Overreliance on small group of vendors
Below are the details of the operational risks covered within this selected sub-risk category:
Overreliance on a single/small group of vendors or vendors from a single geographical location
Risk Description: -
Overreliance on a single vendor/small group of vendors or vendors from a single geographical location may result in business disruption or unplanned costs for the firm. Examples of such overreliance include: -
- Majority of IT Projects are awarded to a single system integrator.
- Single telecommunication provider providing telecommunication service for business operations in all key countries.
- Majority of IT outsourcing vendors are based in a single geographic location (e.g. India).
- Majority of IT equipment is sourced from vendors based in a single geographic location (e.g. Taiwan).
Unexpected bankruptcy or shutdown of a key vendor
Risk Description: -
Unexpected bankruptcy or shutdown of a key vendor may result in business disruption or unplanned costs for the firm. Examples of such disruption include: -
- Disruption to critical IT projects involving a key IT System Integrator, after the vendor announces a major financial statement fraud committed by its CEO and CFO, which results in immediate bankruptcy of the vendor.
- Delayed maintenance of key IT Systems, after the vendor responsible for maintenance declares bankruptcy.