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Beyond Due Diligence: Embracing Continuous Third-party Vendor Risk Monitoring

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Enlighta Spice Team

Ever swipe your card and wonder where that information goes? A recent breach at American Express, linked to a third-party vendor, has shown that even the most secure companies can face hidden risks. The breach involved a merchant processor used by numerous merchants, not American Express’ own systems. 

With the complexities in business operations today, continuous monitoring of vendors and their security practices has become crucial for mitigating such risks. While thorough vendor due diligence is important, what if there was a better way to stay ahead of potential threats and incidents like these?  Continuous third-party vendor risk monitoring proactively assesses the security posture and potential vulnerabilities of third-party vendors throughout the entire lifecycle, from selection and onboarding to risk management and offboarding. This helps identify weaknesses in the vendor’s system and prevents potential breaches. 

Vendor Onboarding & Due Diligence

Let’s understand what usually goes wrong in these situations. Most companies perform due diligence when onboarding a third-party service provider into the organization. Due diligence ensures that the vendor meets the regulatory, internal security, policy compliance and scope requirements. Collecting and reviewing vendor due diligence allows companies to make more informed business decisions and helps businesses steer clear from risky business relationships.

What Happens After Vendor Onboarding?

Due diligence is a crucial first step in building trust with vendors. But what happens after? A vendor’s financial health can shift, security vulnerabilities can emerge, or internal issues within their organization can arise at any later point.  It is also likely the gaps may not be directly associated with the vendor; the gaps or issues may be related to the vendors’ subcontractors (called fourth parties) or affiliates.

Relying solely on due diligence also has its limitations: 

  1. Point in time Due Diligence – Most enterprises perform due-diligence only during the process of vendor onboarding; this provides a snapshot of a vendor’s risk at a specific point in time. A vendor’s situation can change, and new risks can emerge over time.
  2. Sanctions Screening  – Most enterprises perform sanctions screening only during the process of vendor onboarding whereas the global sanctions databases are updated daily. 
  3. Limited Scope – Typically focuses on pre-defined areas like financial stability and compliance with specific regulations. Other potential risks, like negative media coverage or internal issues within the vendor organization, might be overlooked.
  4. Limited Visibility into Performance – Might not be able to assess the vendor’s ability to consistently meet contractual obligations or deliver services according to agreed-upon service level agreements (SLAs)
  5. Limited Visibility into Gaps / Issues – Most enterprises haven’t invested in systems that can flag early-warning alerts to executives, of potential risks that may lead to a failure in the relationship, a litigation or may impact the reputation or brand of the enterprise.

Most enterprises invest heavily in security monitoring systems. These systems monitor, assess, analyze, and prioritize potential security risks within their own networks. But in American Express’s case, this internal vigilance as well as the pre-onboarding due-diligence wasn’t enough. The incident highlights a critical gap in traditional security approaches. While internal security monitoring and periodic third-party risk assessments are essential, they can’t provide a complete picture. This is where continuous third-party vendor risk monitoring steps in.

Benefits of Continuous Third-party Vendor Risk Monitoring

Continuous third-party vendor risk monitoring provides a 360-degree view of the vendor landscape and helps enterprises identify potential problems before they escalate into major disruptions. Some of its benefits include: 

  • Ongoing adherence to evolving regulations and industry standards, and reduced risk of non-compliance penalties.
  • Proactive risk mitigation strategies, minimizing potential damage and ensuring business continuity.
  • Gain constant visibility into vendor performance, ensuring ongoing adherence to contractual obligations and service delivery standards.
  • Enabling organizations to identify and mitigate potential risks before they escalate into significant disruptions, relationship failure, litigation or adversely impact the reputation of their business
  • Gain a complete understanding of the vendor ecosystem and its overall risk profile, allowing businesses to make informed decisions about their partnerships.

Key Areas of Continuous Monitoring

Continuous vendor risk monitoring isn’t a one-size-fits-all approach. It can be tailored based on specific needs and risk tolerance. Here are some key areas where continuous monitoring can provide valuable insights. 

  • Financial Health Monitoring – Financial instability can impact a vendor’s ability to deliver services. Early detection allows businesses to develop contingency plans or find alternative vendors before disruptions occur. This also allows enterprises to take proactive measures like renegotiating payment terms or seeking additional guarantees to minimize potential losses.
  • Compliance Monitoring – Non-compliance can lead to hefty fines and legal issues. Continuous compliance monitoring keeps businesses updated and helps ensure the vendors are compliant, avoiding penalties for organizations. Understanding a vendor’s compliance posture helps businesses assess the overall risk profile of their vendor ecosystem
  • Performance Monitoring – This involves tracking how well a vendor meets the agreed-upon service levels outlined in the contract. This might involve metrics like project timelines, deliverables, and customer satisfaction ratings. Performance monitoring helps businesses gain constant visibility into their vendor’s performance, ensuring they consistently deliver value and meet expectations. 
  • Continuous Sanction and Criminal Database Screening – Unforeseen legal issues with a vendor can damage the reputation of an organization or even lead to legal trouble. Continuous screening helps businesses identify potential risks and take necessary actions to protect themselves.
  • Critical Issues Monitoring – This involves monitoring news and social media for any negative press or internal problems within a vendor’s organization. This could include data breaches, product recalls, or employee lawsuits. Public perception of vendors can impact an organization’s brand image. By identifying potential reputational risks early on, businesses can take proactive measures to safeguard their own brand reputation.

Continuous Vendor Risk Monitoring with Enlighta SPICE

Now that we’ve explored the critical areas of continuous vendor risk monitoring, it is understandable that the process could feel overwhelmingly daunting. But the good news is that it doesn’t have to be. 

Enlighta SPICE is a Software Platform for Intelligent and Continuous Evaluation of vendors and third-parties. Here’s what sets Enlighta Spice apart:

  • Affordable – Enlighta Spice offers a cost-effective solution that delivers powerful continuous monitoring capabilities without breaking the bank.
  • Secure – Enlighta Spice leverages cutting-edge security protocols to protect your data and ensure the confidentiality of your vendor information.
  • Adaptable – Enlighta Spice is built to adapt to your specific needs and industry requirements, providing a customized monitoring experience.
  • Scalable – Enlighta Spice scales effortlessly to accommodate your expanding needs, ensuring continuous monitoring remains effective.

Looking for a solution for continuous third-party risk monitoring? Try Enlighta SPICE to continuously assess, monitor, and mitigate third-party risk throughout the vendor lifecycle. 

Contact us at info@enlighta.com to get a free trial or schedule a personalized demo.