Concentration Risk

What is Concentration Risk?

Concentration risk measures how reliance on a limited set of providers can magnify operational or compliance failures. It considers single-vendor dominance, geographic clustering, and technology monocultures. In TPRM, evaluating concentration risk helps organizations prevent over-dependence on vendors that provide critical or irreplaceable services.

FAQs

What are common sources of concentration risk?

Single-supplier reliance, regional instability, and limited alternative providers.

How does concentration risk influence vendor tiering?

Vendors with high dependency are often placed in elevated risk tiers.

Can concentration risk be mitigated?

Diversification and contingency planning reduce exposure.