Ongoing Monitoring for Third-Party Risk Management (Full Guide)

Ongoing monitoring is a key step in effective Third-Party Risk Management (TPRM) that helps ensure continuous compliance, cybersecurity performance, and risk management of external vendors and service providers. It’s a necessary step that reinforces how vendors are managing their cybersecurity processes to prevent potential data breaches or reputational damage.

While risk assessments are usually point-in-time assessments that evaluate a vendor’s security performance only at that moment, ongoing monitoring establishes continuous risk identification, mitigation, and remediation and ensures continued compliance with key regulatory requirements or industry-standard frameworks.

This guide provides a comprehensive overview of ongoing monitoring in TPRM and implementation tips.

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What is ongoing monitoring in third-party risk management?

Ongoing monitoring in TPRM programs involves continuously assessing third-party vendors and reviewing their activities, performance, and compliance statuses. This monitoring process aims to detect and mitigate any potential risks in real-time that might arise during the vendor relationship.

Ongoing monitoring occurs towards the end of the TPRM lifecycle after the vendor has been onboarded. Unlike due diligence, which is conducted before partnering with a vendor, ongoing monitoring happens after onboarding to ensure that the vendor remains compliant and upholds the agreements established in the SLAs (service level agreements).

A typical third-party risk management lifecycle includes the following:

1. Initial risk assessment: Identifying and assessing potential risks before onboarding.
2. Vendor due diligence: Conducting thorough evaluations of potential vendors.
3. Contract management: Establishing contract terms and ensuring obligations are met.
4. Ongoing monitoring: Continous evaluation and mitigation of risks post-onboarding.

What elements does ongoing monitoring involve?

Typically, the ongoing monitoring process should involve the following elements:

Risk assessments

Evaluate the cybersecurity risk profiles of third-party vendors regularly to identify any new or emerging risks. Third-party risk assessments are carried out using various methods, such as security ratings, security questionnaires, and compliance management. Determine whether or not the vendor has adequate internal controls to prevent possible business disruptions.

Performance tracking

Continuously monitor vendors' performance against established success metrics and key performance indicators (KPIs). If the vendor shows improvement throughout its lifecycle, ongoing monitoring efforts can be reduced over time as part of building trust within the vendor relationship.

However, if the vendor shows signs of regression, it may be time to review their contractual obligations and determine if a continued partnership is possible. If so, work with the vendor to improve their performance and keep a close eye on their progress.

Compliance risk management

Ensure that vendors comply with relevant regulations, standards, and contractual obligations. Many industries have stringent compliance requirements, like GDPR for EU businesses, HIPAA for the US healthcare industry, or PCI DSS for the financial services industry, that can affect the vendor’s overall security performance. Even the smallest violation or misstep can potentially put the whole system at risk.

Incident response plans

Put action plans in place that detail how to respond to security incidents or breaches involving third-party vendors. These plans should be updated regularly to reflect the evolving threat landscape and new vulnerabilities that arise. In addition to incident response plans, vendors should also establish disaster recovery and business continuity plans to ensure minimal operational downtime.

Related: How to Create an Incident Response Plan

How often should ongoing monitoring happen in TPRM?

While you should constantly be monitoring your vendors, it’s also important to periodically perform comprehensive risk assessments to track their security performance over time. The frequency of ongoing monitoring in TPRM depends on several factors, including the criticality of the vendor and vendor services, relevant industry regulations and frameworks, and your organization’s risk tolerance and risk appetite.

As a general guideline, vendors with higher risk should be monitored and assessed more frequently and vendors with lower risk do not need to be audited as often.

1. High-risk vendors: These vendors require more frequent monitoring, typically on a monthly or quarterly basis. High-risk vendors often have access to sensitive data or have the potential to compromise critical business operations.
2. Medium-risk vendors: Monitoring for medium-risk vendors can be conducted quarterly, semi-annually, or even annually in some cases. These vendors sometimes have access to sensitive data but still play a significant role in business operations.
3. Low-risk vendors: Annual reviews are usually sufficient for low-risk vendors. These vendors usually provide non-critical services or products and pose a low risk of compromise.

Organizations should adjust their monitoring frequency to their specific needs and the nature of their third-party relationships. Automating parts of the monitoring process can also help maintain consistency and efficiency throughout the vendor lifecycle.

Should fourth-party vendors be included in continuous monitoring efforts?

Yes, fourth-party vendors should be included in continuous monitoring efforts. Fourth-party vendors can pose significant risks to your organization’s IT ecosystem and the entire supply chain, especially if they handle sensitive information or critical services.

Ensuring that your third-party vendors have adequate risk management practices for their own vendors and suppliers is a critical step of the third-party risk management process, even if they are outsourcing some of their services.

You can include fourth-party vendors in your organization’s monitoring efforts by:

1. Managing fourth-party inventory: Have your third-party vendors disclose their vendors and the nature of their relationships and categorize them by criticality and level of risk.
2. Evaluating risk management practices: Assess the risk management policies and procedures of the fourth-party vendors and whether your third-party vendor has adequate monitoring capabilities and security controls for them.
3. Clarify contractual obligations: Ensure that contracts with third-party vendors include clauses that require them to manage and monitor their vendors adequately.
4. Risk assessments: Include fourth-party vendors in your risk assessments and audits by utilizing extended risk scanning and monitoring of fourth parties to assess their risk levels.
5. Continuous monitoring: Ensure that attack surface scanning and monitoring capabilities are extended to fourth parties. Consistent monitoring can help identify and mitigate risks early on.

Read more: What is Fourth-Party Risk Management?

How to get started with ongoing monitoring of third-party vendors

To get started with the ongoing monitoring of third-party vendors, consider the following key steps:

1. Take inventory of critical vendors: Begin by identifying and categorizing which of your third and fourth-party vendors are critical to your operations and which vendors pose the highest risk.
2. Define monitoring criteria: Establish the benchmark criteria for monitoring, including the key metrics and key performance indicators (KPIs) that will be tracked.
3. Assess risk levels: Use assessment tools, such as security ratings, security questionnaires, and compliance certifications to assess the vendor’s current risk exposure and security posture.
4. Implement monitoring tools: Use dedicated technology solutions that can provide real-time monitoring and risk assessment capabilities. Create a detailed plan that outlines the frequency of assessments, the monitoring methods, and the roles and responsibilities of relevant team members.
5. Provide training and education: Ensure that your team is trained on the monitoring tools and understands the processes regarding ongoing monitoring.
6. Establish reporting mechanisms: Develop processes and workflows for reporting and reviewing monitoring results, including dashboards and executive reports for senior management and key stakeholders.

Ongoing monitoring best practices in Third-Party Risk Management

To ensure your ongoing monitoring processes are working effectively in TPRM, consider the following best practices:

1. Use automation: Automated tools and platforms help streamline the monitoring process, reduce manual efforts, reduce delays and errors, and limit operational risk. For inspiration on how to adopt this practice, read our post on How to Automate Vendor Risk Management.
2. Regularly update risk assessments: Continuously update risk assessments based on new information and changes in the vendor's operations or environment.
3. Stay up-to-date with current regulations and standards: Ensure that your organization and relevant team members are up-to-date with the latest regulatory compliance requirements. Changes to regulations mean your organization and your vendors must work to stay compliant.
4. Encourage internal collaboration: Collaboration between departments, management, and stakeholders is a key part of ongoing monitoring. Teams such as procurement, third-party risk, IT, customer success, and the vendor itself must all communicate to facilitate effective risk management.
5. Nurture vendor relationships: Maintain open lines of communication with your vendors to address any issues promptly and start building stronger relationships. Over time, these vendor relationships rely on trust so that your organization can build
6. Document everything: Keep detailed records of all monitoring activities, assessments, and communications to ensure transparency and accountability.
7. Implement review and testing processes: Review your monitoring processes regularly and make adjustments as needed to address emerging risks and changing business needs.

By implementing these best practices, organizations can enhance their third-party risk management programs and better protect themselves from potential risks associated with third-party vendors.