The risk arising from reliance on external providers for services or data. A firm stays accountable for the outsourced activity.
Where you will meet it
Third-party risk comes up in 6 learning outcome notes across the FRM syllabus.
A few of them:
Advances in Artificial Intelligence: Implications for Capital Markets Activities FRM Part II · Current issues in financial markets
“They also need model validation and ongoing monitoring, sound data quality, explainability, human oversight, and third-party risk management with due diligence and exit plans.”
Risk Mitigation FRM Part II · Operational risk and resilience
“They can transfer it through insurance, outsourcing or contractual indemnities.”
Risk Mitigation FRM Part II · Operational risk and resilience
“Operational risk can be transferred through insurance, outsourcing and contracts, captive insurers and some capital-market instruments.”
Cyber-resilience: Range of practices FRM Part II · Operational risk and resilience
“Some issue cyber-specific rules, and others extend existing operational risk, IT and outsourcing requirements to cover cyber.”
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