Real-Time Monitoring of Third Parties for Effective Risk Mitigation
Written by Dilip N
What Increases Third-party Risk?
Third-parties and their cybersecurity posture
Third-parties must understand that cybersecurity is vital and of utmost importance. Their cybersecurity posture will have both immediate and long term consequences on your business and operations. Cybersecurity must be treated with the same importance accorded to business relationships and financial performance.
Regulatory non-compliance of your third-party
All instances of regulatory non-compliance by a third-party, involvement in disputes, allegations of bribery and corruption are some of the things which must be closely monitored. Also, if your third-party violates any laws such as employee, license, environmental, intellectual property, etc, your organization could still be found liable. An organization’s responsibility does not just end after outsourcing.
There are many other ways third-party risk can disrupt your business
There are several categories of third-party and supplier risks, which must be monitored by an organization through a third-party risk management program, based on potential for disruption, frequency of occurrence, and other factors: Reputational Risk, Operational Risk, Financial Risk, Legal Risk, Country Risk, Compliance Risk, etc. Customers do not differentiate an organization from its suppliers, especially when considering reputation.
Traditional Periodic Assessments are Insufficient
Relying entirely on periodic (annual, quarterly) assessments rather than continuously monitoring your third-parties on a real-time basis creates risk. A supplier’s cybersecurity posture, for example, can change every hour. Organizations can improve their sourcing and supply chain security by monitoring their third parties on a real-time basis to identify and mitigate risks proactively.
There are multiple issues with relying only on third-party risk assessment templates. Closed-ended questionnaires are multi-purpose and do not provide objective or specific details. Risk assessment templates can also be subjective, unverifiable, and non-actionable. While risk assessment questionnaires are an important element, using them as the sole risk assessment tool is a source of vulnerability for third-party risk assessment.
Cybersecurity, for instance, is a constant source of risk as new vulnerabilities and threats emerge daily. Point-in-time assessments merely capture what is true at that moment. Even if a third-party has not been breached before and is following all best practices, they can still be vulnerable. Any data or systems compromise leaves an organization open to regulatory sanctions and fines, drop in customer and stakeholder confidence, damage to brand reputation, litigation and settlements, and loss of competitive edge in the industry.
This is why organizations must move towards proactive forms of third-party risk management, including real-time risk monitoring, risk alerting, and risk scorecards.
Real-Time Monitoring of Third-party Risk
Third-party risk management must be a continuous and recurrent process, not a one-off exercise. With a continuous real-time monitoring solution, organizations can:
- Simplify third-party oversight
- Strengthen third-party risk selection and negotiation
- Identify third-party risk in a timely manner
- Monitor multiple third parties at scale
- Become proactive with potential and real disruptions and opportunities
- Maintain business continuity and resilience
If your organization’s Governance and TPRM function uses a real-time risk intelligence and monitoring solution like Supply Wisdom, they must be receiving real-time incident alerts and risk scorecards as part of multi-category risk health reports.
If you are strengthening your TRPM or if you want expert advice on developing a robust, cost-effective risk monitoring program, talk to us. Our risk management experts will be glad to discuss whether real-time risk monitoring is right for you and how you can integrate it in your TPRM and governance processes.