Most organizations understand that comprehensive third-party risk management includes ongoing monitoring. Even so, many organizations struggle to monitor their vendors once a contract is signed and they’re quietly hopeful that periodic risk reviews will be enough to meet regulatory requirements and best practices. Though periodic risk reviews and due diligence updates are essential, they’re also only a snapshot in time. As most third-party risk professionals know, vendor risk profiles can change dramatically in a short amount of time. While constant day-to-day monitoring is necessary, it isn't always easy.
Why is effective ongoing monitoring so difficult for many organizations? Truthfully, ongoing monitoring can be tough when there is a lack of actionable information. Vendors don’t always disclose problems proactively, if at all. Meanwhile, search engine news alerts can overwhelm you with information that isn’t relevant, timely, or factually correct. In most cases, your organization is already behind when negative vendor news becomes public information.
Despite these challenges, ongoing monitoring is still necessary to ensure that your organization meets regulatory requirements, protects sensitive data, avoids financial losses, and maintains a positive reputation.
Vendor Risk Intelligence Is Now Widely Available
Many firms now offer risk intelligence products designed to help third-party risk teams and their organizations stay one step ahead of new and emerging vendor risks. These services, which are usually sold as a subscription or one-time report services, can be the most valuable tool in your monitoring toolbox. Let's explore how these services work and the risk domains that are typically covered. We’ll also discuss how to use these services, what to look for in a provider, and three compelling reasons to supplement your ongoing monitoring with vendor risk intelligence.
Risk Intelligence Products and Services
Vendor risk intelligence is a big business these days and numerous companies offer these services. However, as with most things, buyers should beware, as the quality of risk intelligence products and the domains covered will vary greatly.
Typically, providers will offer their services on a subscription basis, charging by the number of vendors that need to be monitored. Depending on the provider, they may offer real-time risk alerts, dashboards, or reporting for individual vendors. Some firms also offer additional analysis or reporting to view the risk across your vendor portfolio. It's important to remember that not every firm is an expert in every risk domain. Risk gathering and assessment methodologies vary, and many intelligence products promise more than they can deliver. Still, many qualified risk intelligence providers offer excellent risk intelligence and monitoring products. Understanding how the products and services can support your organization's risk management practices and knowing the specific risk domains available is the first step when considering whether you should engage with a risk intelligence provider.
Let's review some of the most common risk domains and why it’s important to monitor them:
- Cybersecurity - Cybersecurity and cyber risk are hot topics, and with good reason. The dangers are real, including data breaches, ransomware, phishing, vishing, social engineering, bugs, and viruses. Third parties can often make your organization more vulnerable to cybersecurity threats.
- Privacy - New privacy laws and regulations are being implemented around the world. Data governance involves actively managing and monitoring your vendor's data privacy practices to remain compliant.
- Vendor Financial Health - A third party's financial health is essential information. The presence of financial difficulties, such as late payments, can mean a relationship is at increased risk. Vendors with poor financial health risk may not be able to support your products and services which can impact your operations.
- Reputation - Bad news about your vendor can easily impact your organization's reputation and brand. Today, news sources publish millions of pieces of information every day. A single report of a vendor's cyber breach, fraud, regulatory violations, or growing customer complaints can damage your organization.
- Environmental, Social, and Governance (ESG) - Ethical vendor selection and monitoring are becoming more important while ESG transparency and reporting legislation is increasing in the U.S. and abroad. Weak or poor vendor ESG ratings suggest unmanaged risks that can negatively affect your organization's reputation and bottom line.
- Company Information and Profile - A good organization on paper may not necessarily show the whole story as to who they are, with whom they associate, or whether their products and services are what they claim to be. During the due diligence process, it’s not always possible to identify sanctioned organizations, prohibited individuals, shell companies, obscured legal entities, beneficial owners, politically exposed individuals, regulatory enforcement, and legal proceedings.
How to Use Risk Intelligence in Your Third-Party Risk Management Program
Using risk intelligence to supplement your ongoing vendor monitoring is a sound strategy. However, there are other uses for risk intelligence, as well.
Using risk intelligence can help your organization:
- Highlight risks during pre-contract evaluations and vetting
- Prioritize vendors for risk mitigation management
- Provide a consistent approach for comparing vendors for the same product/service
- Identify and justify risk-driven contractual clauses as a new customer
- Give visibility to the risks of fourth parties, fifth parties, etc. The use of risk intelligence can help identify fourth parties' risks and make them more discoverable
- Gather directional guidance and determine actions to take
What to Look For in a Risk Intelligence Provider
It can’t be overstated that not all risk intelligence providers are created equal. Organizations who want to use these services must carefully consider the provider's price, quality of product, and expertise. Additionally, if you have more risk intelligence providers, you’ll need to put in more work to consolidate the data and paint a comprehensive picture of the vendor's risk profile. So, providers that provide risk intelligence on more than one risk domain may be very beneficial.
No matter how many risk domains a provider can service, make sure to consider the following:
- Are the provider's services capable of handling any number of third parties?
- Does the provider identify third parties that pose the highest risk?
- Can the provider integrate and address multiple pieces of risk intelligence for each third party?
- Is the provider capable of continuously reassessing threats to third parties regularly and rapidly?
- How often is risk intelligence refreshed?
- Can risk intelligence products be integrated into your TPRM platform via API or other means?
Three Compelling Reasons to Use Risk Intelligence
There is no doubt that vendor risk intelligence can be an amazing tool for identifying and managing vendor risks in your organization. Still, there may be concerns over the potential costs of these services or the work of incorporating new risk data. Some may even wonder if risk intelligence is necessary or if it’s just another fad.
The truth is that vendor risk is here to stay, and the threat landscape has continued to grow.
The smartest organizations consider the potential damages a single bad vendor can cause. However, if you’re still on the fence regarding risk intelligence, here are three compelling reasons to consider using vendor risk intelligence.
- Your TPRM team can't do it all
Even in the most well-resourced and mature organizations, TPRM teams can be overwhelmed with the number of processes and tasks they must complete daily. Ineffective or manual processes for monitoring vendor risk add additional workload to an already overloaded plate. In these cases, vendor risk monitoring becomes a reactive exercise vs. a proactive one. Adding vendor risk intelligence can often add more value to the risk monitoring process than adding full-time employees. - The cost of a data breach
According to the Ponemon Institute's Cost of Data Breach Report 2022, the average cost of a data breach has reached an all-time high of $4.35 million. Constant proactive monitoring of your vendors can help detect security vulnerabilities before a major breach or another cyber incident occurs. - Ongoing monitoring is both a regulatory requirement and best practice
Your organization is responsible for the effective risk monitoring and management of its vendors. In addition, regulators won’t be very understanding if you fail to establish a proper vendor risk monitoring posture, especially if you claim insufficient resources. Your existing resources can leverage tools like vendor risk intelligence to improve and strengthen your risk monitoring practices.
Ongoing vendor risk monitoring is essential for effective third-party risk management. It can be greatly enhanced with the addition of tools such as vendor risk intelligence. Suppose your organization hasn’t yet explored the many benefits of using vendor risk intelligence. In that case, it's a great time to investigate adding it to your third-party risk management toolkit.