Counterparty risk can be considered in the following qualitative sections:
Reliance on Key Customers – If a business depends heavily on a few key customers, there's a risk they might default, reduce orders, or stop doing business, impacting revenue.
Reliance on Distribution Partners – If a business relies on third-party distributors, there's a risk these partners could fail to deliver, default on agreements, or experience operational issues.
Customer Lock-In – If customers are locked into long-term contracts or face high switching costs, counterparty risk may be reduced. However, if a business is overly dependent on locked-in customers, a sudden default or contract termination could have significant financial consequences.