Financial institutions rely on third-party service providers for a range of services, some of which support their critical operations. These dependencies have grown in recent years as part of the digitalisation of the financial services sector and can bring multiple benefits to financial institutions including flexibility, innovation and improved operational resilience. However, if not properly managed, disruption to critical services or service providers could pose risks to financial institutions and, in some cases, financial stability.

The FSB has developed a toolkit for financial authorities and financial institutions as well as service providers for their third-party risk management and oversight. The toolkit also aims to reduce fragmentation in regulatory and supervisory approaches across jurisdictions and different areas of the financial services sector, thereby helping mitigate compliance costs for both financial institutions and third-party service providers, and facilitate coordination among relevant stakeholders.

The toolkit comprises 4 main chapters. Chapter 1 presents a list of common terms and definitions as a foundation. While complete harmonisation of terms is not always possible or desirable, a common understanding of terms and definitions can help improve clarity and consistency, assisting and enhancing communication among stakeholders under interoperable approaches.