With financial institutions increasingly outsourcing their activities, they face a record number of fraud and misconduct cases arising from third-party services. We survey financial institutions to better understand which governance mechanisms may improve the monitoring and management of third-party relationships. Overall, our results suggest that there are gaps in traditional governance arrangements. We find that financial institutions rely mainly on internal monitoring to detect fraud and that whistleblowing plays an important role in mitigating misconduct risks. Finally, we report evidence that vendor dependency and product complexity play a pronounced role in delaying termination of agreements.
|Title of host publication||Corruption and fraud in financial markets|
|Subtitle of host publication||Malpractice, misconduct and manipulation|
|Editors||Carol Alexander, Douglas Cumming|
|Publisher||Wiley-Blackwell/John Wiley & Sons|
|Number of pages||24|
|Publication status||Published - 7 May 2020|
- financial institutions
- fraud and misconduct
- D22, D23, G20, G34
Mc Cahery, J., & de Roode, A. (2020). Governance of financial services outsourcing: Managing misconduct and third party risks. In C. Alexander, & D. Cumming (Eds.), Corruption and fraud in financial markets: Malpractice, misconduct and manipulation (pp. 399-422). Wiley-Blackwell/John Wiley & Sons.