We live in an age of data-driven operations, which means your company could very quickly find itself in hot water if it doesn’t take every possible precaution to safeguard the security and compliance of personal data. But the responsibility of protecting sensitive information doesn’t just extend to your internal processes: if you use a third-party data processor, it’s critical to establish clear rules for the control of personal data by your suppliers.

For a growing number of organisations, third-party data processors play a crucial role in their business operations – but the use of third-party data processors can pose certain risks to data security and compliance.

Whether you’re using a third party to collect, store, organise, copy, analyse or share data, it’s vital that you understand how to navigate this complex landscape effectively.

Whilst common, the practice of using third parties to process your data make legal responsibilities difficult to understand if not clearly defined in agreements, and a lack of clarity can result in heated discussions about fault and liability in the event of a data breach. In this blog, we’ll explore how to manage these relationships while safeguarding your data.

Identifying Third Party Data Processing Activities

The first step of effective third-party data processor management is identifying the activities your third parties are involved in, and what personal data will be subject to these activities; this means understanding what data processing functions third parties perform on your behalf.

These activities can include tasks like data storage, customer relationship management, payment processing, marketing, or analytics.

UK GDPR requires organisations to document and maintain records of these activities, to ensure complete transparency in data processing activities. You can effectively identify these activities through:

1. Data Audit: Conducting a comprehensive audit of the data flow within your organisation will enable you to understand what personal data you currently handle and how that data is collected, processed, and transmitted, whilst also identifying all touchpoints where third parties are involved.

2. Conducting a gap analysis on existing contractual agreements: Contracts with third-party processors should cover: the types of personal data handled; the processing activities taking place; retention and deletion requirements; mechanisms for returning data once processing is completed; requirements around staff training for personal data; the right to audit client data processing activities; the implementation of appropriate technical and organisational measures; incident and data breach management; subject requests, and the use of sub processors. These are all the responsibility of the data processor.

3. Engage with Third Parties: Open a dialogue with your third-party data processors to clarify their data processing activities. Ensure they understand their obligations and responsibilities under data protection laws, particularly UK GDPR. The initial dialogue should focus on completing an RFI (Request for information) around the areas mentioned above; the RFI will act as the starting point for supplier due diligence. Following a review of responses, further information may be required; this may include conducting an audit.

Understanding Necessary Documentation

Once you have a clear understanding of the third-party data processing activities your company is involved with, you should focus on collating all the essential documentation. Proper documentation not only ensures compliance, but also helps to establish a framework for data protection.

The key documents to consider are Data Processing Agreements (DPAs), Data Protection Impact Assessments (DPIAs), and Transfer Impact Assessments (TIAs).

1. Data Processing Agreements (DPAs): Under UK GDPR, it is a legal requirement to
have DPAs in place when using third-party data processors. A DPA outlines the obligations and responsibilities of both the data controller (your organisation) and the data processor (the third party). It should clearly define data processing activities, data security measures, and the rights and responsibilities of both parties
regarding data protection.

2. Data Protection Impact Assessments (DPIAs): A DPIA is essential when processing activities are likely to result in a high risk to the rights and freedoms of any individual. It’s a systematic evaluation of the potential impact on a data subject’s privacy, and the measures in place to mitigate those risks. DPIAs help you to assess and manage the risks associated with third-party data processing activities.

DPIAs are the responsibility of both the processor and the controller: the processor should have DPIAs that relate to their processes and the mechanisms they have in place to reduce the likelihood of impacting a data subject; the controller should conduct a DPIA that shows they’ve completed due diligence on the processor, and that controls are in place to mitigate any risks with that supplier.

3. Transfer Impact Assessments (TIAs): When transferring data outside of the European Economic Area (EEA) or the UK, TIAs help to evaluate the data protection safeguards in the recipient country. This is especially important in the post-Brexit landscape, where the UK has its own data protection regulations. Ensuring that any data transferred to third parties in other countries is adequately protected is essential for maintaining compliance.

This is the responsibility of the controller if data is being transferred to a processor who processes personal data outside of the EEA/UK. Sometimes, the processor will be using sub-processors outside of the EEA/UK; these should have their own TIAs in place, and authorisation from you to transfer your data to these sub-processors.

The Importance of Verifying Technical and Organisational Measures

It’s not enough to simply have agreements and assessments in place; it’s equally vital to verify that third-party data processors are implementing appropriate technical and organisational measures to protect your data. These measures should align with the level of risk associated with the processing activities, and the sensitivity of the data involved.

  • Technical Measures: Technical measures encompass data encryption, access controls, regular security audits, and intrusion detection systems. Ensure that third parties have robust technical safeguards in place to protect data from unauthorised access or breaches.
  • Organisational Measures: Organisational measures involve policies, training, and employee awareness. Verify that your third-party data processors have a strong data protection culture, with policies that govern data handling, incident response plans, and employee training on data security.

To effectively verify these measures, we recommend carrying out:

1. Audit and Assessment: Conduct periodic audits and assessments of third-party processors to ensure compliance with any measures you’ve mutually agreed upon. These audits can be scheduled or triggered by specific events, such as security incidents or changes in regulations. This could be established through either on-site audits or remote, questionnaire style evaluations.

2. Regular Communication: Maintain open lines of communication with third-party processors. Discuss any changes in data protection laws – updating agreements as necessary and addressing any concerns or issues promptly.

3. Certifications and Compliance: Look for certifications and compliance with data protection standards, such as ISO 27001 or Cyber Essentials. These certifications demonstrate a commitment to data security.

Managing third-party data processors effectively is a critical part of data protection and compliance for any company now. By identifying data processing activities, implementing necessary documentation, and verifying technical and organisational measures, you can protect sensitive data and maintain trust with your customers – and regulatory authorities.

Remember that data protection is an ongoing process. Regularly reviewing and updating agreements and assessments to adapt to evolving threats and changing regulations will help you to safeguard your data (and your reputation) in the long run and give you a robust data protection ecosystem worth shouting about.

Need help managing the safe use of personal data? Contact our team for a free consultation.

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