Termination of a Third Party or Breaking Up Should Not Be Hard To Do

One of treats each month for the compliance professional is reading the GRC Illustrated column by Carole Switzer, President of the Open Compliance and Ethics Group (OCEG), in the Compliance Week magazine. Not only does Switzer write a highly informative and useful column but she also includes two standard features. The first is an illustrated guide that lays out visually her counsel and the second is that she also includes interviews from a Roundtable of compliance industry participants. In the July edition Switzer discussed an issue that brings much gnashing of teeth to both compliance practitioners, lawyers from the legal department and business folks alike; the situation where you must terminate a third party relationship.

In the article, entitled “Breaking Up Is Hard To Do”, Switzer relates how ‘to avoid pain by planning for the end of a third party relationship’, together with an illustrated diagram of “Third Party Risk Management in Financial Service”; she couples these with a Roundtable on “Financial Sector Third Party Risk” with participants Walter Hoogmoed, Jr., a Principal at Deloitte, Marie Patterson, VP-Marketing at Hiperos, and Billy Spears, Chief Ethics, Privacy and Compliance Officer at Hyundai Capital America.

Switzer begins by noting that it all should begin with “an exit strategy, a transition plan or a pre-nup—whatever the title, it’s best to begin by planning for the end which, in the case of business at least, will always eventually come. Whether due to contract completion or material breach, turning over responsibility to another party, or abandonment of the contracted activity altogether, contract termination is an inevitable phase in the third-party relationship lifecycle.” Planning for the end is important because, “The more long term and layered the relationship, the more difficult it will be to disentangle ...

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