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A DPO’s Guide to Managing Third-Party Data Privacy Risks

Tanin Chakraborty ,

Sr. Director and Global DPO,

Biocon Biologics Ltd.,

Nowadays, organisations increasingly rely on third-party vendors to enhance their operational capabilities in today’s interconnected digital landscape. Third-party vendors play various roles within a company, supporting both core and secondary operations. For example, there are different vendors for getting different services such as office stationery services, those handling visiting card printing, candidate’s background verification (BGV), cloud storage, customer relationship management (CRM), data analytics, marketing or even IT Services. Under IT service providers, services can be maintaining digital infrastructure, managing cybersecurity, and even providing end-to-end technical support. In such cases, managing vendors in these evolving increases in risks each day, handling them becomes an immense challenge. These challenges increase when the vendor is unable to understand the criticality of the data being shared as they are a small vendor in the market with a handful of employees, and there are no processes or policies put across in their company. Third-party data breaches are growing more widespread as technology facilitates business connections and global supply networks become more complex. In fact, as per one of the reports from September 2024, 61% of organizations reported a third-party breach in 2023, up nearly 50% from the previous year and thrice since 2021. Because of this, businesses usually have little idea where their data is going, and sensitive or private information can be readily shared with suppliers and subcontractors that the contracting company knows very little about.

However, engaging third parties introduces significant data privacy risks, particularly concerning the handling of individuals’ personal data. When organizations share personal data with third parties, they expose themselves to various risks, including data breaches, non-compliance with regulations, and reputational damage. The General Data Protection Regulation (GDPR) emphasizes that organizations remain accountable for personal data processing even when outsourced to third parties. This accountability necessitates robust risk management strategies.

Risks Involved in Engaging Third Parties

  • Data Breaches: Third parties may not have adequate security measures in place, increasing the likelihood of unauthorized access to sensitive data.
  • Compliance Failures: Non-compliance with GDPR or other relevant regulations by third parties can lead to significant penalties for the primary organization.
  • Reputational Damage: Data breaches or third-party mishandling of personal data can severely damage an organization's reputation and erode customer trust.
  • Contractual Liabilities: Poorly defined agreements with third parties can lead to disputes and financial liabilities if data privacy obligations are not met.

Role of Data Protection Officers (DPOs)

A Data Protection Officer (DPO) plays a crucial role in managing these risks by overseeing compliance with data protection laws and ensuring that third-party engagements are secure and compliant. DPOs are responsible for educating staff about data privacy obligations, monitoring compliance with internal policies and external regulations, and serving as a point of contact for data subjects and regulatory authorities.

Key Responsibilities of DPOs

  • Data Privacy Framework: DPO is responsible for overseeing the implementation of data protection strategies and ensuring that personal data is processed in compliance with applicable laws.
  • Monitoring Compliance: DPOs ensure that both the organization and its third-party vendors comply with GDPR and other relevant laws.
  • Conducting Risk Assessments: They assess potential risks associated with third-party engagements and recommend mitigation strategies.
  • Implementing Data Protection Policies: DPOs help develop and enforce policies that govern how personal data is handled within the organization and by its vendors.
  • Training Staff: They provide training on data protection practices to ensure all employees understand their responsibilities regarding personal data.

Contractual Clauses under GDPR

Article 28 of GDPR outlines specific contractual clauses that organizations must include when engaging third-party processors. These clauses help ensure that personal data is handled in compliance with the regulation.  Not having the necessary contractual clauses when engaging third-party vendors can indeed lead to significant violations of GDPR. This article mandates that data controllers and processors must have a written contract in place that outlines specific obligations and responsibilities concerning data processing. Key elements of the contracts include:

  • Data Processing Agreement (DPA): A formal contract between the data controller (the organisation) and the data processor (the third party) that outlines the terms of data processing. The DPA should be incorporated along with the Master Service Agreement (MSA).
  • Data Process: The controller should inform the controller if there is any change in the data processing process or even the change of collection of new data points from the data subject.
  • Purpose Limitation: The DPA should specify the purposes for which personal data is being processed.
  • Data Security Measures: The contract must require the processor to implement appropriate technical and organizational measures (TOMs) to protect personal data.
  • Sub-Processor: If the processor intends to engage another processor, the agreement must explicitly mention these clauses and refer to the sub-processor details.
  • Data Subject Rights (DSR): The DPA should outline how the processor will assist the controller in fulfilling its obligations towards data subjects.
  • Data Purging: The DPA should call out clauses regarding the data deletion or purging post-processing. In some cases, the data is being returned to the controller but should be in a readable format that can be used by the controller if required elsewhere. 
  • Breach Notification: Any breach incident reported at the processor ends needs to be informed to the controller at the earliest since under various privacy regulations the same needs to be informed to the authority under stipulated timelines.

These clauses are essential for ensuring accountability and transparency in third-party relationships. Even after all these the controller needs to implement solutions to regularly track the vendor’s risk to the controller.

Security Measures in Third-Party Relationships

Security is a critical aspect of managing third-party data privacy risks. Organizations must ensure that their vendors implement robust security measures to protect personal data from unauthorized access or breaches. Key security considerations include (but not limited to):

  • Encryption: In order to prevent unauthorized access to personal data, it is important to encrypt information both while it is in transit and while it is stored.
  • Access Controls: The implementation of strong access controls is recommended in order to restrict the individuals who are able to access personal data depending on their jobs within the company, which is nothing but the implementation of a role-based access control (RBAC) mechanism. 
  • Regular Audits: Conduct regular security audits of third-party vendors to assess their compliance with security protocols.
  • Incident Response Plans (IRPs): Ensure that vendors have effective incident response plans in place to address potential breaches promptly.

Best Practices from Top Countries

Different countries have developed unique approaches to managing third-party data privacy risks through their regulatory frameworks and practices. Here are insights from five leading countries:

1. Germany: Germany has a robust framework for data protection, heavily influenced by its historical context regarding privacy rights. The country emphasizes strict compliance with GDPR provisions, requiring detailed DPAs with third parties. German organizations typically conduct thorough due diligence before engaging vendors, focusing on their security practices and compliance history.

2. France: France's approach includes strong enforcement mechanisms through its regulatory authority, CNIL (Commission Nationale de l'Informatique et des Libertés). French companies often prioritize transparency in their agreement with third parties, ensuring clear terms regarding data processing activities and security measures.

3. United Kingdom: Post-Brexit, the UK has adopted its version of GDPR known as UK GDPR. UK organizations are encouraged to appoint DPOs who play a pivotal role in overseeing third-party engagements. The Information Commissioner's Office (ICO) provides extensive guidance on managing risks associated with third-party processors.

4. Canada: Canada's Personal Information Protection and Electronic Documents Act (PIPEDA) requires organizations to ensure that third-party service providers adhere to similar standards of care regarding personal information protection. Canadian organizations often use comprehensive risk assessments before engaging vendors.

5. India: Under Section 8(2) of India’s Digital Personal Data Protection (DPDP) Act, “Data fiduciaries can engage data processors to process personal data on their behalf for any activity related to offering goods or services to data principals. However, this can only be done under a valid contract. Data Fiduciaries are ultimately responsible for the actions of any data processors they engage”. Although evolving regulations emphasize stringent oversight of third-party data processing, organizations must navigate a complex landscape of compliance and risk management. However, till the rules are out, DPOs in India do not need to focus on data localisation clauses apart from certain financial transactions that are required to be stored in India under specific regulations.

Conclusion

Managing third-party data privacy risks is a critical responsibility for organizations today, necessitating a proactive approach led by Data Protection Officers (DPOs). By understanding the inherent risks associated with engaging vendors, implementing robust contractual frameworks as outlined by GDPR & local regulations, and prioritizing security measures, organizations can effectively navigate the complexities of modern data management while ensuring compliance with legal obligations. DPOs play an essential role in this process by providing expertise, oversight, and guidance on best practices for managing these relationships responsibly. As global regulations continue to evolve, staying informed about international standards will further enhance an organization's ability to protect personal data effectively while leveraging the benefits of third-party partnerships.

The Journey Into Industry

Tanin is a distinguished Sr. Director and Global Data Privacy Officer for Biocon Biologics Ltd. with 18+ years of experience in data privacy, compliance, and information security audits. Recognized as DPO of the Year at the Google Cloud & Niveus Super 40 Digital Native Summit, Outstanding Healthcare DPO by eHealth Magazine and awarded as Data Privacy Leader by the India CISO Summit. A frequent speaker at major conferences such as the ETCIO, ETCISO Annual Conclave, ISMG Cybersecurity meet, AISS (DSCI), IAPP and various Privacy Conferences. Tanin excels in privacy strategy, regulatory compliance, and high-risk vendor audits. He spearheaded privacy frameworks across different jurisdictions – North America, the EU, Southeast Asia and India- for his current organization. Certified in FIP®, CIPM, and CIPP/E, Tanin’s credentials extend to ISO 27001 LA, ISO 42001 LA, ISO 31000, Scrum Master, and ITIL Expert, demonstrating a strong commitment to privacy excellence. Tanin has a rich and versatile background, with experience across various industries—IT, FMCG, FinTech, and Pharmaceutical—working in both established organizations and dynamic startup environments. He is a well-known presence on social media, consistently sharing insightful blogs and articles on data privacy, security, and the latest industry trend—AI. An influential thought leader, Tanin is a trusted voice in shaping data protection for global organizations.

 

 



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