Third-Party Risk is the risk that a business takes on when it outsources tasks, functions, or operations to an external third-party entity, such as vendors, contractors, and suppliers. This risk encompasses financial loss or damage caused by the third-party failing to meet their contractual obligations, as well as reputational damage resulting from the third-party’s unethical or illegal behaviour. It is essential for businesses to manage Third-Party Risk proactively and effectively to ensure potential losses are minimized.