For banks, credit unions, asset managers, fintechs, and insurers, third-party risk is no longer a side issue handled quietly during onboarding. It increasingly edges closer to the center of operational resilience, incident response, regulatory scrutiny, and board reporting.
One of the core messages shared during our webinar, “What SOC Reports Reveal About Vendor Cyber Risk,” was that accountability for cyber risk does not transfer when services are outsourced. Organizations still absorb the consequences when a vendor incident disrupts operations, exposes data, or raises questions from regulators, auditors, and/or customers. SOC Reports can help but only when they are used intentionally, in context, and as part of a broader vendor risk management process.
That concept matters because some institutions still treat SOC Reports as a proxy for vendor safety. However, reframing the purpose of a SOC Report can help move organizations beyond “check the box” activities.
SOC Reports support a reasonable, defensible decision about vendor risk at a point in time.
This distinction is important in financial services, where post-incident questions often come quickly: Why was this vendor approved? What did management review? Was monitoring current? Could the institution explain its judgment to internal audit, regulators, and the board?
This article provides a deeper exploration into how financial institutions can use SOC Reports to make vendor risk decisions more defensible.
Why SOC Reports Alone Are Not Enough for Vendor Risk Management
American Institute of CPAs guidance and current vendor-review content continue to position SOC 1 and SOC 2 Reports as important tools for understanding controls at service organizations and for helping user entities assess outsourced-service risk. Those same resources also make it clear that users need to evaluate scope, report type, dates, testing results, Complementary User Entity Controls (CUECs), and subservice organizations, not merely collect the report and move on.
For financial institutions, those details have become more important because the regulatory environment is moving in the same direction (as evidenced by the 2026 legal and compliance landscape, including SEC Regulation S-P amendments, NYDFS Part 500 requirements, evolving breach-notification expectations, cross-border data restrictions, and international frameworks such as DORA1).
The Reg S-P summary from Forvis Mazars notes that covered institutions must maintain written incident response procedures and oversight of service providers and provide notice to affected individuals as soon as practicable, but not later than 30 days, in certain circumstances. In other words, vendor oversight increasingly connects to regulatory obligations which extend well beyond collecting third-party documentation.
What Should Financial Institutions Look for First in a SOC Report?
Time-constrained teams do not need to read every section of a SOC Report with the same weight regarding vendor risk. There are certain areas to prioritize reviewing, such as scope alignment, exceptions, subservice organization exposure, CUECs, report timing, and whether the vendor appears to have an effective vendor-management program behind the report. This information can help inform vendor risk decisions.
Financial institutions can start with scope. Consider whether the report covers the products, environments, geographies, and processing activities on which the institution relies. External guidance echoes this point. Reviewers need to confirm that the services in the report align with the services being consumed, and they need to understand whether subservice organizations are carved out or included within the report. For financial institutions with cloud-heavy environments, that analysis can be critical. A report may look strong while leaving a material hosting, data-processing, and/or operational dependency outside the audited scope.
Next, look at exceptions and opinion language. Although a “clean” opinion is helpful, it may not encompass the whole story. If there are exceptions, a key question is whether they matter to your use case, data, control environment, and/or continuity needs. This distinction is especially important in banking and insurance, where a vendor weakness can affect customer communications, payment operations, underwriting workflows, claims handling, and regulatory response timelines.
CUECs deserve the same treatment. If the vendor expects the institution to perform certain controls for the report to be relied upon, those responsibilities cannot remain theoretical. Thus, institutions should verify that those controls exist within their own environments. For a financial institution, that may include identity and access controls, secure transmission practices, monitoring, or internal review procedures that support how the outsourced service operates in practice.
Consider SEC Regulation S-P, NYDFS, & Insurance Expectations
Aside from SOC mechanics, vendor oversight in connection with specific regulatory and operating pressures is important to remember.
Vendor review has become more than a procurement exercise. It now serves as a mechanism for demonstrating that an organization’s broader control framework is effective. For instance, SEC Regulation S-P amendments establish clear requirements for incident response, customer notice, service-provider oversight, and record-keeping. Similarly, NYDFS requirements mandate protocols such as multifactor authentication (MFA) and formal asset inventory procedures.
For insurance audiences, it’s important to note claim-payout implications and control representations. Incorrect policy application statements, weak controls, missing MFA, and/or poor information security training can affect underwriting outcomes or reduce claim payouts after an incident. A vendor weakness can grow from a security issue into a financial recovery obstacle.
Who Should Review SOC Reports at a Financial Institution?
The right financial institution reviewers are typically dependent on the situation, though their work is a group effort. For example, if the vendor supports payroll, then a payroll team member may need to review certain elements. If the vendor processes or stores sensitive data, then information security, privacy, compliance, and legal team members may all need a seat at the table. If the vendor affects accounting or financial reporting, finance and internal audit team members may need to be involved. A key takeaway here is cross-functional ownership of the review.
For financial institutions, a cross-functional model is likely to matter even more as artificial intelligence (AI) use expands. While widespread AI governance immaturity exists (as technology proliferation outpaces guideline creation), organizations can focus on collaboration across compliance, IT, data, model risk management, and cybersecurity for their AI governance. That same governance mindset applies to third-party AI, model-enabled services, and shadow AI risk inside the vendor ecosystem.
Actions to Consider Now
Financial institutions can be better prepared for issues by reframing the purpose of a SOC review. Treat the report as one input into a documented risk decision, not as proof that a vendor is “safe.” Prioritize the highest-value report sections first. Begin with the scope, dates, exceptions, subservice organizations, and CUECs, and avoid overloading manual reading.
Following this, financial institutions can tie vendor review to regulatory obligations and connect report findings to incident response, service provider oversight, identity controls, and reporting expectations relevant to your institution. Then, use a cross-functional review model which includes risk, compliance, security, legal, procurement, finance, and business owners where appropriate.
SOC review should be a team effort, and that team can help document why the decision was reasonable at a given time. That record may matter as much as the SOC Report itself if an incident occurs later.
How Forvis Mazars Can Help
SOC Reports still have an important place in third-party risk management for financial institutions. Their purpose moves beyond receiving a report to using the information in ways that can help support defensible decisions for financial institutions.
That shift, from report collection to governance-backed judgment, is where stronger vendor oversight begins. For more information on using SOC Reports for vendor risk management and additional SOC services, please reach out to a professional at Forvis Mazars.
- 1“DORA | Updates, Compliance,” digital-operational-resilience-act.com, 2026.