SOUTH KOREA Trends and Developments Contributed by: Wooyoung Choi, Suhhee Han, Seonghwan Ju and Matt Younghoon Mok, Lee & Ko
ing to third parties has expanded, heightening opera - tional risk management needs. The FSS has devel - oped “Third-Party Risk Management Guidelines” (the “Guidelines”) for systematic risk management. Finan - cial industry associations are implementing these as self-regulatory standards reflecting sector-specific characteristics. The Guidelines require clear board and management responsibilities, comprehensive risk management systems including designation of prior - ity management targets, and stage-by-stage contract management. Board and management responsibilities Boards must deliberate and resolve on key matters relating to third-party risk management policies, con - sidering dependency on third parties. Management must establish, implement and maintain risk man - agement systems and report to the board. Financial companies subject to accountability mapping require - ments should reflect third-party risk management in their accountability structures. Comprehensive risk management Financial institutions must measure third-party risks for each outsourcing contract, designate high-risk con - tracts as priority management targets with enhanced management activities including shortened evaluation cycles, and establish business continuity plans linked to third-party risk management. Risk management activities must be documented and retained.
Stage-by-stage contract management Systematic risk management is required at each stage: pre-contract due diligence including on-site inspec - tions; written contracts with risk management provi - sions; periodic monitoring during the contract term with immediate action upon material risk indicators; exit strategies for termination; and post-termination risk assessment. Sector-specific application For financial investment businesses, the Guidelines apply to investment traders, brokers and collective investment managers with assets of KRW5 trillion or managed assets of KRW20 trillion or more, effective from 18 February 2026. For insurers, the Guidelines apply to all insurance companies, effective from 1 December 2025, with extended grace periods for smaller insurers and non-sales outsourcing risks. The insurance sector has specifically addressed sales out - sourcing risks given high reliance on corporate insur - ance agencies.
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