What is DPA? Understanding Data Processing Agreements

When working with third-party vendors that process personal data on your behalf, having a Data Processing Agreement (DPA) in place isn’t optional. It’s a legal necessity under regulations like the GDPR, LGPD, and other global privacy laws.

DPAs are foundational to organization's privacy programs. They help enforce accountability, ensure secure vendor relationships, and protect your organization from non-compliance risks. Whether you're building a new privacy framework or strengthening your third-party oversight, the DPA is one of the most important documents in your compliance toolkit.

What are Data Processing Agreements (DPAs)?

A DPA is a legally binding contract between a data controller (your organization) and a data processor (such as a cloud service provider or vendor). It outlines how personal data must be handled, ensuring both parties meet their compliance obligations and protect data throughout its lifecycle.

A DPA also clarifies critical procedures and responsibilities for both parties. It establishes how the processor will assist the controller in fulfilling obligations related to data subjects’ rights, such as responding to access or deletion requests. It also lays out clear procedures for data breach notifications, including defined timelines and the responsibilities of each party. This level of detail ensures that, should a security incident occur, everyone knows what steps to take—reducing confusion and response time when it matters most.

Additionally, the DPA should address the use and engagement of sub-processors, specifying that no sub-processing can take place without the controller’s written approval and an equivalent agreement in place. When personal data crosses borders, especially outside the EEA, the DPA must detail the safeguards required to ensure the data receives protection equivalent to domestic laws. This might include the use of Standard Contractual Clauses (SCCs) or other legally recognized mechanisms when transferring data to countries with less robust privacy protections.

Are Data Processing Agreements Legally Required?

Yes, data processing agreements (DPAs) are legally required under major data protection laws like the GDPR (General Data Protection Regulation) and CCPA/CPRA (California Consumer Privacy Act/California Privacy Rights Act) whenever a data controller engages a third-party data processor to handle personal data on its behalf. If you’re outsourcing processing activities, a DPA is not optional.

While GDPR and CCPA are the most frequently cited, several other major privacy regulations around the world also require a DPA, including:

• European Union General Data Protection Regulation (GDPR)

• California Consumer Privacy Act (CCPA) / California Privacy Rights Act (CPRA)

• United Kingdom General Data Protection Regulation (UK-GDPR)

• South Africa Protection of Personal Information Act (POPIA)

• Thailand Personal Data Protection Act

• India Digital Personal Data Protection Act (DPDP Act)

• China Personal Information Protection Law

• Virginia Consumer Data Protection Act (VCDPA)

• Colorado Privacy Act (CPA)

No matter where your vendors or partners are located, if you’re working with personal data, chances are you’ll need a DPA to stay compliant and clearly define how information is handled.

Why Are Data Processing Agreements So Important?

A data processing agreement (DPA) is a legally binding document between the controller and the processor. It regulates processing activities, as described in the GDPR Article 28 (Section 3):

• The processor agrees to process personal data only on the written instructions of the controller. Everyone who comes into contact with the data is sworn to confidentiality.

• All appropriate technical and organizational measures are used to protect the security of the data.

• The processor will not subcontract to another processor unless instructed to do so in writing by the controller, in which case another DPA will need to be signed with the sub-processor.

• The processor will help the controller uphold their obligations under the GDPR, particularly concerning data subjects' rights.

• The processor will help the controller maintain GDPR compliance with regard to Article 32 (security of processing) and Article 36 (consulting with the data protection authority before undertaking high-risk processing).

• The processor agrees to delete all personal data upon the termination of services or return the data to the controller.

• The processor must allow the controller to conduct an audit and will provide whatever information necessary to prove compliance.

The GDPR, for example, requires data controllers and processors to take measures to ensure the protection of personal data they handle (Security of processing). If these organizations decide to outsource any data processing activities, they must demonstrate they have an assessment and monitoring process in place that guarantees that their sub-processors maintain the same level of security.

The objective of this document is to ensure vendors are held accountable when handling your information throughout the data life cycle. Your processing agreement should also include specific clauses about data deletion and portability in the case of contract termination.

The Role of the Controller and Processor

When signing a DPA as a controller, you are the entity that determines why and how personal data will be processed. It’s your responsibility to ensure the agreement clearly outlines how the processor is permitted to use personal data, and to verify that the processor is committed to complying with all applicable data privacy laws. The processor should only process data based on your explicit instructions—never on their own initiative.

You are ultimately accountable for the data processing activities carried out on your behalf. This means you must also consider the implications of any international data transfers and confirm that your processor complies with all relevant regulations, such as the GDPR or CCPA. By meticulously reviewing and signing the DPA, you ensure that your processor is legally bound to protect personal data in line with your regulatory obligations, which is essential for achieving compliance.

The GDPR, for example, requires data controllers and processors to take measures to ensure the protection of personal data they handle (Security of processing). If these organizations decide to outsource any data processing activities, they must demonstrate they have an assessment and monitoring process in place that guarantees that their sub-processors maintain the same level of security.

Why Your DPA Matters

The objective of this document is to ensure vendors are held accountable when handling your information throughout the data life cycle. Your processing agreement should also include specific clauses about data deletion and portability in the case of contract termination.

Other important points stated above are:

• The right to audit these vendors to assess traceability of their systems and accountability, and

• Collaboration in case there is a data breach (which we will explore a bit further).

When is a Data Processing Agreement Required?

Based on GDPR, LGPD and among many other privacy regulations, you must set in stone all data processing-related responsibilities implemented by your sub-processor with a finalized document named the Data Processing Agreement (DPA).

A DPA is required whenever you, as a data controller, share personal data with a third-party service provider for processing purposes. This isn’t just a formality: the DPA must be signed before any data processing occurs. Whether you’re a small business, nonprofit, government agency, or multinational, you’re on the hook if:

• You’re subject to laws and regulations that mandate a DPA (like GDPR, LGPD, or CCPA/CPRA), based on criteria such as the location of your data subjects or your organization’s size and activities.

• You determine how and why personal data is processed (i.e., you’re the data controller).

• You use third-party vendors to process personal data on your behalf.

Common Examples Where a DPA Is Needed

• IT Support Firms: If you hire an external IT support company that can access employee or customer data, a DPA is necessary to ensure lawful and secure handling.

• Payment Processors: Using services like Stripe or PayPal for online transactions? A DPA is required since these providers access personal data such as names, addresses, and payment details.

• Marketing Platforms: Services like HubSpot or Mailchimp that manage email campaigns and store customer interaction data will need a DPA.

• Web Hosting Providers: Hosting your site with Amazon Web Services or GoDaddy, and storing user account or contact form data? You’ll need a DPA to regulate how personal data is processed and protected.

• Recruitment Agencies: Engaging a third party to collect resumes or manage job applications requires a DPA to safeguard candidate information.

• Logistics Providers: If you share customer addresses or order histories with a shipping partner, a DPA ensures that personal data is handled responsibly.

Don’t forget about cookies: If you use third-party analytics or marketing platforms to process information from tracking cookies—which often collect personal data like IP addresses or browsing behavior—you must have a DPA in place with those providers. This ensures that the processing of cookie-derived data aligns with privacy laws, including providing transparency and respecting user consent or opt-out rights.

In short, whenever another party processes personal data on your behalf, a DPA is a legal and practical necessity.

Your Requirements For Breach Notification

This is your chance to document your requirements in the case of data security incidents. It should be known there are specific requirements based on legal notification to data authorities, but your company must also have an internal data incident response procedure that abides by internal demands.

One important tip here: Make sure your DPA reflects your own requirements as well. If you want your vendor to notify you within 24 hours in order for you to have time to investigate the incident or activate your forensics team, it should be written in the DPA. Documenting first and second responders to incidents notification might also save you from bigger problems.

Is There a Standard Way to Draft a DPA?

A common question at this stage is whether there’s a required, step-by-step approach for creating a Data Processing Agreement. The short answer: no, there’s no universal, government-mandated method or one-size-fits-all template dictated by GDPR, LGPD, or other major privacy laws.

Instead, organizations have flexibility regarding how a DPA is developed and finalized. Some prefer to craft their own from scratch, others leverage industry templates or guidance from resources like the International Association of Privacy Professionals (IAPP), and many engage specialized legal counsel to tailor the DPA to their unique needs.

What's essential is ensuring your agreement addresses all regulatory requirements and reflects your organization’s data practices and expectations. Now, let’s look at a critical portion you’ll want to include...

Can Your DPA Be Part of a Larger Contract?

You might wonder whether your Data Processing Agreement truly needs to stand alone, or if you can simply embed those requirements within a broader contract with your vendor, perhaps inside your Master Services Agreement (MSA) or a similar overarching agreement.

The answer? There’s no rule set in stone that says your DPA must be a separate document. Legally, what matters is that all the required data protection clauses—per GDPR, LGPD, or other applicable regulations—are clearly included somewhere within your contractual arrangement. If those obligations are thoroughly addressed and signed off, regulators will generally be satisfied.

That said, drafting your DPA as a separate agreement is often the smarter move. Why? A standalone DPA makes it much easier to review, update, and manage without the need to unpick your entire MSA each time privacy regulations evolve or your processing practices change. This separation keeps your privacy controls nimble and ensures you’re always audit-ready. Additionally, your legal team (and your vendors') will thank you for not sending them on a legal scavenger hunt for compliance clauses buried in 70 pages of unrelated terms.

What Are the Risks of Not Having a DPA When Required?

It's worth pausing here to consider the risks if you skip this crucial step. Failing to have a Data Processing Agreement in place when required isn’t just a paperwork oversight, it can have serious consequences.

For starters, you'll be exposed to hefty regulatory fines if authorities find your organization is missing a DPA where one is mandated under laws like GDPR or LGPD. Regulators across Europe, Brazil, and elsewhere have not hesitated to issue penalties for such lapses.

But the trouble doesn’t stop at financial penalties. Your organization’s credibility is also on the line. Data subjects, partners, and clients expect you to treat their information responsibly; lacking a DPA can quickly erode trust and tarnish your reputation. Not to mention, it makes demonstrating compliance during audits much more difficult, adding unnecessary headaches and risks to your operations.

Lastly, without a DPA, you have little legal recourse if your vendor mishandles your data or if a data breach occurs. Leaving you without clear pathways for response or remedy.

Are There Templates or Resources Available for Drafting a DPA?

You’re not on your own when it comes to drafting a Data Processing Agreement. While there isn’t a strictly defined procedure laid out by most data privacy regulations, you have several options:

• Many organizations start with reputable DPA templates, which can usually be tailored to fit specific operational needs.

• National data protection authorities, like the UK Information Commissioner’s Office (ICO), publish checklists and sample clauses to help guide you through the process.

• You can also consult with a legal professional specializing in data privacy to ensure your DPA captures every requirement and avoids common pitfalls.

Whether you prefer to build your DPA from scratch, rely on trusted guides, or seek legal expertise, there are plenty of resources to make sure your agreement is robust and compliant.

How Can GRC Tools Help?

Once your Data Processing Agreement (DPA) is signed, the real work begins—making sure those detailed commitments don’t just gather digital dust. This is where GRC software becomes a practical ally. These platforms streamline the ongoing task of tracking each vendor’s obligations, helping you monitor everything from the scope and duration of data processing to updates in security practices.

With automated alerts and reminders, you can ensure audits happen when required and that no renewal or critical update slips through the cracks. Many platforms also keep a clear record of any amendments, making it easy to demonstrate compliance if regulators come knocking or if your internal team needs a quick status check. In short, GRC software is like having a vigilant assistant dedicated to upholding every aspect of your DPA across your vendor landscape.

Leveraging Software for Contract Lifecycle Management (CLM) for DPA and GDPR Compliance

Using GRC software for contract lifecycle management (CLM) enables organizations to simplify and strengthen their DPA and GDPR compliance efforts. When used thoughtfully, GRC tools introduce structure, efficiency, and confidence to all stages of managing data processing agreements, from drafting to enforcement.

Centralized Oversight and Automation

GRC software streamlines the typically complex process of handling multiple DPAs and related documentation. Here’s how:

• Central Repository: Store and easily retrieve DPA contracts, amendments, and related compliance documentation in a central, organized digital hub. This ensures version control and prevents the dreaded email search for “the latest DPA.”

• Automated Workflows: Set up approval chains, reminders for renewals, and escalation procedures so nothing slips through the cracks, especially key contract milestones or audit cycles.

• Template Management: Standardize documents with approved templates, reducing drafting errors and aligning all stakeholders—legal, procurement, and IT—under a unified process.

Enhanced Security and Access Control

By its nature, a DPA contains sensitive language around the use, handling, and protection of personal data. Leading GRC solutions give organizations granular control over who sees what:

• Role-based Permissions: Assign rights by department, function, or jurisdiction, ensuring each user only accesses contract data relevant to their responsibilities.

• Audit Trails: Automatically log all access, edits, and approvals for full traceability—a lifesaver during compliance audits or investigations.

• Data Identification & Redaction Tools: Many platforms now employ AI to highlight sensitive fields (names, addresses, payment information) so administrators can redact or set handling rules as needed.

Integrating Third Parties With Confidence

For organizations working with third-party vendors, GRC platforms are indispensable:

• Compliance Tracking: Easily associate DPAs with specific vendors and monitor their ongoing compliance status.

• Automated Notifications: Keep everyone in the loop with automated reminders for contract renewals or GDPR-mandated reviews.

Supporting GDPR’s Key Requirements

GDPR compliance hinges on maintaining strong controls around data processing activities and being able to demonstrate those controls on demand:

• Data Mapping: Map what data is being processed, by whom, and under what conditions in once central tool. This fulfills core GDPR documentation requirements and aids in regulatory response.

• Incident Response Documentation: Link your breach notification procedures right into DPA workflows, so your organization is prepared to act within required timelines.

• Data Subject Rights Management: Quickly locate relevant contracts and terms if a data subject requests access or deletion.

Secure, Compliant Execution

Electronic signature capabilities built into GRC solutions ensure your DPAs are executed quickly and securely, with:

• Legally-Binding Signatures: Support for eIDAS and other global standards, with robust audit trails.

• Integrity Protection: Automated time-stamping and encryption ensure documents remain tamper-evident from signature through term.

Continuous Compliance Assurance

Finally, GRC platforms make ongoing monitoring straightforward. Organizations can set periodic review reminders to confirm ongoing adherence to DPA terms, and generate audit-ready reports at the click of a button. Making GDPR compliance less of a scramble, and more of a sustainable routine.

Preventing Data Breaches and Ensuring Accurate Data Processing

GRC software plays an important role in safeguarding sensitive information and minimizing the risk of breaches or mistakes during data processing. Robust platforms often come equipped with advanced security controls, such as granular user permissions, which allow you to determine exactly who can access, edit, or simply view specific types of data. This means that whether you're working with confidential contract clauses, personal client details, or financial terms, only authorized team members—think legal departments, finance, or regional managers—can interact with the data relevant to their roles.

Additionally, instead of assigning access to a long list of individual users, you can organize permissions by role or department. This not only streamlines management, but also reduces the chance of an inadvertent data leak due to human error or miscommunication.

For those needing an extra layer of control, many solutions allow restrictions down to the metadata level. For example, while one team member might be able to edit a contract’s value, another may only have viewing rights for the same field. These fine-tuned controls help ensure that changes to critical information are tightly monitored and traceable.

Combined with audit trails and automated alerts for unusual activity, contract management software can quickly surface any unauthorized attempts to access sensitive information. Giving you peace of mind and the necessary tools to respond swiftly should any irregularities arise.

By integrating GRC tools, like StandardFusion, into your privacy and vendor risk management programs, you elevate your agreements from static paperwork to living processes, ready to adapt as regulations, risks, or relationships evolve.