Jargonautica
Governance, Law and Regulation

Third-party Risk

What you remain accountable for when the model is somebody else’s. Regulators and customers hold the organisation using the system responsible for the outcome, regardless of who built it. Outsourcing the technology does not outsource the obligation.

Technical view

Requires an inventory of AI components including embedded features in existing software, risk classification by use rather than by vendor, contractual flow-down of obligations, ongoing monitoring rather than one-off assessment, and contingency planning for provider failure or deprecation. Concentration risk is a genuine systemic concern where many organisations depend on a small number of foundation model providers, and it is increasingly raised by financial regulators.


Part of AI Terminology Index, section: Governance, Law and Regulation.

How it connects

Third-party Risk links to 6 other terms. The faint lines are links between those terms. See it in the full graph.

Procurement and Vendor AssessmentProcurement and Ven…Model DeprecationModel DeprecationData Sharing AgreementData Sharing Agreem…Liability and IndemnityLiability and Indem…Concentration of PowerConcentration of Po…Supply Chain SecuritySupply Chain Securi…Third-party Risk