-Party Vendor Management Business Continuity Cybersecurity Fintech NVendor Strategic Planning Ncyber Ntransmittal Audits & Findings Company Culture OCC Regulatory Updates Audit Nverify Regulatory Compliance Exams FDIC Compliance Management Findings Nfindings NCUA Contract Management Employee Intranet Contract FRB Business Continuity Management FFIEC Findings Management Ncontracts manager Third-Party Vendors Enterprise Risk Management Vendor Risk ABA Bank Access Control Audit Findings Board Portal Call Report Due Diligence Efficiency Employee Engagement Exam findings FIEC Inc. 5000 Internal Audit Management Nboardportal Verify Wealth Management
Reputational Risk
Risk Management

Reputational Risk

Nov 12, 2018 1 min read
Reputation Risk & the Consequences of Lending Discrimination: A True Story
Fair Lending

Reputation Risk & the Consequences of Lending Discrimination: A True Story

Apr 28, 2021 2 min read
What is A Real-World Example of Fair Lending Discrimination?
Fair Lending

What is A Real-World Example of Fair Lending Discrimination?

Jun 20, 2017 8 min read