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September 10, 2021

Third-Party Monitoring, Explained

<richtext-head>What is Third Party Monitoring<richtext-head>

<richtext-para>Third party vendor monitoring is an important part of business operations that ensures your company has a complete understanding of the vendors with which it conducts business. It also helps to reduce the risk of fraud, increase operational efficiency, and minimize future liability. In this blog post, we will discuss what third party vendor monitoring is, why you need it, and the different types of Third Party Monitoring Mechanisms.<richtext-para>

<richtext-head>Why is Third Party Monitoring Important?<richtext-head>

<richtext-para>Third party vendor monitoring is important for a number of reasons. First, it’s an effective way to ensure that all data and systems are secure from third party risks. It also helps keep your vendors honest by providing regular reports on their performance against contractual obligations and service level agreements (SLAs). Third party vendor monitoring can help identify potential security threats before they become a problem as well.<richtext-para>

<richtext-para>Third Party Vendor Monitoring is Important for Compliance and Security Reasons:<richtext-para>

<richtext-para>- Identifies potential security threats before they happen<richtext-para>

<richtext-para>- Helps keep your vendors honest by providing regular reports on their performance against contractual obligations and SLAs<richtext-para>

<richtext-para>- Ensures compliance with industry regulations such as PCI DSS, HIPAA or SOX<richtext-para>

<richtext-para>Another reason why third party vendor monitoring is so crucial is because you can't always trust employees and business partners to act in the best interest of your company, which includes following rules and policies that ensure the security of company data and information. Third party vendors are given access to this sensitive information, but not everyone is going to act in your company's best interest, which could lead to a data breach.<richtext-para>

<richtext-head>Types of Third Party Monitoring<richtext-head>

<richtext-para>Vendors are the backbone of any company. They help in carrying out day-to-day tasks, such as payroll processing or the management of customer data, etc. However, with a plethora of vendors coming into contact with your business on a regular basis, it becomes difficult for organizations to monitor all of them and keep tabs on their cybersecurity posture, human resources policies, and vendor performance. In this section we discuss various types and methods of third party risk monitoring.<richtext-para>

<richtext-head>SLA Monitoring & Performance Monitoring<richtext-head>

<richtext-para>It is important to monitor and ensure that the service provided by the third party vendors is in line with the contract terms.  It also helps keep your vendors honest by providing regular reports on their performance against contractual obligations and service level agreements. Without this, the company can be exposed to loss and liability. Sometimes, a breach of this SLA could result in financial loss to organizations. For example, if the uptime in a datacenter is not maintained, customers may face unavailability of service ultimately leading to financial impact on business.<richtext-para>

<richtext-para>Your company should implement a system of checks and balances that ensures processes are followed on time with all details recorded, including who does what work when, trending reports, and so forth. For example, it is important to monitor how many requests are handled by each vendor in order to maintain a consistent level of service.<richtext-para>

<richtext-head>Information Security Risk Assessments and Monitoring<richtext-head>

<richtext-para>Another important type of monitoring is the information security risk assessment. This type of assessment helps to understand the risks involved with third party vendors and their IT policies and procedures. For example, if a vendor does not have a clear policy for data encryption over wireless networks, it poses serious threats such as loss or leakage of sensitive customer information that can cause hefty losses. Such assessments will also include procedures to check the cybersecurity posture of vendors and the defences deployed therein.<richtext-para>

<richtext-head>Human Resource Risk Assessments and Monitoring<richtext-head>

<richtext-para>This type of assessment helps to understand the risks involved with third party vendors and their human resource policies and procedures. For example, an organization may hire a vendor for its payroll processing services who does not follow proper background checking processes during recruitment, thereby leading to risk exposure due to potential threat from insiders. Such assessments also include procedures to check the human resource policies and defences deployed in their systems. HR risk assessments also include checks on the hiring policies followed by vendors, such that the company is not exposed to risks of Modern Slavery. The checks will include procedures to verify the human resources to be a fair and diverse representation of society.<richtext-para>

<richtext-head>Business Process Management Monitoring<richtext-head>

<richtext-para>Business process management monitoring ensures that your company is only working with vendors that are not compromising on business processes such as billing, service requests, or incident management.. For example, if a vendor does not have proper controls over data leakage from its payment systems, it can cause serious financial and reputational loss to the business. Additionally, before onboarding, it is crucial to do a thorough background verification of every vendor.<richtext-para>

<richtext-head>Financial Posture and Reputational Risk Assessment<richtext-head>

<richtext-para>Another important type of risk assessment is to check the financial posture and reputation of a vendor. The company can consider hiring an external party that provides such services or conducting in-house assessments for this purpose.  For example, if exposure from third parties including vendors increases the debt levels on your balance sheet due to lack of proper reporting processes, it can lead to poor ratings from financial institutions.<richtext-para>

<richtext-head>Monitoring for Cybersecurity and Data Privacy<richtext-head>

<richtext-para>It is important that your organization implements a continuous monitoring process, especially in the case of third party vendors who handle sensitive information like customer data or employee credentials. This type of monitoring helps keep organizations updated about potential breaches as soon as they happen and also helps to take immediate actions.<richtext-para>

<richtext-para>In order to make informed decisions, it is important for organizations to implement proactive vendor management policies that ensure the protection and security of their business interests including assets and sensitive information. By implementing such strategies on time, businesses can save themselves from huge financial losses due to poor risk assessment or improper monitoring processes in place, as well as loss of reputation and goodwill.<richtext-para>

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