30 August 2022
On 5 August 2022, the Monetary Authority of Singapore (“MAS”) released an information paper titled Operational Risk Management - Management of Third Party Arrangements (“Information Paper”).
MAS conducted thematic inspections on the operational risk management standards and practices of selected banks, with a focus on third party risk management, over 2020 and 2021. The Information Paper sets out good practices relating to third party risk management that MAS expects to see in banks. Areas covered include governance and management oversight, due diligence, and ongoing monitoring.
MAS expects all banks to benchmark their practices against the Information Paper. The design of banks’ controls would take into consideration their specific organisational structures, business models, scale of operations, and risk profiles. The Information Paper summarises the desired outcomes and provides additional details on certain practices through the use of case examples noted from the inspections.
While the focus of the Information Paper is on banks, the good practices highlighted should be referenced by all financial institutions (“FIs”) given that they are exposed to similar risks. Non-bank FIs are encouraged to adopt the recommended practices where relevant and appropriate to the materiality of the risks posed by their third party arrangements.