Third-Party Risk Management Highlights from Spring 2022 OCC Semiannual Risk Perspective Report

The Office of the Comptroller of the Currency (OCC) charters, regulates, and supervises national banks and federal savings associations and licenses, regulates, and supervises the federal branches and agencies of foreign banking organizations. Twice a year, the OCC publishes a Semiannual Risk Perspective Report. It addresses important issues faced by banks and focuses on risks that threaten banks' safety, soundness, and compliance with applicable laws and regulations.

Highlighted risk themes in the report include operational, compliance, interest rate, and credit risks:

• Operational risks, including evolving cyber risks, are elevated, with increased attacks against financial services given current geopolitical tensions. Moreover, banks also face challenges due to "strong competition" in the labor market due to staffing challenges
• Compliance risk remains high due to the current operational environment, regulatory changes, and policy initiatives
• A moderate level of credit risk persists, and specific areas of weakness and potential longer-term consequences result from the Covid-19 pandemic, inflation, and the Russia-Ukraine war

Third-Party Risk Is an Ongoing Concern

The report also includes third-party risk as an ongoing concern. But, more specifically, it reports how the use of third parties directly impacts an organization's risk profile. Third parties are susceptible to the same cyber and many other risks that banks experience. For banks to address risk, they must clearly understand how third parties manage their risks.

Here are a few relevant excerpts from the report:

It's clear the OCC expects banks to be aware of and manage their risks, and third-party risk management plays a substantial role.