Greg Robinson Discusses Regulatory Reform and Compliance in the Field Services Industry
The June issue of MReport featured an article authored by Safeguard’s Chief Financial Officer Greg Robinson, titled Front of the Class.
Front of the Class
Regulatory reform brings compliance and third-party oversight to the forefront of the field services industry.
When President Obama signed the Dodd-Frank Wall Street Reform
and Consumer Protection Act of 2010, it represented the largest set
of financial regulatory reforms seen in the United States since the Great Depression.
The wide-ranging and comprehensive legislation significantly
impacted every aspect of the financial services sector—and the field services
industry was no exception. It is imperative that field services companies make
the appropriate investment in resources, both human and technology, to
minimize clients’ exposure to the risks of noncompliance for a wide range of
requirements. Those not committed to compliance and the necessary investment
will not survive the new regulatory environment; those who embrace the
compliance requirements will strengthen their organization and the industry in
While not all-encompassing, the regulatory environment that field services
companies must operate in include but are not limited to:
- Consumer Financial Protection Bureau (CFPB) rules and regulations
- False Claims Act provisions
- Gramm-Leach Bliley Act (GLBA)
- Protecting Tenants at Foreclosure Act (PTFA)
- Service Members Civil Relief Act (SCRA)
- Fair Debt Collections Practices (FDCPA)
- Unfair Deceptive or Abusive Acts or Practices (UDAAP)
The financial services industry has invested heavily in their audit and compliance
functions to ensure there are proper frameworks in place to assess their suppliers’
adherence to applicable rules and regulations. This has fostered a renewed sense
of partnership and collaboration within the industry as client/vendor audit and
compliance teams have worked side-by-side to identify gaps, implement monitoring
procedures, and create best practices around adherence to these important
requirements. Importantly, organizations that provide services in this space must
embrace the new environment and ensure that executive leadership is engaged and
provides thought leadership to their teams in this dynamic regulatory environment.
Financial Services Focus on Compliance and Audit
There is a renewed focus and investment on vendor oversight within the financial
services industry. Typically, the vendor management department of these
organizations will risk rank their vendors based on predefined criteria such as
annual spend, service provided, potential risk to the organization, and maturity
of the suppliers’ systems and processes. In the course of a year, depending on
their size, a field services company could undergo close to 75 onsite and desk
audit assessments. There’s no question audits can be time consuming, but each
audit should be looked at as an opportunity to strengthen and enhance existing
There are two focused audits that field services companies undergo: vendor
compliance audits and global information security audits. These audits are
focused on different criteria but often overlap in a number of areas. The
global information security audits are generally focused around the ISO 27002
control set, Information Technology Infrastructure Library (ITIL) controls, Control
Objectives for Information and Related Technology (COBIT) controls, and other
IT-related control frameworks. From a testing perspective, the IT auditors
perform reviews of:
- Physical security
- Business continuity and disaster recovery
- Software development and change management procedures
- Application permission and authority levels
- Data integrity and protection (encryption)
- Network vulnerability testing
As field services companies typically receive and utilize confidential consumer data,
it is imperative that the controls safeguarding this data are robust, comprehensive,
The vendor compliance audits focus primarily on the business processes and
procedures and the frameworks by which controls are in place to ensure quality
service delivery. Comprehensive business process control walkthroughs are
performed and transactional control testing is conducted to ensure compliance.
In the past year, the audits have expanded their scope to ensure compliance with
regulations and to assess the field services companies’ policies and procedures
as they relate to:
- Comprehensive customer complaint tracking systems
- Legal complaint tracking systems
- Background check validation for anyone who performs
services on a property
- Human resource management and systems entitlement reviews
- Customer service call monitoring
- Vendor management controls and scalability of network
- Protection of confidential customer data and adherence to
Upon completion of the audit, an exit conference is conducted to share any
findings, risk rank those findings based on a severity matrix, and agree upon
remediation activities and timelines. This also is an opportunity for the vendor
to respond to any misinformation and agree upon the formal execution of a
CAP, or corrective action plan. Progress on the CAP is monitored monthly
and evidence is provided to close out action items once completed.
To ensure compliance, many in the field services industry have invested
heavily in resources to manage their organizational risk as a supplier. From
new technology and the expansion of in-house internal audit and compliance
teams, a strong partnership of collaboration with clients is formed to proactively
and aggressively manage risk and to ensure the frameworks are in place to
maintain regulatory compliance and fully protect the consumer.
Enhanced Focus on the Supply Chain
As third-party oversight and compliance has become more formalized, it should
be seen as an opportunity to expand activities focused on the compliance and
quality frameworks of third-party providers. While many field services
companies have implemented robust administrative compliance and verification
activities when onboarding vendors in the past, much like the financial services
industry, some have taken the process to the next level by including onsite
vendor audits at their headquarters as part of the overall audit.
So what are some best practices to consider when designing a framework
for establishing the nature, timing, and extent of audit procedures? First,
perform a high-level risk assessment or tierranking activity across all
service lines to place vendors into risk categories. The purpose of the
assessment is to group vendors into “risk” tiers to determine the audit
frequency as well as to properly schedule and execute on a plan.
To facilitate an audit program, contracting with a national independent
audit firm is highly suggested. The company’s subject matter experts
can work hand-in-hand with the firm to create the audit plan, scope, and
program. The scope can include compliance issues, administrative
oversight activities, control frameworks, and substantive testing of
work orders and human resource practices. The following includes
a brief overview of the focused audit and control objectives.
Internal file review—Vendor files are inclusive of verification of proper
insurance; required acknowledgements are executed by applicable
vendor personnel; evidence of required background checks are
available; confidentiality agreements protecting client data have been
executed; and diversity certifications are present if applicable.
Business process walkthroughs—Auditors perform a general
walkthrough of the organization’s controls surrounding the applicable
business processes they perform. Gaps are discussed and best
practice discussions are offered to improve the capacity of the
Work order testing—Substantive testing focused on key criteria is
conducted on a representative sample of vendor work orders.
License affirmations—File reviews are conducted to validate that the
organization maintains the proper licensing as required by its jurisdictions
and applicable professions.
Quality control framework—A review is conducted of the organization’s
quality control processes and procedures. Evidence is noted for the nature,
timing, extent, and tools utilized to formalize its quality program.
Similar to the client audits we undergo, an exit conference is conducted
to share any findings, risk rank them based on a severity matrix, and
agree upon remediation activities and timelines. A formal CAP is executed
and progress is monitored monthly.
Compliance Frameworks and Executive Ownership
As should be evident by the increased investment in third-party oversight,
executive involvement in compliance activities must be focused and
committed. It is a dynamic environment we are operating in and having
appropriate frameworks in place to be agile, to efficiently identify risks,
and to make procedural adjustments and resource investment is critical.
Anticipating client needs, implementing best practices to minimize their
risk, and creating comprehensive frameworks to ensure transparent
communication protocols are in place from the operational departments
to the boardroom should be a priority in any organization. To proactively
identify and mitigate risk in operations and vendor network, and create
an environment of continual process and procedure improvement, a
nimble governance structure is recommended.
While there are varied ways organizations can accomplish these objectives,
a streamlined committee approach consisting of a cross section of
executive and service-line leadership will enable companies to ensure
consistency and transparency of duties for their clients.
The purpose of the Compliance Committee is to ensure compliance and
ethical behavior within the organization by defining responsibilities and
ownership, increasing awareness of compliance requirements, and
providing a mechanism for identifying and responding to new
requirements and noncompliance with existing requirements.
The committee has general oversight responsibility for compliance
programs, policies, and procedures.
The purpose of the committee is to oversee the company’s
implementation of compliance programs, policies, and procedures
that are designed to be responsive to the various compliance and
regulatory risks; assist the organization in fulfilling its oversight
responsibility for the compliance and ethics programs, policies,
and procedures; delegate responsibility for ensuring compliance;
and determine prioritization and resources necessary to have an
effective compliance program.
Security Advisory Board
The purpose of a Security Advisory Board (SAB) is to provide continuity
of knowledge, leadership, executive oversight and guidance for security
policies and activities. The SAB acts as the governing body for risk and
compliance for all of the organization. This includes both physical and
Through the assessment of security risk and application of appropriate
controls, the SAB is continually focused on the protection of confidential
data and integrity of assets in support of business objectives, physical
and financial resources, reputation, legal position, employees, partners,
and other tangible and intangible assets.
Comprised of executive leadership, the Quality Council’s main focus is
to review progress on quality assurance efforts and drive change based
on the results of internal audits and quality assurance initiatives. The
objectives of the Quality Council include:
- Report on key metrics such as quality control results and internal
operations audit findings.
- Discuss trends impacting quality of services and agree on
short- and long-term actions to address quality problems.
- Provide updates on quality improvement initiatives and
prioritize quality improvement initiatives and resources.
The governance structure can be organized within any framework that
meets the organization’s goals and objectives. The key point is that
executive leadership is continually involved in risk management and that
a transparent and actionable environment is created within an organization.
The enhanced focus on compliance brought on by the regulators has
proven to provide a solid framework for third-party oversight—something
that was much needed in the field services industry. Those who welcome
the changes and continue to invest in the resources necessary to improve
their organization will continue to flourish in this dynamic environment. This
requires the collaboration and partnership with their clients, executive
ownership, and understanding of risk factors that affect day-to-day activities,
proper investment in both human and technological resources, and a focused
partnership with vendors through collaborative third-party oversight.
Please click here for the article in PDF.
Safeguard Properties is the largest mortgage field services company in the U.S. Founded in 1990 by Robert Klein and based in Valley View, Ohio, the company inspects and maintains defaulted and foreclosed properties for mortgage servicers, lenders, and other financial institutions. Safeguard employs approximately 1,700 people, in addition to a network of thousands of contractors nationally. Website: www.safeguardproperties.com.