Avoiding Common Pitfalls in Vendor Data Privacy Risk Assessment

Before any organization can do business with an external vendor, it needs to examine its data privacy protocol against new legal requirements. Recent legislation like General Data Protection Regulation (GDPR) in the EU and the California Consumer Privacy Act (CCPA) in the U.S. has cast a spotlight on the handling of consumer data, especially the way it is shared among 3rd parties. Organizations of all sizes in every industry are upgrading the vetting processes to make sure that new vendors don’t bring additional risks.

These risk assessment processes contain several moving parts and a mistake at any point along the way can jeopardize the result. The easiest way to pinpoint the holes in your organization's vendor vetting workflow is to review the entire process from beginning to end and examine the opportunities for data privacy lapses. Here are four common pitfalls to look for:

Overlooking contract-level details

Amid all the changes happening to the regulatory landscape, it’s easy to overlook errors in the language of your contracts. In a short window of time, contract language—on old and new agreements—needs to be updated to provide consumers with new legal protections and redefine business-to-business relationships with any party that touches consumer data. If contracts are being negotiated in that window, some terms might slip through the cracks and expose you to new risk. 

To ensure compliance, all commonly-used language and templates need to be reexamined from the perspective of the new data privacy rules. It’s not enough to assume that contract language is protected because it was signed before new data privacy laws were enacted. In many cases, legacy vendor contracts may need to be repapered to ensure compliance and protect your organization. This process can be painstaking, costly and error-prone.

To help streamline this process, DocuSign CLM has tools to automate contract creation, negotiation and approval. With CLM, businesses can leverage a central clause library to ensure that approved clauses are available for all agreements. It’s the easiest way to make the most of limited legal resources, ensuring that new contracts start from approved templates. CLM simplifies complex negotiations by minimizing the amount of legal work needed to approve an agreement.

DocuSign’s newest innovation in managing data privacy risk is Analyzer, which uses AI to analyze contract language and assess risk across a range of topics, including data privacy. If a contract contains risks, Analyzer can be used to pinpoint the term(s) in questions and suggest alternative language. It’s an incredibly powerful tool to lighten the burden on sales, legal and procurement teams.

Lack of a common data privacy assessment process

Another common pitfall is the lack of a formal workflow to evaluate vendors in regards to data privacy. These process-related blind spots usually appear when there’s a lack of clarity at the outset of the vendor selection process. If separate parts of a company are managing contract negotiation and vendor relations, it exposes the company to unnecessary risks and increases the amount of effort spent on duplicative work across different lines of business. 

Companies that successfully minimize data privacy risk learn to bypass these process problems by clearly defining a vendor selection workflow that is uniform across the entire organization. When every employee and team is trained to follow the same process, it reduces the opportunity for errors in vendor agreements.

To help organizations develop a successful vendor evaluation process, DocuSign eSignature offers the ability to create an automatic routing structure that will pass agreements from one party to the next in any order an organization requires. Once the approval process is defined and implemented in DocuSign, the platform can automatically advance an agreement through all the necessary approvers as soon as previous parties have completed their work.

Losing sight of the full vendor relationship 

Strategic vendors can be important business partners that play a crucial role in your ecosystem. There are a lot of factors that play when it comes to considering a vendor’s overall value for an organization. That vendor’s behavior, history and extended business relationships are all relevant information and need to be weighted correctly in the risk assessment.

DocuSign integrations with common procurement software such as SAP and Oracle, which offer a full picture of your relationship with vendors. Using that bigger picture of those business relationships, you can more accurately analyze your organization’s risk exposure.

Forgetting the human touch

When analyzing a vendor’s trustworthiness, data points and documents alone only go so far. To jump start that process, AI can narrow the scope of analysis to only the riskiest aspects of the evaluation. After those risk areas are identified, the team can focus their vendor selection and negotiation efforts more clearly on the high impact topics that require more customized analysis.

DocuSign Insight uses AI to provide 360-degree visibility into your agreements, regardless of how and where they’re stored in your enterprise. Insight comes preconfigured to automatically and intelligently identify contract clauses triggering data privacy issues. It also provides a conceptual understanding of vendors’ commitments around personal data use and the opportunity to instantly access pre-approved data privacy clauses so your team can complete a thorough risk assessment under tight timelines.

Download the Managing the Challenges with Burgeoning Data Privacy Laws whitepaper authored by SIG (Sourcing Industry Group) to learn more from experts about how to manage vendor data privacy compliance.

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