Bits guide to concentration risk in outsourcing relationships

Concentration risk is a commonly recognized problem in the financial arena, but its presence is less commonly discussed in operational areas. Nevertheless, concentration risk is a fundamental matter in a number of operational areas, including outsourcing. Although many of the considerations in this paper are directly applicable to relationships with suppliers of goods, the primary focus of this paper is on concentration risk in outsourcing relationships with third-party service providers. Although institutions define outsourcing differently, relationships significant enough to be within the scope of an institutions vendor management program are primarily in view.