Third Party Risk: Major pitfall Fintechs must guard against – Dr. Oseni

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The President, Risk Management Association of Nigeria (RIMAN), Dr. Ezekiel Oseni has identified third party risk as a major pitfall Fintech companies must avoid if they are to effectively and efficiently deliver service.

Oseni who made this declaration at the 2022 Annual Conference of the Finance and Business Online Publishers ( FiBOP), themed, “Harnessing Fintechs for Economic Growth and Development”, ‘in Lagos advised Fintechs to always evaluate the security of third-party vendors, insisting that all it takes is one vendor to cause a third-party data breach.
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Dr. Oseni in his lecture titled, “Hedging Against Fintech Risk In Financial Services Delivery”, harped on the need for enforcing strong access reporting; auditing and third-party vendors monitoring as well as conducting compliance audits and checkups as important in checking third-party breaches.

This is in addition to ensuring vendors are well experienced and certified by various international standards.

While positing that Fintechs have a vital role to play in accelerating the recovery of the economy by facilitating loans and payments, supporting SMEs and driving financial inclusion, charged regulatory bodies on creating compliance policies and internal controls, conducting compliance audits and checkups, implementing training and stay updated with recent guidelines and also keep abreast of technological development that can impact or disrupt organisations.

Other risk mitigating factors in this regard, Dr. Oseni declared, include securing computers, servers and wireless networks, use of data backdrops that include off-site or remote storage, regular update of software to the latest versions and the training of staff in IT policies and procedures.

Dr. Oseni insisted that the drive for innovation occassioned by the challenges of the external environment on organizations gave rise to the introduction of financial technology.

“The challenges posed by the external environments on organizations have put many organizations that want to remain relevant and deliver value to its stakeholders to make innovation constant factor.”

“It takes a risk taker to be innovative. As risk managers, we should be supportive of innovations and creativity in business processes, products and service delivery and more importantly customer satisfaction.

“One of the areas that innovation has become very obvious in recent times is the financial industry with financial
technology (Fintech)”, he said.

He further noted that the Advent of the cashless policy of the Central Bank of Nigeria, CBN was a stimulator for the emergence of Fintech as well as created the environment for it to thrive and was further fueled by the Advent of the COVID – 19 pandemic.

“The emergence of COVID-19 early 2020 with the attendant lockdown as banks could not operate msde Fintech as the virtual banking where funds can be sourced, transferred and spent very handy. It became the way out for everyone during the lockdown to reach out to people in financial needs across the world and to transact businesses”, he added.

The RIMAN President listed some other major risks to include fraud and money laundering risk, lack of funding or underfunding, competitive market place and cybersecurity risk amongst others.

Photo: Dr. Ezekiel Oseni, President, Risk Management Association of Nigeria, RIMAN.

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