Managing third-party risk is a challenge for any organization - but for credit unions, in my experience, the stakes are even higher. I have personally observed that, with limited resources and rising regulatory scrutiny, many credit unions find themselves navigating a high-liability environment with few tools to mitigate their exposure. I’ve been in both the tools business and a direct provider in my career. It’s an ever riskier dilemma that’s becoming harder for credit unions to ignore.
What Is Third-Party Risk Management?
In short, it’s your plan for making sure your partners don’t become your biggest risk.
But more specifically, Third-Party Risk Management (TPRM) is the process of identifying, assessing, and controlling risks associated with outsourcing to vendors, suppliers, and partners. According to industry definitions, TPRM aims to ensure that third parties comply with regulations, protect data, and uphold the security and performance standards expected by the institution and its members. Take a look at all of the latest breaches, and you’ll find that they typically have a third-party component that broke down/was defeated by hackers. Flagstar was breached in 2021 due to a File Transfer Appliance, and JPMC in 2014 by a compromised login credential at a vendor.
The Problem
Every credit union - no matter its size - relies on an ever-growing list of third-party vendors. That risk isn’t one-dimensional. Vendor relationships introduce reputational risk, regulatory exposure, cybersecurity vulnerabilities, financial inconsistencies, and data privacy concerns.
Even worse, risk isn’t static. A vendor that’s compliant and low risk today might suddenly become non-compliant tomorrow due to operational changes, data breaches, or new regulatory requirements. Treating risk as a single checkbox can be a very costly mistake.
The Cost of Getting It Wrong
The numbers are sobering, to say the least. The average cost of a data breach in the U.S. last year hit $9.48 million. For credit unions, that number jumps by 15% when a third party is involved, far exceeding the liability limitations of credit union vendors. Why so much? Coordination delays, legal complexity, regulatory consequences, and loss of member trust all add layers of damage.
When vendors are part of the problem, remediation is slower and reputational recovery takes longer. It’s not just the financial impact - it’s the erosion of trust that can take years to rebuild.
So, What’s the Answer?
There’s no shortcut to effective third-party risk management. Avoidance isn’t a strategy, but alignment is.
In my experience, most effective TPRM programs align people, process, technology, and data. I’ve spent years selling in the technology industry and have seen that when you lack any one of these elements, the whole structure becomes unstable. For a credit union, “better TPRM is possible” in a cost-effective manner through intelligent hiring, fractional support, and occasional temporary capacity expansion.
I have teamed up with CC Pace to help credit unions build and staff risk programs that are sustainable, scalable, and smart - because when the risk is shared, the management of that risk should be shared too.
Need help building a better TPRM strategy?
Let’s talk about how CC Pace and I can help you find the right people and strategy to protect your credit union from avoidable risk.
Connect with me to learn more about our Risk Advisory Talent Services.