Third-party risk monitoring is the process of continually assessing any third-party vendors that enter into a contract with your company, to understand how much risk they do or don’t bring to your organization. Monitoring is one of the most critical components of any third-party risk management program (TPRM).
Even if you performed thorough due diligence before working with any third-party vendors or contractors, continuous monitoring is crucial to the risk assessment process and can protect your company from issues that may surface in the future — that is, after due diligence and onboarding. These same monitoring standards should also apply to any companies hired by your contractors (which would be third parties to the contractor, and therefore fourth parties to you) that might be included in your agreements with other companies.
Why are control assessments important to risk management?
A company’s overall risk profile depends on internal controls to monitor and mitigate potential risk factors. If at any point these controls can be bypassed, you’ll need to examine the potential damage to your risk profile. If the possibility for a data breach or security risk is high, your company will need to act quickly to ensure that the control continues to function appropriately.
By engaging in ongoing monitoring of third parties, you’ll be alerted to any potential issues sooner and have more time to attend to those issues before they cause significant harm.
Data security and the ability to track operational risk should be an important part of your decision-making process when hiring vendors. Be sure to have a risk management framework and monitoring system in place when forming a business relationship with any third party.
How often should monitoring be done?
The most critical risks should be examined quarterly, if not monthly.
Risk assessments are usually performed annually, but when dealing with sensitive data you’ll sleep better knowing that any potential threats can be identified early.
With information security, therefore, it’s in your best interest to monitor your third-party relationships consistently, so you can be alerted to any cyber risks immediately. Cybersecurity is a constantly evolving field, and security controls can easily be rendered ineffective. Monitoring can bring that threat to light so you can respond quickly.