In today's world, third party risk management (also known as TPRM) has become a top priority for most organizations. This is because the risks associated with third party vendors and partners have grown tremendously in recent years.
The most common types of risk include intellectual property theft, cyber-attacks, compliance violations, and financial losses due to fraud or operational failures. Organizations typically manage their risks internally through processes such as internal audits and cybersecurity measures.
But what about the risks that occur when organizations work with other firms? With so many companies outsourcing more tasks to outside providers than ever before, it can be difficult for an organization to know who is managing risk in different aspects of their business at any given time. And if something goes wrong with one of those third party services, the business could experience significant harm.
What is Third Party Monitoring?
3rd Party Monitoring is the process of conducting regular, ongoing audits and reviews to ensure that third parties are complying with the terms of their service contract.
Third party risk monitoring helps organizations mitigate risks associated with outsourcing services by ensuring they meet contractual obligations in areas such as service levels, security, performance, financial stability, and compliance. These risk management measures ultimately help companies avoid unnecessary costs, disruptions, and negative impacts on their brand.
5 Benefits of Third Party Monitoring
Third party monitoring is an essential part of any modern risk management strategy. When implemented correctly, the process helps organizations manage third party risks more effectively and helps them avoid unnecessary costs and other types of damage. Here are 5 benefits of effective third party monitoring:
1. Monitoring Service Levels and Performance
Third party monitoring helps organizations meet their service-level expectations and enhance their performance. Monitoring service levels and performance is also important because it ensures that third party agreements are upheld to avoid disruptions to the organization.
2. Monitoring Information Security Posture of Service Providers
An organizational risk management strategy must include a focus on cybersecurity, and third party monitoring is an effective way to ensure service providers are upholding best practices when it comes to protecting their data. By leveraging technology that provides real-time visibility into the security posture of its vendors, organizations can minimize network breaches and other types of cyberattacks by intervening before any damage occurs.
3. Monitoring Regulatory Compliance
In many cases, organizations must meet specific compliance standards to work with certain third parties. Third party risk management is an effective way for companies to ensure their providers comply with those rules and regulations because it gives them insight into the vendors' infrastructure and access to a single point of contact for all vendor-related compliance issues.
4. Monitoring Financial Stability and Performance
Many service providers experience financial difficulties or unexpected bankruptcies, which can impact their customers in a big way if they aren't prepared for it. Third party monitoring is an effective tool to ensure organizations are aware of any changes that might occur within the company to take action before any damage is done.
5. Ensuring Service Provider Engages Skilled Resources
Third party risk assessment helps organizations avoid working with vendors that aren't well-equipped to meet their needs. This includes ensuring service providers are hiring skilled professionals who will be able to uphold the terms of their agreement and help protect the organization's sensitive information throughout its contract.