Financial Risk Manager Part 2
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In the context of a bank aiming to finalize an agreement with a third-party service provider specializing in loan origination and credit services, what would be the most appropriate set of due diligence measures that the bank should implement beforehand?
A
The bank should audit the service provider's operational processes and also give the service provider the similar right to audit the bank's processes.
B
The bank should purchase insurance to cover potential losses resulting from the provider's services and should require that the provider deposit collateral with the bank to mitigate performance risk
C
The bank should determine the compensation structure for the provider's sales representatives and ensure that it incentivizes their productivity through a high proportion of variable compensation. The bank should define specific events that are considered a default under the contract and give the provider an opportunity to resolve a default before terminating the contract.
D
The agreement should define specific events that constitute a default, and the bank should give the provider an opportunity to cure the default if one of these events occur instead of immediately terminating the contract.