Financial institutions rely heavily on third-party partners, from financial management to day-to-day operations. When a third-party provider fails, the entire organization can be compromised. To safeguard operations, financial institutions need to proactively monitor the financial health of their third-party partners, especially private ones, at least twice a year.

Here are 7 tips to incorporate into your third-party risk management program:

1. Early Risk Detection: Financial assessments help identify signs of distress, such as declining revenue or increasing debt, allowing you to mitigate risks before they impact your operations.
2. Operational Stability: Regular financial checks (minimum of 2 times per year) ensure third-party partners are stable and capable of meeting their commitments, reducing the risk of disruptions.
3. Cost Management: Monitoring financial health helps anticipate and manage potential cost fluctuations or renegotiation needs.
4. Contractual Obligations: Regular reviews ensure third-party partners can uphold their agreements, protecting your interests.
5. Relationship Management: Understanding a third party’s financial health allows for informed discussions about contract terms, support, or adjustments, fostering proactive relationships.
6. Strategic Decisions: Financial health assessments provide data for strategic decisions about third-party relationships, supporting long-term planning and risk management.
7. Compliance and Due Diligence: Regular evaluations ensure compliance with regulatory standards and contribute to a resilient and trustworthy operation.

RapidRatings provides visibility into the financial risk of third-party partners by gathering financial information directly from them, generating risk ratings, and calculating the likelihood of default. This proactive approach helps safeguard your operations.

Talk to one of our experts about our private company outreach program.