Third-Party Risk Management and GDPR Compliance
The General Data Protection Regulation (GDPR), which came into effect in May 2018, is a comprehensive privacy law. It outlines how organizations should process the personal data of EU citizens and requires organizations to conduct third-party risk management effectively.
The GDPR applies to any organization worldwide that processes, stores, or transfers the personal data of EU individuals. It imposes strict data protection measures on these organizations.
Non-compliance can result in severe fines, up to €20 million or 4% of global turnover. This ensures that partners and service providers also comply with data protection standards.
Why Third-Party Risk Management Matters?
Organizations typically share personal data with third-party vendors who thereby engage in management on their behalf. This makes third-party risk management very important to ensuring GDPR compliance. These vendors, also called data processors, should be put under very strict controls in the protection of data. Failure to ensure their compliance can lead to very serious regulatory, financial, and reputational consequences.
Key GDPR Requirements for Third-Party Risk Management
Conduct Risk Assessments
Whereas the law requires organizations to conduct risk assessments for their processing activities, GDPR demands a higher standard. GDPR mandates that organizations ensure their controls and governance are effective and adequate.
Recital 76 specifies that organizations must assess whether their data processing operations pose a risk or high risk to the rights and freedoms of data subjects.
Article 24 of the GDPR requires data controllers to implement and maintain adequate technical and organizational measures for compliance. Data controllers must also regularly update assessments for all their vendors to ensure they have the necessary data protection measures in place.
Establish Clear Contracts
Article 28 of the GDPR establishes that controllers are to engage processors that provide adequate guarantees when it comes to the protection of data. The contract signed with third-party processors should have clauses that guarantee compliance with the GDPR—for example, audit support and the right to security. Contracts should also govern the rules for data protection impact assessment in Article 35 and keep records to be overseen by regulators in Article 28, Paragraph 3.
Overcoming the Compliance Challenges of Third Parties
Third-party risk management goes beyond one-off verification; the process is, in essence, all about continuous monitoring. The greatest challenge is to keep the GDPR adherence, the status of that, updated with regular assessments and audits, and controlling the emerging risk. The answer to developing third-party management processes is in truly potent scenarios: using advanced tools and platforms now available, use the process to be much more fine as well as objective approximation along with guaranteed continuous compliance.
Implementing The Third-Party Risk Management Process
Organizations have to embed third-party risk management within the larger organizational data protection strategy, and this includes:
- Taking an inventory of all third-party vendors and understanding their processes regarding personal data.
- Apply the practices of data minimization and limit access to personal data with legitimate purpose.
- Review of vendor contracts to include clauses on the GDPR and update accordingly and on a regular basis.
- Monitor Continuously: Establish ongoing monitoring and periodic reassessments to keep ongoing compliance with the requirements of GDPR in check.
A business can address the risk of third parties in these sensitive areas while keeping GDPR compliance intact, without fines incurred and a tainted reputation.
