Provide one example that shows the importance of each of the following
acronyms/ concepts when reducing risk and verifying compliance and
performance in any agreement:
A. SLA
A. Service Level Agreement (SLA) -
Imagine a company has outsourced their IT infrastructure to a third-party vendor. In order to reduce risk and ensure compliance and performance, they establish a Service Level Agreement (SLA) with the vendor. The SLA clearly defines the expectations and responsibilities of both parties, including metrics such as minimum system availability, response time for resolving incidents, and data backup procedures.
Suppose there is an unexpected system outage that severely impacts the business operations of the company. Since the SLA has specified a minimum system availability of 99%, the vendor is contractually obligated to restore the system within a specified time frame, minimizing downtime and reducing the risk of potential losses for the company. In this case, the SLA allows the company to verify the compliance of the vendor and holds them accountable for any performance issues, ensuring that the agreed levels of service are being maintained.