Organizations are bewildered by the multiple data privacy regulations across countries. Even though the common privacy principles across these regulations remain the same, the challenge is the lack of required competency and resources to meet the mandated privacy requirements. One of the best ways to tackle this challenge is to outsource data privacy services. Contrary to popular belief, outsourcing privacy services has various direct and indirect benefits. This include secure data processing, reduced overhead costs, and improved business efficiency, along with access to expert recommendations that comply with regulatory requirements and help improve brand trust.
Outsourcing data privacy service helps organizations focus on their core competency by simply governing their data privacy program. Various new types of services have started evolving since the inception of GDPR, such as privacy automation services, digital process operations (DPO) as a service, and privacy compliance services, among others. These services have helped organizations efficiently manage the burden of securing their data privacy objectives.
Let me give a quick example of how this can work in favor of various industries. Suppose we have an international bank whose core competency lies in retail banking and wealth management. The bank may be subject to numerous regulations such as GDPR, Australian Privacy Principle, Indian PDPB, etc. Now, the bank may not have the required expertise or resources to manage these privacy compliance requirements.
Some of the steps toward achieving this goal include building an in-house data privacy team, establishing policies or procedures, and procuring the right privacy tools. However, this usually proves to be resource-intensive, time-consuming, and expensive proposition. The other way is to avail data privacy advisory, consulting, and operational services that are personalized and customized to their unique business needs, which saves on resources and on-boards greater expertise.
However, an organization needs to understand the risks and benefits of outsourcing data privacy services, such as:
- Data privacy services to be outsourced (DSAR/Assessments/Consent Management/Advisory)
Depending on the existing privacy maturity of the organization, the top management must decide on the different services that need to be outsourced. If they are unsure of the requirements, organizations may avail an advisory and consulting services provider to help evaluate their privacy posture first. A company can consider several outsourcing options:
- Complete privacy services: Includes advisory, implementation, and operations for DSAR, PIA/DPIA, and consent management, etc.
- Modular outsourcing: Involves relying on the privacy activities that the organization undertakes by themselves and outsources only those where they lack the required capability and resources
- Only consulting services: To gauge the privacy requirements and regulatory applicability.
- Perform due diligence
It is necessary to evaluate the security posture of the vendor to understand the risks involved in outsourcing the services. An organization must consider various factors before choosing a service provider. Key ones include ensuring security controls for data protection, geographical presence of the servers/data stores, and the veracity of any sub-vendors or third-party partners.
The necessary steps toward ensuring due diligence for privacy service include:
- Carry out the initial research using industry benchmarks such as BitSight rating
- Check for any standard attestations/certifications such as SOC 1 Type II or ISO 27001, which helps to compare the organization’s existing data protection regime with the service provider standards to check for compatibility deviations
- Check the regulatory compliance coverage provided by the vendor, as there are differences in the requirements of different privacy regulations. For example, including an ‘opt-in’ option for EU resident customers while including ‘opt-out’ option for Californian citizens.
- Defining airtight NDA/contracts/ data processing agreements
Both the organization and the vendor must sign the data processing agreements and NDAs that are legally binding privacy documents. The key risk here is not having a legally sound agreement, leading to regulatory scrutiny or fines levied at a later stage of the project over non-compliance with the obligations.
Thus, the contracts and the data processing agreements must clearly define the roles and responsibilities of each organization and the data protection controls to ensure compliance with regulations. A clean data processing agreement must also clearly call out the scope and purpose of the processing of personal data. Few key clauses to be included in a data processing agreement are:
- Type of personal data processed
- Categories of data subjects involved in the processing
- Conditional processing of personal data based on the contract
- Roles and responsibilities of the data controller and processor
- Security measures to be put in place for data protection
- Ease of integration of privacy services
Meeting data privacy regulation is not easy, especially with complex regulations such as the GDPR and CCPA, which focus on achieving ‘privacy as a fundamental right of the data subjects.’ There are various external aspects of these regulations such as data subject rights, cookie tracking, and management, which are not easy to perform manually. Thus, organizations must take the help of data privacy automation solutions to cater to these regulatory requirements. These solutions require integration with the existing IT systems of the organization. For example, a vendor may utilize a SaaS application for the fulfillment of DSAR requests that integrated with various on premise and available cloud data stores. Organizations might have to check for the availability of API connectors and SDK support for easier integrations.
- Visibility of personal data and metadata to the data processor
An organization may use multiple types and sensitive personal data in their business processes. While outsourcing data privacy services, they must be sure of the type of personal data processed by the vendor and the criticality associated with it. Organizations must also evaluate the risk of exposing metadata to the vendor and respond appropriately to reduce the visibility. This is very essential because any kind of data breach or leak at the vendor level may expose the complete data of the organization. In order to mitigate these risks adoption of various solutions available in the market, such as data masking and encryption techniques can ensure adequate data protection every time. A point worth noting is that GDPR has also mandated pseudonymization of personal data while at rest and in transit.
- Data handling mechanism
When we talk about personal data protection, the key factors include how data is stored, processed, and purged. Few aspects to evaluate are:
- Will the data be stored in the vendor’s environment?
- Define disaster recovery and business continuity?
- What are the controls implemented for data protection?
- What is the data retention and purge frequency?
- Managing vendor risks
In general, organizations have vendor risk management (VRM) established to audit and evaluate the key risks involved during the lifecycle of the project. However, a standard VRM framework may not suffice to evaluate the privacy risks due to outsourcing of data privacy services. These audits are bound by various privacy regulations, which have very specific requirements for continuous monitoring of personal data processing. A few key aspects to consider while setting up vendor audits for data privacy are:
- Evaluate the vendor contract annually to be in line with the regulatory requirements
- Check and update data maps annually, if required
- Conduct annual PIAs/DPIAs
As is evident, managing a data privacy regime is not simple and entails many micro-processes to comply with various regulations. For a non-IT products and services organization bound by data privacy regulations, it is highly recommended to outsource certain data privacy processes.