Third-party risk

Many banks depend on third-party arrangements for payment, clearing, and settlement services to process customer transactions. These external arrangements, whether for technology services or payment systems can strengthen efficiency and innovation. At the same time, they can introduce risks that could affect a bank’s operational and financial resilience.

A failure at one of these service providers could disrupt multiple institutions’ ability to deliver critical services and impact the stability of the financial system. Such disruptions can expose banks to financial, operational, and reputational harm.

Managing third-party risks

Third-party risk is one of the key non-financial risks facing Canada’s financial system.

It’s important for banks to identify, assess, and manage risks arising from third-party arrangements while remaining fully accountable for any activities they outsource.

Effective third-party risk management helps ensure that disruptions at external providers do not jeopardize the broader financial system.