Definition ∞ Third-party vendor oversight involves monitoring and managing the risks associated with external service providers. This process ensures that vendors providing critical services, such as custody, cybersecurity, or software development, adhere to an organization’s security, compliance, and operational standards. For digital asset firms, it includes rigorous due diligence, continuous performance monitoring, and contractual agreements to mitigate risks posed by external dependencies. Effective oversight is essential for protecting client assets and maintaining operational integrity.
Context ∞ Third-party vendor oversight is a growing concern for digital asset service providers, as reliance on external technology and infrastructure introduces additional security and operational risks. Regulators are increasing their scrutiny of these arrangements, requiring firms to implement robust risk management frameworks. This focus aims to ensure that outsourced functions do not compromise the safety and soundness of regulated entities.
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