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Privacy Considerations while Third Party Risk Management

Privacy Considerations while Third Party Risk Management
Privacy Considerations while Third Party Risk Management

There are inherent risks in engaging with a third-party vendor because their practices and procedures would be ungovernable. However, large scale functioning often makes it necessary for organizations to use third party vendors and in turn increase their chances of facing potential risks. This is where Third-Party Risk Management comes in.

Often referred to as TPRM, Third-Party Risk Management is an area focusing on analyzing and regulating risks associated with outsourcing third-party vendors or service providers. There are third-party and vendor risk assessments to determine how much exposure would an organization be risking if they were to outsource a business process to a third party.

A few reasons why it is risky to outsource third-party vendors:

Reliance on Third-Party Softwares:

Organizations are increasingly relying on third-party softwares to run facets of their business and it is only for rare exceptions where things are built in-house. This puts their sensitive data at risk.

Ecosystem of Collaboration:

By creating an environment where information needs to be shared to various collaborators that organizations rely on, there could be severe lapse in apt management of sensitive data and open a window for security risks to the organization.

Reputational and Monetary Damage:

It is a monetary burden to outsource third-party vendors. Furthermore, any reputational damage caused by third-party vendors and their oversight could be irreparable and have long lasting consequences for the organization.

Violation of Laws:

Third-party vendors might be compliant with the rules and regulations applicable by law. This could lead to serious consequences for the organization.

It is essential to modulate the privacy risks caused by third-part vendors, this could include:

Conducting Assessments:

Organizations should conduct diligent assessments of the third-party’s security measures and practices and see if they are of industry standard. This should include crosschecking of all available legal and technical documents that would help attest to their authenticity or incapabilities.

Entering Into Apt Contracts:

Organizations should enter into a processing agreement regarding their data which would specify the third-party vendor’s methods of processing, storing and utilizing the organization's data. The contract should be specific and would protect the organization's data from being mishandled.


Organizations should keep a check on the working of the third-party and ensure they are complying with all terms and conditions and licit regulations wherever applicable. This should include conducting proper assessments of third-party systems, security measures, and audit reports.

In addition to these, here are a few additional considerations that would be essential:

  • Transparency: Organizations should be transparent with their employees and customers about the use of third-party vendors. This should clarify what data is being used, the purposes for which it is being shared with the third-party and the identity of the third-party.

  • Data Subject Rights: Organizations should give their customers and employees control over their personal data, such as the right to access, alter, and delete their data.

  • Data Minimization: Organizations should limit the data they collect and only store personal information that is necessary. This would help reduce risks of data breaches and other risks related to privacy incidents.

Conclusively, TPRM is imperative in bridging the gap in terms of protecting the privacy of customers and employees when there is an involvement of a third party. It guarantees efficient and responsible handling of data and minimizes chances of probable privacy risks.


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