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4 Ways to Avoid Vendor Data Privacy Risk

Summary5 min read

Staying compliant with new consumer privacy laws requires standardizing and automating updates to vendor contracts. Every vendor brings additional risk.

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Before any organization can do business with an external vendor, it needs to examine its data privacy protocol against new legal requirements. Canada’s federal data privacy act, PIPEDA, and 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. 

To ensure compliance, organizations of all sizes in every industry are upgrading the vetting processes to make sure new vendors don’t bring additional risk. Risk assessment processes have 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 out for.

1. 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. It must 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 updated to ensure compliance and protect your organization. This process can be painstaking, costly and error-prone.

To help streamline this process, new tools are available to automate contract creation, negotiation and approval. 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 new contracts start from approved templates simplifies complex negotiations by minimizing the amount of legal work needed to approve an agreement.

You can now leverage AI to analyze contract language and assess risk across a range of topics, including data privacy. If a contract contains risks, analytics can pinpoint the term(s) in questions and suggest alternative language. It’s a smart and powerful way to lighten the burden on sales, legal and procurement teams.

2. Lack of data privacy assessment process

Another common pitfall is the lack of a formal process to evaluate vendors. These workflow-related blind spots usually occur where there is no centralized or common 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 duplicate work across different lines of business. 

Companies can successfully minimize data privacy risk by clearly defining a vendor selection system 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 and risk in vendor agreements.

To help businesses establish successful vendor evaluation processes, electronic signature tools can be used to incorporate automatic routing for sign-off that passes agreements from one party to the next in any order an organization requires. Once the approval process is defined, vendor contracts automatically advance through all the necessary approvers as soon as previous parties have completed their work.

3. Losing sight of the full vendor relationship 

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

To make onboarding new vendors more seamless, look for tools that integrate with your existing procurement software such as SAP and Oracle, offering a full picture of your relationship with vendors. That big picture view allows you to more accurately analyze your organization’s risk exposure and see the vendor in relation to your overall business.

4. Forgetting the human touch

When analyzing a vendor’s trustworthiness, data points and documents alone only go so far. 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.

Get 360-degree visibility into your agreements, regardless of how and where they’re stored in your enterprise. Use tools that automatically and intelligently identify contract clauses triggering data privacy issues. Gain full 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.

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