Vendor Concentration Risk Assessment Template

Your largest vendor handles the majority of payment processing. Another manages your entire cloud infrastructure. A third runs your customer support operations. Each represents a concentration risk that could cripple your business within hours of failure.

Vendor concentration risk assessment templates transform this vulnerability mapping from spreadsheet guesswork into systematic risk quantification. The template captures dependency percentages, revenue exposure, operational impact scores, and recovery time objectives for each vendor relationship. It generates automated alerts when any vendor exceeds predefined concentration thresholds—typically 25% for critical operations or 40% for revenue-generating services.

For TPRM managers juggling hundreds of vendor relationships, this template provides the framework to identify hidden dependencies before they become crisis scenarios. It answers the board-level question: "What happens to our business if Vendor X disappears tomorrow?"

Core Components of the Template

The vendor concentration risk assessment template contains five essential sections that work together to quantify and monitor dependency risks:

1. Vendor Dependency Mapping

This section captures:

• Service Category Classification: Payment processing, cloud infrastructure, data storage, customer support, logistics
• Dependency Percentage: Exact percentage of total operations handled by each vendor
• Revenue Attribution: Direct revenue tied to vendor-dependent services
• User Impact Metrics: Number of customers affected by vendor failure

Example mapping structure:

Vendor Name	Service Category	% of Total Operations	Annual Revenue Impact	Users Affected
AWS	Cloud Infrastructure	85%	$12M	45,000
Stripe	Payment Processing	70%	$8M	35,000
Zendesk	Customer Support	100%	$2M	45,000

2. Risk Scoring Matrix

The template employs a dual-axis scoring system:

Concentration Score (1-5):

• 1: <10% dependency
• 2: 10-a meaningful portion of dependency
• 3: 26-40% dependency
• 4: 41-60% dependency
• 5: >60% dependency

Impact Score (1-5):

• 1: Minimal operational impact, <$100K revenue
• 2: Minor disruption, $100K-$500K revenue
• 3: Moderate disruption, $500K-$2M revenue
• 4: Major disruption, $2M-$10M revenue
• 5: Critical failure, >$10M revenue

3. Mitigation Strategy Documentation

For each high-concentration vendor, document:

• Alternative vendor options with implementation timelines
• In-house capability development costs
• Multi-vendor distribution strategies
• Contractual protections (SLAs, termination rights, data portability)

4. Monitoring and Alert Thresholds

Configure automated triggers:

• Immediate escalation: Any vendor exceeding many concentration in critical services
• Quarterly review: Vendors between 25-a significant number of concentration
• Annual assessment: All vendors with >a meaningful portion of concentration

Industry-Specific Applications

Financial Services

Banks and fintech companies face stringent concentration risk requirements under OCC Third-Party Risk Management guidance and Basel III operational risk frameworks.

Key focus areas:

• Core banking system providers
• Payment processors and card networks
• Cybersecurity service providers
• Cloud infrastructure for customer data

Regulatory thresholds:

• OCC suggests immediate board notification for any vendor handling >some transactions
• FFIEC requires documented contingency plans for vendors processing >15% of daily volume

Healthcare

HIPAA Business Associate agreements create unique concentration risks when PHI processing consolidates with single vendors.

Critical dependencies:

• Electronic Health Record (EHR) systems
• Medical billing processors
• Telehealth platforms
• Laboratory information systems

Compliance requirements:

• Document data portability capabilities per 45 CFR § 164.524
• Maintain alternate PHI access methods within 72-hour requirement

Technology Companies

SaaS and technology firms often face extreme concentration in infrastructure providers.

Common concentration points:

• Cloud computing platforms (AWS, Azure, GCP)
• Content delivery networks
• Authentication services
• Development toolchains

Compliance Framework Alignment

SOC 2 Requirements

CC9.2 - Vendor and Business Partner Risk: The template directly satisfies the requirement to assess and monitor vendor concentration as part of supply chain risk management.

Documentation requirements:

• Annual concentration assessments for all critical vendors
• Quarterly updates for high-risk concentrations
• Board-level reporting for vendors exceeding 40% thresholds

ISO 27001 Compliance

A.15.1 - Information Security in Supplier Relationships: Requires organizations to identify and document risks from supplier dependencies.

Template alignment:

• Maps to risk assessment requirements in clause 6.1.2
• Supports supplier relationship documentation per A.15.1.1
• Provides monitoring framework for A.15.1.3

GDPR Article 28 Considerations

When vendors process personal data, concentration risk intersects with data protection requirements:

• Document data portability capabilities for each processor
• Maintain processor redundancy for critical data categories
• Include concentration limits in Data Processing Agreements

Implementation Best Practices

1. Start with Revenue-Generating Services

Begin assessment with vendors directly tied to revenue:

• Payment processors
• E-commerce platforms
• Customer-facing applications
• Order fulfillment systems

2. Establish Clear Ownership

Assign concentration monitoring to specific roles:

• TPRM Manager: Overall template maintenance and threshold monitoring
• Business Unit Leaders: Service-specific dependency assessments
• CFO/Risk Committee: Review and approval of concentration limits

3. Integrate with Existing Risk Registers

Link concentration scores to:

• Enterprise risk management systems
• Vendor performance scorecards
• Business continuity planning
• Contract renewal processes

4. Automate Data Collection

Pull dependency metrics from:

• Accounts payable systems (spend concentration)
• IT service management tools (ticket volume by vendor)
• Transaction processing logs (volume concentration)
• Revenue attribution systems

Common Implementation Mistakes

1. Ignoring Indirect Dependencies

Teams often miss second-tier concentrations. Your cloud provider's dependency on specific data centers creates hidden concentration risk.

2. Static Assessment Cycles

Vendor dependencies shift constantly. Annual assessments miss critical changes. Implement continuous monitoring for vendors exceeding 25% thresholds.

3. Focusing Only on Spend

A vendor consuming a notable share of budget might handle 80% of critical operations. Balance financial metrics with operational impact scoring.

4. Generic Threshold Setting

Copy-pasting another company's 30% threshold ignores your risk tolerance. Set limits based on:

• Business recovery capabilities
• Industry regulations
• Alternative vendor availability
• Contract switching costs

5. Missing Geographic Concentration

Three different vendors operating from the same data center or region create location-based concentration risk.

Frequently Asked Questions

What concentration percentage should trigger immediate action?

Any vendor exceeding 40% of critical operations or 50% of revenue-generating services requires immediate mitigation planning. Financial services often use lower 25% thresholds per OCC guidance.

How do I calculate concentration for vendors providing multiple services?

Score each service independently, then calculate weighted average based on service criticality. A vendor providing a large share of payment processing (critical) and 20% of marketing automation (non-critical) poses higher risk than simple averages suggest.

Should internal departments be included in concentration assessments?

Yes, internal single points of failure create similar risks. Document dependencies on specific teams, systems, or employees using the same scoring methodology.

How often should concentration assessments be updated?

Critical vendors (>some concentration): Monthly monitoring with quarterly full assessment. Medium-risk vendors (10-25%): Quarterly reviews. All others: Annual assessment minimum.

What's the difference between vendor concentration and vendor criticality?

Criticality measures importance of the service; concentration measures dependency percentage. A critical vendor providing unique services might have low concentration if you've distributed the workload across multiple providers.

How do I handle concentration risk in sole-source situations?

Document compensating controls: enhanced SLAs, source code escrow, detailed transition plans, increased monitoring frequency, and pre-negotiated termination assistance.

Can vendor concentration be TOO low?

Yes. Over-distribution creates complexity costs and integration risks. Most organizations find optimal concentration between 20-a significant number of for non-critical services.