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By Simon Cartlidge, CRO (L&G Retirement Solutions), Legal and General
What risks come with reliance on third parties to provide infrastructure or processes, and how can these risks be managed?
Firms are free to contract with third parties to support the delivery of products and services, but it is crucial to remember that they can’t delegate the regulatory responsibility they have. Contracting with the right third party can help to mitigate risk and provide good customer outcomes, but this isn’t automatic and shouldn’t be assumed.
As a minimum, firms must ensure they have:
- Policies and processes in place to identify and select appropriate third parties;
- Robust contractual arrangements (incl. service level agreements (“SLAs”)) in place;
- Knowledgeable/skilled resources to provide effective oversight of third party performance;
- Adequate contingency arrangements to ensure continuity of service and resilience.