Third Party Risk Management in the context of GDPR

Updated: Aug 18




The General Data Protection Regulation (GDPR) is an EU regulation on privacy and data protection. The GDPR covers the transfer of personal data both inside and outside of the EU and EEA areas. The GDPR gives control to individuals over their personal data and increases the obligations of organisations to deal with that data in secure and transparent ways. 

GDPR also extends to third party vendors. Third-party compliance GDPR requirements relate to a person, agency, public authority, or body other than the data subject, processor, controller and persons who, under the direct authority of the controller or processor, are authorised to process personal data.

To ensure you meet third party compliance GDPR requirements, organisations must take steps to protect data held within their care and those shared with third parties. Seeing as a large percentage of data breaches happen through third-party relationships, GDPR states that third parties must handle data privacy and security in a way that is compliant to the regulation. Capturing the third party due diligence GDPR requirements is a fundamental part of ensuring that the necessary steps are taken to abide by compliance. 

For companies or organisations who are unable to stick to third party compliance GDPR requirements, regulatory authorities have greater powers to act, issuing fines totalling up to 4 percent of annual revenue or 20 million euros, whichever is greater. Therefore, conducting third-party due diligence GDPR and ensuring compliance is a crucial part of protecting an organisation and its assets. 

Third-party compliance GDPR

Although organisations know they should take their own cybersecurity and compliance requirements seriously, third party compliance GDPR is often overlooked. 

Organisations around the world have become increasingly aware of the significant legal requirements imposed by GDPR and the business risks posed by cybersecurity breaches. Therefore, a 3rd party security risk assessment is a fundamental part of ensuring your business is third party compliant. 

Businesses are now beginning to devote substantial resources to identifying and eliminating internal vulnerabilities and to mitigating their exposure resulting from potential cyber security incidents or non-third-party compliance GDPR. 

Addressing cyber security and privacy risk management from multiple angles is key, including investing in robust IT security systems, conducting employee security awareness training, considering the purchase of cyber security-related insurance policies and developing a data breach response plan to make sure that they can meet the 72 hours data breach notification of GDPR.

Organisations have found that they must conduct a 3rd party security risk assessment to counter threats. Under GDPR, businesses are legally bound to provide assurance to the regulator that these third-party service providers are compliant with the new regulations by having good cyber security and privacy controls in place.

Third-party issues

Many cyber security breaches occur due to a company’s cyber security measures only being as strong as its third-party vendor cybersecurity measures – stressing the importance of a 3rd party security risk assessment.

Let’s take a closer look at some of the issues organisations should tackle to mitigate their cyber security data privacy risk, in connection with third-party service providers.

1. Take Stock of existing Vendor Relationships

The first step is to ensure that your organisation has a complete understanding of who has access to what data. It’s important to conduct a 3rd party security risk assessment, including the cloud and all elements of internal and external security. 

Third-party compliance GDPR is a requirement of any third-party risk management assurance program. As well as understanding who these providers are and what information you exchange with them, whether it has been classified as personal data or not, under GDPR you also need to be clear on who is the data controller or processor in each relationship. This will help you both to understand which part of the GDPR needs to be complied with.

2. Limit Access and Segregate Data

Although it may be necessary to share some data or systems with third-party vendors and outside services providers, such access should be on a need-to-know basis in order to meet the data minimisation principle within GDPR.

Ensuring the third party due diligence GDPR requirements is key to protecting data and securing assets. There have been many instances where very costly credit card data breaches have led to repetitional damage, lawsuits and excessive costs.

One example, the infamous Target Inc breach, started with the theft of credentials granted to the company that managed Target’s Air conditioning, Fazio Mechanical Services. The attackers infected the vendor with general purpose malware through an email phishing campaign. While many lessons can be gleaned from Target’s misfortune, one of the most obvious is that the compromise of an air conditioning vendor’s credentials should never have led to the compromise of a company’s payment system data. This could have been easily mitigated by segregating the Air conditioning network from the company’s payment card systems network. Fazio Mechanical Services could have helped reduce its risk to phishing attacks by running regular cyber security awareness training for its staff. 

If you are required to ensure third party compliance GDPR requirements, then you will have to run regular security awareness training for your staff.

3. Review existing Contracts

A written contract will serve as a crucial foundation for a relationship with third-party service providers. Ensuring third party compliance GDPR requirements and tweaking existing vendor contracts with an eye towards mitigating cyber security risk is key. Under GDPR, Data processor activities must be governed by a binding contract with regard to the controller.

A number of contractual protections might help to manage such risk:

Consider extending your own security polices to service providers. Contracts can include provisions requiring providers to comply with specified cyber security procedures and technical controls. It would also help if they were built around a recognised security framework like NIST, BS 27001 or CIS top 20 security controls. Under GDPR, processors, like controllers, are required to implement appropriate security measures. What is appropriate is assessed in terms of a variety of factors including the sensitivity of the data, the risks to individuals associated with any security breach, the state of the art, the costs of implementation and the nature of the processing. Regular testing of the effectiveness of any security measure is also required.

Consider requiring the vendor to make representations or warranties regarding its cyber security practices or authorising your organisation to conduct audits regarding the vendor’s ability to meet and sustain your security expectations. Under GDPR, you must have a right to audit clause within your processor contracts

Require that the service provider implements timely notification of any security incidents that it experiences. Such a provision might also define your organisation’s rights to control any responses or disclosures to third parties in the event of an incident. Under GDPR, your processors are required to notify their relevant controller of any breach without undue delay after becoming aware of it.

4. How to Tackle the Problem

- Control with good security controls and limit downstream transfers of your data, specifically personal data under GDPR.

- Require the vendor to destroy copies of your data in the manner you specify on termination of the relationship.

- Consider how to allocate liability through indemnification provisions or limitations on liability based on the nature of the relationship, the sensitivity of the data involved and the GDPR requirements.

- Consider requiring the service provider to maintain cyber security-related insurance coverage. You should consider whether and to what extent data breaches stemming from third-party service providers fall within your own insurance coverage. You should consider combined public liability and cyber-security insurance coverage for the best possible coverage.

- Ensure the following: abide by third party compliance GDPR requirements, cover the third party due diligence GDPR requirements, and conduct a 3rd party security risk assessment.

5. Develop a Third-Party Cyber Risk and GDPR Compliance Assurance Program

After reviewing existing contracts for these requirements, an organisation should consider whether such contracts can and should be renegotiated. It’s very likely they will, as most contracts seen on a daily basis, do not meet third party compliance GDPR requirements. Additionally, the organisation should develop cyber security data protection guidelines for future contracts.

Once these revised contracts have been renegotiated and put in place, organisations should implement a Continuous Compliance Monitoring program that allows it to monitor the cyber risk and GDPR compliance of its third-party service providers on demand. This program should also have the ability to monitor not only third-party risk, but also fourth-party and firth-party risk across your eco-system of service providers and partners. One of the threads that runs through the GDPR is the requirement to demonstrate compliance. So, in the event of a data breach or audit by the regulator, you will be required to demonstrate good third-party assurance. This can be easily achieved with an on-going Continuous Compliance Monitoring program.

About RiskXchange

RiskXchange abides by third party compliance GDPR requirements, covers the third party due diligence GDPR requirements and conducts a 3rd party security risk assessment.

RiskXchange is an information security technology company, that helps companies of all sizes fight the threat of cyber threats by providing instant risk ratings for any company across the globe. RiskXchange was founded and is led by recognised experts within the security industry, who have held leading roles within companies such as IBM Security. 

Find out more here.

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