Dollars and Sense – The Real Value of Ongoing Third-Party Monitoring

For many third-party risk management (TPRM) professionals, ongoing monitoring is primarily an activity that helps keep an organization safe. A healthy practice of ongoing monitoring will identify changes in a third-party vendor’s risk and performance, whether it’s a sudden decline in financial health or an emerging trend of unmet service level agreements (SLAs). But did you know that continuous monitoring can provide substantial cost benefits as well? Keeping an eye on your third-party vendor after you sign the contract ensures that you’re not losing money on unexpected fines or low-value third parties.

3 Unnecessary Expenses You’ll Avoid with Ongoing Third-Party Monitoring

Partnering with a third-party vendor involves various expenses that aren't just paying for the outsourced product or service. There's also costs for managing the third party within your organization. While many of these expenses are necessary, some can be reduced or avoided altogether through ongoing monitoring.

Consider how monitoring your third party can help you avoid some of these expenses:

1. Regulatory fines and penalties – Remember, if your third-party vendor fails to comply with applicable laws and regulations, your organization is held accountable. Even if your own operations are compliant, your third party’s actions could ultimately cost you heavy fines and penalties. Ongoing monitoring helps you remain aware of your vendor’s compliance risk, so you can reduce the likelihood of regulatory fines and avoid this added expense. 
2. Surprise price increases – Contract management should be an ongoing activity, not one that ends after you sign on the dotted line. It’s not uncommon for third-party vendors to adjust their pricing to account for instability in the economy. If your contract is set to be renewed automatically, you might face some unexpected price increases for your third party’s products or services. By incorporating contract management into your ongoing monitoring activities, you can help avoid these surprise expenses and unplanned spending.
3. Cybersecurity costs – A third-party cybersecurity incident can not only damage your reputation, but also your bottom line. Legal fees, credit monitoring services for your customers, and additional security controls are just some of the costs that you might incur when your third party suffers a breach. Although third-party data breaches aren’t 100% avoidable, ongoing monitoring can help identify issues with the third-party vendor’s controls and make sure that they’re addressed before they turn into larger problems.

Preventing Declining Revenue by Continuously Monitoring Your Third Party’s Value 

Ongoing monitoring is also an excellent tool to reaffirm your third party’s value and ensure that they’re worth the expense. A low-value third party can lead to operational inefficiencies, missed growth opportunities, and even declining revenue.

Ongoing monitoring can help identify some of these signs of a low-value third party:

• Poor performance – If a third-party vendor is showing signs of poor performance, it may only be a matter of time before this translates into declining revenue. This is especially true if the third party is delivering products or services to your customers on your behalf. Monitoring your third-party vendor’s performance regularly helps identify this decline quickly so you can decide your next steps, whether that’s switching to a new third party or bringing the activity in house.
• Misdelivered products or services – Third-party vendor contracts are often complex, and it can be easy to lose track of the specific details related to the third party’s products or services. Minor changes that may still have an impact on your organization or customers could be overlooked between annual reviews. Ongoing monitoring serves as a helpful reminder of the third-party vendor’s contractual obligations, so you can determine whether they’re meeting your expectations.
• Slow response time – A third-party vendor that’s slow to respond isn’t just an inconvenience. It could also lead to larger problems if you’re facing issues that need immediate attention. Issues that go unresolved can lead to reputational damage and unsatisfied customers. Monitoring your third-party vendor throughout the engagement should give you a better idea of how responsive they are to issues, both large and small.

The benefits of ongoing monitoring extend beyond protecting your organization from things like data breaches and declining third-party vendor performance. When you look a little deeper, you’ll discover that ongoing monitoring provides a level of monetary value that can support your organization’s financial health. Understanding the true value of this practice should be a strong motive to implement it within your own program.