Third-Party Risk Management: Why You Need Continuous Monitoring
When it comes to third-party risk management, many organizations believe that once they have completed their initial assessment and put in place the necessary controls, they are done. However, this could not be further from the truth. In order to ensure the safety of your data and protect your organization from potential threats, you need to continuously monitor your third-party relationships and regularly assess their risk levels.
The Importance of Third-Party Risk Management
The EY Global Third-Party Risk Management Survey 2019–20 reveals that, although cybersecurity risk management remains incredibly important, organizations increasingly understand that their third-party risk universe is expanding to include other key risk areas like business continuity and resiliency risk, financial risk, and privacy risk. However, EY discovered that only 50% of firms currently have centralized TPRM programs, with 39% embedding separate programs for each business function.
What this tells us is that it is becoming increasingly important for more companies to monitor their third-party risk. This means taking into consideration factors such as the security of your data, regulatory requirements, potential financial losses related to malicious attacks or data theft, damage to reputation due to unauthorized exposure of sensitive data, and brand equity.
What Continuous Monitoring Is and Why It's Important
Continuous monitoring is the process of maintaining an eye on things at all times. It is an always-on, 24/7 way of assessing your third parties and current and potential risks. The main benefit of this process is that you are able to identify potential security or compliance issues before they become a problem.
When it comes to continuous monitoring of third-party risk, it is best practice to implement a three-pronged approach that includes monitoring, mitigation, and response. This is important since you will need to know which of your third parties may be exposing you to the risk and the different ways in which their mishandling or misuse of your data may impact your organization.
How to Implement Continuous Monitoring in Your Organization
In order to implement continuous monitoring in your organization, you need to have a sound risk management program in place. In addition, other factors such as clear policies and procedures, the right tools, and skilled resources will also be necessary.
To successfully continuously monitor your third-party risk, it is important that you regularly review all contracts and implement a standard set of due diligence questions. Monitoring your third-party risk also involves keeping track of the relevant news and industry events, as changes to their business can have a major impact on your organization.
Lastly, it is important to monitor the security of any third-party applications that are used in your business. This will help you identify potential security vulnerabilities and provide early warning signals if they experience any issues.
As mentioned earlier, the goal of third-party risk management is to proactively evaluate and respond to the third parties that you do business with. In some cases, it might be necessary for organizations to terminate a third-party relationship if there is a significant security breach or major compliance issue. This will certainly have an impact on your company, so it is important to have a clear strategy in place for mitigating the potential risks.
When it comes to dealing with third-party risk, there are two different types of responses you can take: proactive and reactive.
A proactive response means that you take action ahead of any event occurring. This could involve updating terms and conditions to include a security breach notification clause, adding data loss prevention (DLP) tools to your list of third-party services, and performing an annual security risk assessment. A reactive response is something that you do after an issue has occurred, which generally involves working closely with law enforcement or other agencies to determine the best way forward.
Benefits of Continuous Monitoring
Continuous monitoring has many benefits, some of which include the following:
Continuous monitoring allows you to be proactive in mitigating your third-party risk since you are likely to identify issues before they have serious consequences. This will allow companies to reduce potential litigation costs, fines, and any other type of financial, reputational, or operational damage.
Effective Response Planning
Regularly monitoring your third-party risk will help you to create an effective incident response plan. This can involve updating your service-level agreements, performing regular testing on the third party, having a response team in place that includes legal, public relations, and other experts, and ensuring that your data is backed up regularly.
When you continuously monitor your third-party risk, it places you in a position where you are able to identify issues more quickly. This will allow businesses to implement a more effective risk management strategy and limit any damages that may have been caused.
Companies that take a proactive approach to their third-party risk are seen in a more positive light by their customers. This is because they can demonstrate that they take security and compliance seriously, which will increase customer confidence and improve the company's reputation.
By continuously monitoring your third-party risk, you can ensure that you remain compliant with any regulations that govern your organization. This includes data protection regulations, anti-bribery and corruption laws, industry standards, and other reporting requirements.
Reduced Burden on IT
When you use continuous monitoring, your IT department will no longer be responsible for making regular checks on third-party service providers. This will allow them to focus their efforts on other critical tasks, which increases your organization's productivity.
Challenges Associated with Continuous Monitoring
There are various challenges involved with continuous monitoring, which include the following:
When you perform regular third-party risk assessments, you may need to increase your monitoring costs. This will be dependent on the size of your organization, how many third-party service providers you work with and the type of monitoring you decide to perform.
Increased Time and Effort Requirements
Depending on your IT resources, you may find that performing continuous monitoring is more time-consuming and resource-intensive. This will especially be the case if you have a large number of third-party service providers.
Increased Resistance from Third-Party Service Providers
When you implement continuous monitoring, some of your third-party service providers may become resistant. This will be particularly true if they are unable to meet the requirements of their service-level agreements.
Tips for Getting Started with Continuous Monitoring
Despite the challenges that are associated with continuous monitoring, it provides organizations with a number of benefits. To get started with this process, you should consider the following tips:
Develop a Plan
Before you begin monitoring your third-party risk, you should develop a plan. This will involve identifying your requirements, defining your IT resources, and determining how you will perform third-party risk assessments.
Apply the Right Approach
Your approach to continuous monitoring will depend on your specific requirements. This may involve adhering to industry standards, implementing a regulatory strategy, or only assessing certain third-party service providers. When you perform regular risk assessments, you should focus on the most common third-party risks. These may include security risks, compliance issues, and potential reputational damage.
Use the Right Tools
There are various tools that can be used to perform continuous monitoring, which can include: NIST, GRC (governance, risk, and compliance), access management systems such as BMC Atrium or Oracle Access Management, and third-party auditing tools such as Veracode.
While third-party risk management is critical, it is also important to remember that it is an ongoing process. You cannot simply complete an assessment and put in place the necessary controls and then forget about them. In order to ensure the safety of your data and protect your organization from potential threats, you need to continuously monitor your third-party relationships and regularly assess their risk levels. At Privva, we understand the importance of third-party risk management and are here to help you implement a continuous monitoring program that will keep your organization safe. If you have any questions or would like more information, please don't hesitate to call us today.