The General Data Protection Regulation [GDPR] has significantly impacted how companies across all industries manage data. It has also transformed how organisations interact with third-party vendors who process personal data on their behalf. Failing to properly manage vendor relationships & compliance can expose companies to substantial GDPR penalties & reputational damage. That’s why robust vendor management programs are becoming an essential pillar of broader GDPR compliance strategies.
This article provides practical guidance on how to mitigate vendor risks in order to achieve GDPR compliance. It covers key topics such as assessing potential vendor exposures, using contracts to outline responsibilities, centralising oversight & taking action when issues arise. Proactively addressing these areas will allow businesses to partner securely with vendors in the GDPR era.
Before diving into vendor management, it’s helpful to understand some GDPR basics. The regulation went into effect in 2018 & standardised data protection laws across the European Union [EU]. Some key requirements include:
Additionally, GDPR introduced new principles like “privacy by design,” which calls for data protections to be built into processes & systems from the onset rather than tacked on afterwards. Accountability is another core tenet, requiring companies to take responsibility for personal data from collection through destruction, regardless of where it resides.
Fines for non-compliance are steep – up to 4% of a company’s global revenue or €20 million, whichever is higher. This has certainly gotten executive attention & made GDPR compliance a top priority across industries. Understanding these key regulations & principles provides context around steps to mitigate vendor risk.
Third-party vendors like cloud providers, payment processors & service partners often handle personal data on an organisation’s behalf. These vendors can easily become a compliance liability if their data protections are not up to GDPR standards. Consider examples like:
While outsourcing can provide efficiencies, it also represents a loss of control. GDPR makes clear that organisations retain full accountability for vendor actions involving personal data processing.
This risk is often overlooked, largely because vendor contracts do not adequately outline GDPR responsibilities. A 2020 survey by Osterman Research found that only 15% of companies audit vendors for data protection more than once per year. Nearly half do no auditing at all after contracting. Without vigilant oversight, vendors become an unseen GDPR liability.
Contracts are a powerful tool to outline vendor compliance responsibilities & empower oversight through audits. Key areas to address include:
While contracts establish baseline requirements, actual vendor risk management occurs outside of the contract process. Ongoing monitoring & auditing is what truly reinforces compliance.
Establishing ownership of vendor compliance monitoring is critical for success. The Data Protection Officer [DPO] is ideally suited for this oversight:
The DPO should centrally manage:
While labour intensive, robust oversight is the only way to truly gain visibility into vendor risk. Their compliance posture impacts your regulatory exposure.
Beyond contracts & oversight, GDPR needs to be ingrained into vendor interactions from the start:
By integrating GDPR early via processes like these, compliance becomes intrinsic to the vendor relationship rather than bolted on as an afterthought.
Despite best efforts, vendors may still experience GDPR issues that require action. Having remediation protocols & consequences defined in the contract provides recourse:
Having structured processes to address compliance failures not only protects your organisation but provides incentives for vendors to avoid violations.
Managing vendor risk is no longer an optional part of data privacy programs; it’s a mandatory component central to GDPR compliance. Companies that embrace vendor governance will gain quality partners truly aligned to their data values while those who neglect it are leaving themselves open to regulatory violations.
In summary, leading practices include contracting for clear GDPR accountability, centralising monitoring under the DPO, embedding compliance into procurement & communications & being willing to take action with non-compliant vendors. This comprehensive approach develops a resilient vendor compliance framework poised for GDPR success & beyond.
Vendors are subject to the same GDPR financial penalties as the organisations that contract them – up to 4% of annual revenue or €20 million. They may also face contractual consequences like termination, remediation requirements & indemnification for damages caused.
GDPR audits should occur annually at a minimum for critical vendors who handle significant amounts of regulated data. Higher risk vendors may warrant more frequent reviews, such as after major processing changes.
Initial actions include requiring a remediation plan from the vendor, placing the relationship on probation, and/or issuing financial penalties based on contract terms. If improvement isn’t demonstrated quickly, terminating the partnership may be necessary.
Yes, GDPR protects the data of any EU citizen regardless of where it is processed. Companies are responsible for ensuring adequate GDPR compliance from vendors globally, not just those in Europe.
Must-have contract terms include EU model clauses, audit rights, breach notification specifications, GDPR training requirements & indemnification for regulatory damages caused by the vendor’s non-compliance.