Third-party monitoring is a critical aspect of Third-Party Risk Management as it keeps security teams informed of the organization's evolving third-party risk exposure. To learn the importance of third-party monitoring and why it should be emphasized in your TPRM program, read on.
Third-party monitoring definition
Third-party monitoring is the ongoing identification, assessment, and management of security risks from third-party vendors. The intensity of this monitoring process is commensurate with each third-party vendor’s level of access to your sensitive data. Third-party risk monitoring is a core function of a third-party risk management program, ensuring security teams remain aware of the organization’s external risk exposure relative to its third-party risk appetite.
In the context of third-party risk management (TPRM), third-party risk monitoring primarily focuses on two categories of risk:
- Cybersecurity risks: Any security risks introduced through third-party relationships that could facilitate a data breach, such as software vulnerabilities, security misconfigurations, or any cyber threats resulting from poor overall vendor security postures.
- Regulatory compliance risks: Any threats to your compliance efforts that could result in regulatory fines stemming from insufficient third-party security controls
Depending on your organization’s unique risk management process objectives, a TPRM program could also include the following categories in its continuous monitoring efforts:
- Financial risks: Potential risks to your organization’s finances could include data breaches, business continuity disruptions, reputational risks, and a lack of adherence to industry standards, such as the GDPR.
- Operational risks: Stemming from major supply chain disruptions, such as the CrowdStrike outage
Watch this video for an overview of how UpGuard helped its users rapidly respond to the CrowdStrike outage.
What is the difference between third-party risk monitoring and third-party risk assessments?
Third-party risk monitoring is an ongoing process that does not stop. It constantly takes place in the background of a vendor risk management program throughout the entirety of each vendor's lifecycle to produce real-time tracking of emerging third-party risks.
Third-party risk assessments offer the most in-depth evaluation of vendor risk profiles during due diligence when organizations onboard new vendors and throughout offboarding when business relationships run their course.
Risk assessments reveal a service provider’s risk level at a single point in time—when the security team completes the evaluation. Point-in-time residual and inherent risk assessment methods fail to discover emerging security risks associated with third-party partnerships between assessment schedules. TPRM programs must combine point-in-time vendor risk assessments with continuous third-party monitoring to combat these gaps in coverage.
Why third-party risk monitoring is important for TPRM
There are three primary reasons why third-party risk monitoring is a critical requirement for effective Third-Party Risk Management.
1. Vendor ecosystems are rapidly expanding
With digital transformation continuing to evolve business models, success in the business world is now more dependent on the quality of support offered through third-party services and cloud computing solutions. The growing dependence on outsourcing to third-party services to support critical business operations means an organization’s security posture is now primarily affected by cyber threats from the vendor ecosystem.
A third-party risk monitoring solution is essential to achieving secure scalability while remaining competitive in a rapidly evolving digital business landscape.
Watch this video to learn how UpGuard helps its customers effectively manage vendor-related security risks in a rapidly expanding digital footprint.
2. Regulatory compliance requires ongoing visibility
Increased vendor-related information security incidents have triggered regulatory bodies to emphasize third-party risk oversight, especially in industries most vulnerable to cyber attacks, such as healthcare and financial services. Businesses in these industries must demonstrate prompt vendor risk mitigation potential through ongoing monitoring of emerging supply chain risks.
For the highest protection against regulatory violations, these monitoring processes should extend to fourth parties, given that fourth-party risks could facilitate security incidents.
A comprehensive third-party risk management platform like UpGuard can automate the process of fourth-party discovery and the management of security risks, helping users prepare for regulatory standards and increasing their focus on fourth-party risk management.
A third-party risk management platform, like UpGuard, can automate the process of fourth-party entity discovery and security risk management, helping users prepare for an inevitable future in which fourth-party risk management will have a higher priority in regulatory standards.
3. Proactive third-party risk management
One of the most impactful benefits of third-party risk monitoring is the ability to proactively identify and remediate third-party security risks before cybercriminals exploit them. When combined with TPRM workflows, third-party risk monitoring supports rapid progression through the TPRM lifecycle.
Watch this video to learn how third-party risk monitoring is integrated into the third-party risk assessment workflow of a TPRM program.
How third-party monitoring works
Though concentrated during the onboarding and ongoing monitoring phases of a TPRM program, third-party risk monitoring processes are integrated throughout the entire lifecycle. Here is a close look at the role of third-party risk monitoring in key phases of TPRM.
1. Onboarding
During the onboarding process, third-party risk monitoring is leveraged to gauge the likely criticality of potential vendors. This process can be deployed at scale across numerous vendors with security rating technology representing a vendor’s security posture as a quantified risk score.
Learn more about UpGuard’s security ratings >
Third-party risk monitoring through security ratings during the TPRM onboarding phase could offer a sufficient estimate of a vendor’s cybersecurity standards, potentially highlighting high-risk vendors likely to violate SLAs due to poor security hygiene.
Third-party monitoring during the onboarding phase of TPRM could expedite the process of disqualifying partnerships with inherent risk levels, breaching your risk appetite.
2. Ongoing risk assessment
After onboarding a third-party vendor, they must be enrolled in continuous monitoring processes to ensure risk exposures remain within tolerance levels. Real-time monitoring is made possible with security rating tools, which have the ability to track variations in quantified vendor security postures.
When combined with point-in-time risk assessments and security questionnaires, security ratings could trigger emergency assessments outside of schedules when risk ratings drop below a specified threshold—a response that could highlight new critical data breach risks that would have otherwise remained exposed to cyber criminals until the next scheduled risk assessment.
Third-party risk monitoring, when integrated into the remediation workflow of the risk assessment process, could streamline risk management and elevate the overall efficiency of your TPRM program. By leveraging security rating technology, security teams can project the likely impact of selected remediation tasks on a vendor’s security posture. This will help you understand which risk treatment tasks to prioritize for maximum impact, supporting a more strategic risk management approach.
3. Stakeholder reporting
With regulatory bodies increasingly focusing on third-party cyber risk management, stakeholders now expect to remain informed about the company’s evolving third-party risk exposure.
Third-party risk monitoring streamlines vendor risk exposure reporting by pulling the most up-to-date third-party security insights into a cybersecurity report template. The level of insights could be elevated to represent the security impact of your entire vendor ecosystem as a risk matrix.
Here is an example of a vendor risk matrix from one of UpGuard’s cybersecurity report templates. This matrix represents third-party risk exposure distribution across three levels of criticality, where third-party security postures are represented as security ratings. This matrix is updated to reflect an organization’s current vendor security rating distribution whenever a new cybersecurity report is generated.
In this example, stakeholders would learn that three vendors in tier 1 (critical vendors with sensitive data access) currently account for the organization’s highest concentration of third-party risk exposure. If tiering within a TPRM program is an unfamiliar concept, refer to this post explaining vendor tiering.
4. Offboarding
When vendor relationships end, third-party risk monitoring confirms whether all access to internal systems and sensitive data has been completely revoked. This vendor offboarding best practice is critical for maintaining compliance with data privacy regulations, such as the GDPR.
Confirming all retired vendors can no longer access your sensitive resources reduces the risk of offboarded vendors facilitating data breaches if they are compromised.
Third-party monitoring best practices
While third-party risk monitoring is a critical implementation for all TPRM programs, several operational challenges need to be overcome to streamline its operations.
1. Remove manual processes
Outdated practices for managing third-party risks include using spreadsheets to manage vendor security questionnaires and emails to collaborate with vendors. These manual processes will limit the effectiveness of your third-party risk monitoring strategy. Consider replacing repetitive, manual risk management tasks with automation technology, such as UpGuard's Questionnaire AI solution, to improve your results. Harnessing automated workflows is one of the best ways to establish a scalable TPRM foundation.
Watch this video to learn how automation can significantly elevate the efficiency of TPRM processes.
Learn about UpGuard's AI Toolkit >
2. Don't only rely on point-in-time assessments
Solely relying on periodic assessments to evaluate third-party risks limits an organization’s visibility into emerging threats, resulting in risks emerging between assessments often going unnoticed until it's too late. To convince stakeholders to invest in a third-party risk monitoring strategy, the limitations of point-in-time assessments alone must be understood and clearly communicated.
3. Expand third-party monitoring context
Many third-party risk management programs depend on vendor self-reported data, which may not accurately reflect the vendor's actual security posture. For a trustworthy reflection of a vendor's complete risk profile, consider expanding the context of vendor security risks being analyzed by combining third-party risk monitoring insights with data gathered from security certifications and completed questionnaires.
This model would streamline vendor onboarding by automatically calculating prospective vendors' baseline security postures. This would help security teams instantly identify which vendors are safe to consider onboarding and those likely to introduce excessive inherent risk levels.
UpGuard Trust Exchange harnesses AI-powered automation to streamline the vendor onboarding and security questionnaire process. You can sign up for Trust Exchange for free.
