Reasons Why Businesses Should Continuously Monitor Third Party Vendors
October 9, 2023
As businesses continue to grow, so does the number of third party vendors they work with. This vendor is a company or individual that provides goods or services to a business but is not part of the business itself. Third party vendors can help a business save money, increase efficiency, and expand their operations, but they can also present risks to a business. That’s why businesses need to monitor their third party vendors. Continuous third party monitoring, also known as TPRM (third party risk management), is a best practice to ensure risks are identified and managed in real-time.
In this article, we will explore the reasons why businesses should monitor third party vendors and the benefits of continuous vendor monitoring. We will also look at some of the risks associated with vendors that businesses need to manage.
Reasons for Monitoring Third Party Vendors
There are a variety of reasons why businesses should monitor third party vendors. Some of these reasons include the following:
Regulatory Compliance: Many businesses are subject to regulatory requirements and standards that they must adhere to in order to avoid penalties or fines. Vendors that a business works with must also comply with these regulatory requirements, and monitoring them ensures that they are in compliance.
Cybersecurity Threats: One of the biggest risks associated with them is cybersecurity. A third party vendor can provide a point of entry for a hacker to access a business’s systems and data. Monitoring vendors for cybersecurity threats can help a business detect potential breaches before they occur.
Operational Risks: Third party vendors can also present operational risks to a business. If they experience a disruption or outage, it can have a significant impact on the business. Monitoring these vendors can help a business identify potential operational risks and take steps to mitigate them.
Benefits of Continuous Vendor Monitoring
Continuous vendor monitoring, or TPRM, has many benefits for businesses. Some of these benefits are:
Early Detection of Risks: By monitoring third party vendors in real-time, a business can detect potential risks as soon as they arise. This allows the business to take action before the risk becomes a major issue.
Improved Risk Mitigation Strategies:Continuously monitoring vendors enables a business can improve its risk mitigation strategies. This involves identifying potential risks, taking steps to mitigate those risks, and establishing contingency plans in case of an incident.
Improved Decision Making: Monitoring can provide a business with valuable information that can be used to make informed decisions. This includes information on vendor performance, potential risks, and opportunities for improvement.
Third Party Vendor Risks
There are several risks associated with third party vendors that businesses need to manage.
Data Breaches: One of the most significant risks associated with these vendors is the risk of a data breach. If they have access to a business’s data, they can be a target for hackers. A data breach can result in the theft of sensitive data, including customer information, trade secrets, and financial information.
Supply Chain Disruptions: Third party vendors can also present a risk to a business’s supply chain. If a vendor experiences a disruption or outage, it can have a ripple effect throughout the supply chain, causing delays and increased costs.
Financial Risks: They can also present financial risks to a business. If a financial difficulty occurs or the company goes bankrupt, it can impact the business’s finances.
Continuous third party monitoring can be challenging for businesses, particularly those that work with a large number of third party vendors. However, there are tools and technologies available that can help automate the monitoring process and make it more efficient. By leveraging these tools, businesses can save time and resources while still ensuring that their third party vendors are being monitored effectively.
Monitoring third party vendors is critical for ensuring that a business is able to identify and manage the risks associated with these vendors. By implementing a TPRM program, businesses can reduce the risk of data breaches, supply chain disruptions, and financial risks, while also improving their overall security posture. With the right approach, continuous vendor monitoring can be an effective way for businesses to manage the risks associated with third party vendors, while also ensuring that they are getting the most value from these relationships.