Vendor and outsourcing risk refers to the potential for loss or negative impact on an organization due to issues arising from third-party vendors or service providers. This risk can include disruptions in service delivery, data breaches, compliance failures, and financial instability of the vendor. When companies rely on external partners for critical functions, such as IT services, manufacturing, or logistics, they may become vulnerable to these risks. Effective management involves conducting thorough due diligence when selecting vendors, establishing clear contracts with performance metrics, monitoring vendor performance regularly, and having contingency plans in place to mitigate potential disruptions or failures.

Basel scope:

• Pillar 1
• Pillar 2

Capital requirements:

Mitigated by Capital

Related Links:

•       Basel Framework