Addressing Data Protection and Privacy Challenges in TPRM

Addressing Data Protection And Privacy Challenges In Third Party Risk Assessment

By: Beaconer, Jan 10, 2024

Addressing Data Protection And Privacy Challenges In Third Party Risk Assessment

In today’s digital world, organizations rely heavily on third party vendors and suppliers for various business functions. While these partnerships can help drive innovation and efficiency, they also introduce significant data protection and privacy risks if not properly managed.


Recent high-profile data breaches have underscored the dangers of improperly secured third party access to sensitive data. 98 percent of organizations worldwide have an association with at least one third party vendor that has been breached in the last two years. To mitigate these risks, organizations need robust third party risk assessment processes that adequately address data protection and privacy concerns. This blog post examines key challenges in this area and provides recommendations for improving third party risk assessment practices.

Defining Third Party Risk Assessment

Third party risk assessment involves evaluating risks associated with an organization’s vendors, partners, suppliers, and other external entities. It encompasses identifying, analyzing, and responding to risks related to data security, privacy, resilience, regulatory compliance, and more. Effective third party risk assessments enable organizations to determine potential vulnerabilities and implement appropriate controls to reduce exposure. This is especially critical where third parties handle sensitive customer data subject to privacy regulations.

Difficulties in Data Protection and Privacy

Third party mishandling of data poses significant privacy and compliance risks. The key problem area is unauthorized data access or theft. Third parties may expose data through poor security controls, insider threats, and malicious attacks. Data processing violations mean that third parties may use data improperly or fail to follow contractual handling restrictions. Another is subcontractor risks where data provided to third parties could be passed to subcontractors without proper oversight. Moreover, global third parties may transfer data across borders in violation of laws resulting in cross border data transfers.

Also, third parties could fail to comply with privacy laws and regulations resulting in noncompliance with the regulations enforced. The lack of transparency is another factor where organizations may lack visibility into third party data handling practices.

With proliferating data flows to third parties, these risks are intensifying. Rigorous vendor risk assessment processes are essential to close vulnerabilities.

Challenges in Third Party Risk Assessments

While critical, assessing third party data risks presents major challenges that include complex fragmented processes where risk assessment processes often span multiple functions and lack coordination. Critical information falls through the cracks. If the assessment focuses heavily on financial and resilience risks then data protection becomes an afterthought.

Excessive reliance on surveys is also a challenge as assessments depend too much on superficial supplier surveys with unverified information. There may be a lack of technical assessments when technical testing of controls is missing. Reviewing policies and procedures is not enough. When static point in time evaluations fail to account for evolving vendor environments, it results in outdated assessments. 

Unscalable manual methods are also a cause of worry as heavily manual third party risk management strains limited resources. Opaque practices also demand attention as they limits the transparency of vendor risk management programs for customers and regulators. Addressing these shortcomings requires a more rigorous, data centric approach capable of providing complete, accurate, and current visibility into vendor environments.

Improving Data Protection in Third Party Risk Assessment

Organizations can significantly improve oversight of third party data risks by:

  • Integrating data protection into core assessment processes – Build data protection criteria into vendor selection, onboarding, continuous monitoring, and reviews. Include data security, privacy, handling practices, and regulatory compliance.
  • Performing technical security assessments – Augment audits and surveys with technical testing of security controls, vulnerability scanning, penetration testing, and source code reviews. Validate security posture.
  • Leveraging continuous automated monitoring – Implement continuous automated monitoring leveraging AI of vendor environments using technologies like user behavior analytics. Proactively detect threats.
  • Maintaining comprehensive data maps – Maintain detailed maps of high risk data flows to third parties and subcontractors to evaluate exposure. Detail maps of risk are useful when conducting thorough vendor risk assessments.
  • Using advanced analytics – Apply advanced analytics techniques like machine learning to model vendor risk scenarios and detect anomalies indicating threats.
  • Enforcing data handling contracts – Insert strong data protection, privacy, and security provisions in contracts. Ensure compliance monitoring and enforcement.
  • Collaborating with vendors – Work collaboratively with vendors to continuously improve data protection programs and controls. Provide guidance and training.
  • Participating in risk assessment alliances – Join industry alliances focused on improving third party risk assessment standards.

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With growing reliance on third party services, rigorous assessment of data protection and privacy risks is imperative. Organizations can no longer rely on vendor surveys alone. Implementing technical assessments, analytics, automation, and stronger oversight will provide the visibility required to substantially lower risks and ensure compliance. Taking a proactive, data-focused approach will enable more effective partnerships that support business needs while protecting stakeholder data.

Author Bio

Nagaraj Kuppuswamy

Nagaraj Kuppuswamy is the Co-founder and CEO of Beaconer, an esteemed enterprise specializing in managed third-party risk using the cloud native AI based solution. With an extensive portfolio of accolades and industry certifications, Nagaraj stands out as a seasoned expert, boasting over 16 years of dedicated involvement in the field of Cybersecurity. Throughout the course of their career, he has predominantly focused on elevating the realm of third-party risk assessment.


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