Risk Assessments

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  • 1.  Financial assessments on 4th Party

    Posted 01-04-2022 08:03 AM
    We do a unique partnership with third parties but we will look at their third parties (our fourth).   On the Critical vendors, we will do a quasi review of them financially based on the information provided as well as we will do some research online.    
    Is anyone using a checklist in this type of situation on items looking for?  I am trying to look at a uniform process.


  • 2.  RE: Financial assessments on 4th Party

    Posted 01-06-2022 03:37 PM

    Hi there Scott -

    It is prudent you are moving forward with financial reviews on fourth parties, akin to the best practice of performing financial reviews on your own third parties.

    In terms of a checklist / guidepost you can utilize to get details on fourth parties, the below is a representative set of items to request and look for, which is generally consistent with approaches and details you can request on third parties.

    If you have direct contact with fourth parties or access to their information to request details (see below for public vs. private fourth party guidance), look to request or achieve some or all of the following:

    - Financial statements (income statement, balance sheet, cash flow statement) for a minimum of the last 2-3 years
    - Audit letter and corresponding audited financial statements
    - Letter from a finance lead / management on financial health / position
    - Management discussion and analysis on financial trends and performance
    - If the fourth party is public, most of this information is available on its annual and quarterly financial statements released to the SEC Edgar website (if US-listed), SEDAR (if Canadian listed), or on the company's website directly
    - If the fourth party is private, you can include questionnaires or due diligence request lists that ask for the details above or asks direct questions on certain information you need to do a minimum financial review (e.g., questions like: what is your annual revenue? annual gross profit? annual operating income? annual net income? current assets and current liabilities? total assets and total liabilities? total debt? total stockholders' equity?

    Hope this is helpful in your reviews and internal processes. I'm interested to hear what others are doing, too. 

    Ramin Zacharia




  • 3.  RE: Financial assessments on 4th Party

    Posted 01-06-2022 03:50 PM
    Ramin, thank you for the response.    That is in line with what is being done now.  Coming from a bank were I was managing to a Third Party instead of a Fourth Party has been interesting.   Really only time I was truly concerned previously is if they had access to customers PII.