Sales practices in the financial services industry have come under increased scrutiny from both regulators and financial institutions since last year. The attention so far has been largely on the financial institutions’ sales practices, which include activities throughout the customer relationship lifecycle from marketing to sales, servicing, and collection. However, the scope is broadening to include third parties, which have been used over the last decade to help institutions grow revenues, cut costs, and improve the customer experience.
Many institutions recognize that effectively managing their third-party operational risk (i.e., risks resulting from people, processes, and systems) is not only important to regulators but is also good business strategy. Institutions can outsource processes, but they cannot outsource accountability for the activities conducted on their behalf. Thus, the failure to effectively manage third-party relationships can lead to financial penalties and long-lasting reputational damage. As a result, institutions should take action to enhance their third-party risk management (TPRM) programs to ensure they are effectively managing the unique risks associated with third parties that interact directly with consumers on their behalf in the sales process.
A publication of PwC's financial services regulatory practice
Financial Services Leader, PwC US