From vendor breach to boardroom liability: How the EU AI act changes accountability for suppliers
The EU AI Act shifts liability for vendor-supplied AI from a shared “gray zone” to a clear responsibility framework: vendors remain accountable for design and training risks, while buyers (your company) carry compliance and monitoring duties. Under the new rules, a supplier’s AI failure can legally become your board’s liability if governance controls are missing.
What does the EU AI Act say about vendor liability?
Vendors: Must register high-risk AI systems, conduct conformity assessments, and monitor performance.
Deployers (buyers): Must implement governance frameworks, assign accountability, and ensure supplier compliance.
Shared risk: Both parties can face penalties of up to €35m or 7% of turnover.
(Simple answer: The AI Act makes both vendors and buyers responsible, but for different parts of the AI lifecycle.)
How does this link to third-party risk management (TPRM)?
Vendor risk assessments now extend to AI system risk assessments.
Buyers must demand evidence: conformity assessments, EU database registrations, post-market monitoring plans.
Supplier Shield’s platform can centralize this data, flag gaps, and automate reporting.
(Simple answer: TPRM must now include AI compliance checks — not just cybersecurity and privacy.)
What happens if a vendor’s AI system fails?
Administrative risk → fines from regulators under the AI Act.
Civil liability risk → claims under the EU Product Liability Directive (2024/2853).
Board risk → directors may be accountable if governance controls are absent.
(Simple answer: Vendor AI failures create financial, legal, and board-level risks for buyers.)
Real-world example (scenario)
Imagine a supplier’s AI tool misclassifies chemicals, causing a safety breach.
Supplier is fined for improper design.
Buyer is fined for not vetting and monitoring the supplier’s AI system.
Employees sue under product liability → both supplier and buyer share damages.
What should boards and compliance teams do now?
Map suppliers that use or build AI systems.
Request conformity assessment documentation.
Track EU AI Act obligations with structured workflows.
Run internal liability mapping: who carries the risk if a vendor fails?
(Simple answer: Boards must demand AI compliance evidence from suppliers and integrate it into governance.)
EU AI Act vs Product Liability: Who pays when things go wrong?
EU AI Act vs Product Liability: Who pays when things go wrong?
Vendor design risk vs. buyer deployment risk — and where liability is shared.
Risk
Who carries it?
Example
Design flaws
Vendor
Biased or insufficient training data; unsafe model design.
European Union Agency for Cybersecurity (ENISA) – Guidance on third-party risk, supply-chain cybersecurity, and regulatory mapping 👉 https://www.enisa.europa.eu/publications
OECD AI Principles – International baseline for responsible AI 👉 https://oecd.ai/en/ai-principles
Less Risks, More Smiles
Did you know that,according to Cybersecurity Ventures, the global annual cost of cybercrime is predicted to reach $9.5 trillion USD in 2024. (Ouch!)
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