What Is Third-Party AI Risk?
Third-Party AI Risk is the risk an organisation takes on when it relies on AI systems, models, or data supplied by external vendors.
Third-Party AI Risk — the risk an organisation takes on when it relies on AI systems, models, or data supplied by external vendors.
Most organisations consume AI rather than build it, which means their risk largely sits in their supply chain — foundation-model providers, API vendors, and embedded AI features in third-party software. Managing third-party AI risk involves vendor due diligence, contractual allocation of responsibilities, ongoing monitoring, and contingency planning for vendor failure or model change. Frameworks such as APRA CPS 230 and the EU AI Act's provider/deployer split make this supply-chain dimension an explicit governance obligation.
Source: APRA CPS 230; EU AI Act, Articles 25–27
Plain-language explanation
Most organisations consume AI rather than build it, which means their risk largely sits in their supply chain — foundation-model providers, API vendors, and embedded AI features in third-party software. Managing third-party AI risk involves vendor due diligence, contractual allocation of responsibilities, ongoing monitoring, and contingency planning for vendor failure or model change. Frameworks such as APRA CPS 230 and the EU AI Act's provider/deployer split make this supply-chain dimension an explicit governance obligation.
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