Ongoing monitoring is one of the pillars of an effective vendor risk management process. All of the major regulatory guidance directs organizations to conduct ongoing monitoring on their vendors, but what exactly does that mean?
What Is Ongoing Monitoring for Third Party Risk Management?
For starters, ongoing monitoring means keeping an eye on the health of the third party and be poised for any changes that may be of concern. Ongoing monitoring is tricky because it requires discipline, planning and patience. It’s a must that provisions for monitoring be outlined early in the discussions with the third party, certainly prior to the contract being signed during the pre-contract stage, and then carefully woven into the contract so that both the organization and the third party understand what each must do.
Perhaps the simplest form of ongoing monitoring is service level reporting, which gives visibility into how the vendor is performing – this is particularly effective with processors (e.g., system availability, transaction accuracy) or call centers (e.g., average speed of answer, abandon rate). Other forms of monitoring may require action on your part, such as monitoring social media or maintaining a good handle on their complaint management processes.
Monitoring does require follow up. If you discover you’re not getting the agreed upon reporting, you need to make the concerted effort to go and gather; if they’ve stopped providing information, you certainly should escalate the issue. It may be a simple oversight or it could be a sign of a bigger problem that you’ll certainly want to be made aware of as soon as possible.
The Forgotten Pillar of Third Party Risk Management
Monitoring is often considered the forgotten pillar of third party risk management. It’s easy to see how that happens with the hustle and bustle of daily responsibilities. Think of it this way – all the effort goes into the due diligence, risk assessment and contract development initially that once the contract is signed and things are up and running. It’s like you’ve tossed the relationship onto cruise control and aren’t paying as close attention as you should. However, if unchecked, it can have some very bad consequences in the form of potential reputation risk, unmanaged complaints and regulatory criticism.
There’s one other major thing to think about with ongoing monitoring. Just like the other pillars of third party risk management, ongoing monitoring should be risk-based and thus tailored to the nature of the product or service provided. For call centers, that may mean reporting and call listening; for retail or branch locations, that may mean mystery shopping. The list goes on and on. We often describe it as having a clear line of sight through the transaction all the way from the institution to the customer and back.
Ongoing monitoring is important. Don’t put your relationship at risk by forgetting to conduct a regular check on your third party relationships.
Now that you've got ongoing monitoring down, what about the other pillars of vendor risk management? Download our infographic now so you can be sure you're on track.