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Governance, Risk, Audit & Privacy · Intermediate

Fourth-Party Risk

Risk arising from a vendor's own vendors and subcontractors that support services provided to you.

Definition

Fourth parties, such as a SaaS provider's cloud host or payment processor, can cause outages or breaches affecting the customer without any direct contract. Managing this risk requires subcontractor disclosure, flow-down clauses, notification of changes, and reviewing carve-outs in SOC reports.

Example

A widespread outage at a cloud provider disrupts several of an organization's SaaS vendors simultaneously.

Exam tip

Look for carve-out subservice organizations in SOC reports to identify fourth parties.

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