Published on: Feb 18, 2021
How to Build a Third-Party Management Program
So far, we’ve covered how to develop your privacy framework, establish policies and procedures, and assign accountability within your privacy program. Now, we turn to a foundational pillar of privacy and risk management: building lasting vendor relationships through a third-party management program.
As your organization grows, so does your reliance on external vendors—whether they’re providing cloud infrastructure, payment gateways, HR systems, or marketing platforms. These relationships are essential to your success, but they also introduce significant privacy, security, and operational risks. A strong third-party management program helps you manage those risks with confidence, ensure regulatory compliance, and maintain operational continuity.
Why Third-Party Management Matters
In today’s digital ecosystem, organizations collaborate more than ever with external vendors and partners. But each third-party relationship opens the door to potential vulnerabilities—especially if those vendors access, process, or store your data. Whether you’re trying to meet GDPR, ISO 27001, NIST, or CCPA requirements, the key to trust and compliance lies in building a structured, risk-based third-party management program.
This article outlines practical steps to help you build or enhance your vendor management program, keeping both your organization and your customers protected.
Steps to Building a Third-Party Risk Management Program
Below, we outline the key steps to help you create an effective third-party management program that safeguards your organization and strengthens trust in your vendor relationships.
1. Create a Use Case and Assign Ownership
Every third-party engagement should begin with a clear business justification, known as the use case. This could be implementing a cloud CRM, outsourcing payroll, or engaging a penetration testing firm. For each vendor, you must define:
Why the vendor is needed
What data they’ll access
Which services they’ll deliver
What risks are introduced
Once identified, assign ownership to a responsible stakeholder—typically a system or asset owner—who understands the business value, monitors the vendor’s performance, and ensures ongoing compliance.
2. Classify and Categorize Vendors
Not all vendors carry the same risk. Start by classifying vendors based on the type of data they process:
Public Data
Confidential Data
Sensitive or Regulated Data (e.g., health, financial, or personal data)
Next, categorize vendors by criticality:
Critical Vendors – Directly impact operations or handle sensitive data.
Non-Critical Vendors – Limited operational or data exposure.
This classification helps determine the level of scrutiny and frequency of monitoring each vendor requires.
3. Conduct Risk-Based Assessments
Before onboarding a third party—and at regular intervals thereafter—conduct a risk-based due diligence assessment. This process should evaluate the vendor’s technical and organizational controls based on their data processing activities and business impact.
Common tools and assessments include:
SOC 2 Type II Reports
ISO 27001 Certification and SoA
SIG (Standardized Information Gathering) Questionnaire
Cloud Security Alliance (CSA) CAIQ Assessment
Cybersecurity scorecards and threat intelligence
This assessment identifies security gaps, validates compliance, and informs appropriate risk treatment actions.
4. Optimize Contractual Requirements
Contractual agreements are not just legal formalities—they are critical instruments for risk mitigation. Your Master Services Agreement (MSA) or Data Processing Agreement (DPA) should include:
Minimum security requirements
Privacy and data handling clauses
Encryption standards
Key management policyBusiness continuity and incident response expectations
Subprocessor management responsibilities
Vulnerability Management
Penetration Tests
Business Continuity Plan
Employee Training and Awareness
Ensure these agreements align with legal and regulatory obligations (e.g., GDPR Article 28) and your internal risk appetite.
5. Manage Data Sharing Strategically
Personal data should only be shared with third parties on a "need-to-know" and "legal basis" foundation. Implement processes that:
Track data flows between your organization and each vendor
Use structured, controlled data sharing methods
Log legal justifications (consent, contractual necessity, etc.)
Define and enforce data minimization principles
Use vendor management tools to monitor and limit data access, set permissions, and prevent unauthorized transfers.
6. Ensure Ongoing Monitoring and Reassessment
Third-party risk management isn’t a one-time event—it’s a lifecycle.
Build a schedule to regularly reassess vendors, with frequency based on their classification. For example:
Annually for critical vendors
Every 18–24 months for non-critical vendors
Your monitoring process should include:
Performance reviews
Updated risk assessments
Contract and DPA renewals
Security audit results
Data protection impact assessments (if applicable)
Document all activities and report key findings to internal stakeholders and leadership for transparency and accountability.
7. Document, Communicate, Improve
A successful third-party management program requires consistency and repeatability. That starts with documenting:
Your vendor risk management policy
Standard operating procedures (SOPs)
Roles and responsibilities
Assessment results and action plans
Communicate these internally, especially to legal, security, procurement, and compliance teams. Use stakeholder feedback and audit results to continuously improve the program.
Solutions for Managing Personal Data Sharing with Third Parties
Managing personal data sharing with third parties requires a mix of legal and technical strategies to ensure compliance and control. Here are some effective solutions:
Controlled Data Sharing: Implement a structured process for sharing personal data. This involves employing legal and technical measures that help ensure each third-party vendor complies with regulations like GDPR.
Vendor Management Tools: Utilize modules that allow businesses to track and understand the basis for data disclosure to each processor. This includes defining and implementing safeguards to prevent unauthorized access, data breaches, or illegal data transfers.
Risk Assessments: Conduct comprehensive risk assessments regularly. Evaluate the potential risks associated with each vendor and address them through specific Data Protection Agreements.
Data Protection Agreements (DPAs): Maintain and manage DPAs with a focus on expiration and renewal notifications. Use smart alert systems to keep track of important events related to these agreements, offering peace of mind by preventing lapses in enforcement.
Ongoing Relationship Management: Recognize that working with third-party vendors is an evolving process rather than a single event. Keep detailed records of all onboarding and offboarding activities to ensure you remain informed and in control.
By integrating these solutions, businesses can better manage personal data sharing, safeguarding both their interests and the privacy of their clients..
Understanding the Responsibilities of Data Controllers
When collaborating with third-party vendors, data controllers carry significant responsibilities to ensure data protection and compliance. Here's a breakdown of their key duties:
Defining Purpose and Scope: Data controllers must clearly establish the goals and boundaries of data processing activities. This entails determining why the data is being processed and identifying the necessary data types to meet those objectives.
Selecting Compliant Data Processors: It is crucial for data controllers to choose vendors that adhere to regulations like the GDPR. This involves conducting due diligence to verify that a vendor’s data protection measures align with legal standards.
Maintaining Oversight and Control: To remain in command of data processing, data controllers should implement strong contractual agreements. These agreements should outline the responsibilities of third-party vendors and ensure adherence to data protection protocols.
Regular Audits and Assessments: Conducting regular audits of third-party vendors can help data controllers identify potential compliance risks. These evaluations ensure that data processors uphold their data protection obligations consistently.
Managing Data Breaches: In the event of a data breach, data controllers are responsible for notifying the relevant authorities within the stipulated time frame. They must also collaborate with vendors to mitigate damage and prevent future incidents.
Ensuring Transparency: Data controllers should ensure transparent communication with both the third-party vendors and data subjects. This includes informing data subjects about who accesses their data and for what purposes.
By fulfilling these responsibilities, data controllers can safeguard personal data effectively and foster trustworthy partnerships with third-party vendors.
Tackling Data Retention and Removal Challenges
Challenges Organizations Face with Data Retention:
Compliance Complexity:
As regulations like GDPR and CCPA evolve, organizations must navigate a complex web of compliance requirements. Ensuring data retention policies align with varying global standards is a formidable task.
Managing Diverse Data Sources:
Companies often collect data across numerous platforms and systems. Consolidating and monitoring these data points to conform with retention policies demands significant resources and meticulous planning.
Determining Data Lifecycles:
Understanding exactly when to purge data isn’t straightforward. Organizations need a clear grasp on the lifecycle of their data—from asset creation to expiration based on contractual, policy, or usage metrics.
Issues with Data Removal:
Overlooked Processes:
While focusing on data collection compliance, the intricacies of data removal can be neglected. Organizations struggle to prioritize and implement effective removal strategies, often postponing this crucial step.
Legacy Systems:
Older systems may not support modern data deletion protocols, making it difficult to automate and enforce data purging across outdated infrastructures.
Balancing Accessibility and Privacy:
There's a constant tug-of-war between retaining data for analytical and operational purposes and ensuring privacy through timely data removal.
By understanding these challenges, organizations can better plan their strategies for effective data management, improving both compliance and operational efficiency.
Lawful Bases for Data Processing
When it comes to processing personal data, understanding the lawful bases is crucial for any organization. These bases ensure that the data process is not only ethical but also compliant with data protection regulations such as the General Data Protection Regulation (GDPR).
Key Lawful Bases:
Consent: Data can be processed when an individual has given explicit and informed consent. For example, when a user agrees to a company's terms to receive newsletters.
Contractual Necessity: If processing personal data is necessary for fulfilling a contract with an individual, it's justified. A common scenario includes processing payment information for an online purchase.
Legal Obligation: Organizations may need to process data to comply with a legal obligation, like tax regulations.
Legitimate Interests: Processing is allowed if it’s necessary for the legitimate interests of the organization or a third party, provided it doesn't override the individual’s rights. This could include fraud prevention measures.
Public Interest: Data can be processed if it's necessary for performing a task in the public interest or official functions, such as public health matters.
Vital Interests: When processing is required to protect someone’s life, it qualifies under vital interests. For instance, in medical emergencies.
Expiration of Lawful Bases
Each lawful basis has conditions under which it may expire:
Contract Conclusion: Once a contract has been fulfilled or terminates, the basis for processing data related to it often ends.
Consent Withdrawal: Individuals have the right to withdraw consent. Organizations must cease processing upon withdrawal unless another lawful basis applies.
Legal Obligations Changes: When laws change or no longer apply, the lawful basis under legal obligation can expire.
Overriding Interests: If circumstances shift and an individual's rights outweigh the legitimate interests being pursued, this basis may no longer be valid.
What Happens Next?
Once a lawful basis expires, organizations are generally required to take action to comply with data protection rules:
Archiving: Some data might be archived if it has historical or statistical value, as long as privacy is preserved.
Anonymization: Data can be anonymized, rendering it unidentifiable, and thus, not subject to typical data protection rules.
Deletion: Data must be securely deleted to ensure it cannot be accessed or used unjustly.
Understanding the lawful bases for data processing and their expiration is essential for maintaining compliance and protecting individuals' rights. By carefully managing these aspects, organizations can ensure ethical data practices and avoid potential fines or legal issues.
Managing Data Destruction: Strategies for Businesses
In the digital age, businesses are tasked with the important responsibility of managing sensitive data. Effective data destruction processes are key to safeguarding privacy and maintaining compliance with regulations. Two essential methods are anonymization and deletion. Here’s how businesses can proficiently manage these processes:
Anonymization
Anonymization is the process of removing personal identifiers from datasets, ensuring individual identities cannot be discerned. Implementing anonymization techniques can be done effectively through:
Data Masking: Replace original data values with fictional placeholders. This method allows data to be usable for analysis without exposing sensitive information.
Aggregation: Combine data entries to produce summaries or statistical insights, thereby eliminating individual-level detail.
Perturbation: Introduce small changes to data values, making it difficult to trace data back to individuals while maintaining overall patterns.
Deletion
Data deletion involves permanently removing data from all storage locations. To manage deletion efficiently, businesses should consider:
Establishing Policies: Develop comprehensive data retention schedules determining when data must be deleted. Ensure this aligns with legal obligations and industry standards.
Secure Erasure: Implement secure deletion tools that overwrite data, ensuring it's unrecoverable.
Regular Audits: Conduct routine checks to verify data deletion procedures are being adhered to and remain effective.
Implementing Best Practices
Employee Training: Educate staff on data destruction policies and the importance of following these protocols for compliance and security.
Utilize Technology: Leverage software solutions which offer robust tools for managing data lifecycle and destruction.
Engage Experts: Partner with data privacy professionals or consult firms specializing in data management to regularly review and update processes.
Maintaining Compliance
Adhering to laws such as the General Data Protection Regulation (GDPR) or the California Consumer Privacy Act (CCPA) is crucial. Businesses should:
Document Processes: Maintain thorough records of data handling and destruction procedures to demonstrate compliance.
Stay Informed: Keep up-to-date with evolving regulations to ensure all practices remain compliant.
By implementing these strategies, businesses not only safeguard data but also build trust with customers and stakeholders, reinforcing their commitment to privacy and security.
How StandardFusion Helps You Build a Scalable Third-Party Management Program
StandardFusion’s GRC platform empowers teams to manage third-party risk with efficiency and transparency. Key features include:
Centralized vendor inventory: Create, classify, and manage vendor profiles from one place.
Automated workflows: Send and track questionnaires, request documents, and manage approvals.
Compliance-ready tools: Maintain and track SOC reports, DPAs, and audit histories.
Assessment scheduling and alerts: Ensure timely reassessments and renewals.
Dashboards and reporting: Gain real-time visibility into third-party risk posture.
With StandardFusion, you can turn third-party risk management into a scalable, integrated function of your privacy, security, and compliance operations.
