Environmental Risk Advisor:
Environmental Vendor Management

Charlotte, North Carolina - According to the Office of the Comptroller (OCC), a lending institution is expected to practice “effective risk management” regardless of whether the bank uses a third-party vendor or performs the task internally.  Third-party relationships and management of those relationships are addressed by the OCC in OCC Bulletin 2013-29, which was published on October 30, 2013.  The bulletin provides guidance to both national banks and federal savings associations, and rescinds OCC Bulletin 2001-47, “Third-Party Relationships: Risk Management Principles” and OCC Advisory Letter 2000-9, “Third-Party Risk.” 

Management of Environmental Consultants is a critical role for Environmental Risk Managers.

The new OCC guidance emphasizes a 5-phase "life-cycle" process for management of third-party vendors.

The life-cycle consists of:

   •  Planning
   •  Due diligence and third-party selection
   •  Contract negotiation
   •  On-going monitoring
   •  Termination

Management of Phase I Environmental Consultants (vendors) is a critical role for Environmental Risk Managers.  The vendors should be required to provide Statement of Qualifications, including resumes of Environmental Professionals who will be involved with the bank’s projects. In addition, a current Certificate of Professional Liability Insurance, including errors and omissions coverage, should be required.  If there are changes in the Environmental Professionals assigned to the bank’s projects, then the bank should ask to be notified of those changes and supporting resumes should be provided. 

Vendor management also includes monitoring and tracking vendor performance.  Performance metrics to consider when evaluating vendors not only include timeliness and cost, but whether or not the report meets the current ASTM E1527 Standard and the All Appropriate Inquiries (AAI) Rule. Equally important considerations include whether or not the report conclusions are supported by the report findings, and whether or not Recognized Environmental Conditions (RECs) were appropriately identified. 

About Environmental Risk Innovations
Environmental Risk Innovations (ERI) is the nation’s largest environmental risk consulting firm, specializing in the environmental risk management services for commercial lenders.   ERI’s clients include a broad base of commercial lenders, from small regional banks to large banks with national footprints.  ERI develops internal environmental risk policy for commercial lenders, provides third-party review of environmental assessment reports, and conducts Records Search with Risk Assessments (RSRAs)/“desktop reviews” on commercial properties.  ERI is not a traditional environmental consulting firm that performs Phase I or Phase II Environmental Site Assessments.  As a result, ERI’s recommendations represent a truly independent, third-party opinion that conforms to the client bank’s specific risk tolerance. 

For more information on ERI's environmental consulting expertise, please contact Karen Nelson at knelson@eRiskInnovations.com or 704.548.9333.

© 2014 Environmental Risk Innovations, LLC