In this Explainer article you will learn about the third-party risk management implications of the General Data Protection Regulation (GDPR), and how to achieve data security and conduct due diligence within your extended supply chain.
When the EU introduced GDPR in May 2018, it marked a significant shift in data protection requirements.
The regulation strengthened and, perhaps more importantly, created a unified approach to data protection across Europe for today's digital environment. What started as a European initiative has now influenced how organisations worldwide handle personal data.
A key implication of GDPR is how it impacts organisations’ third-party risk management efforts. Most businesses today work with external service providers who process personal information on their behalf, creating layers of risk and regulatory obligations. This has pushed Third-Party Risk Management to the forefront of compliance concerns, meaning companies need to secure both their own data practices and ensure their suppliers and partners also meet GDPR's standards.
Here, we discuss how GDPR affects vendor risk management and outline steps for how to achieve GDPR compliance with respect to external partners and suppliers.
GDPR applies to organisations processing EU residents' personal data, regardless of where those organisations are based.
This broad reach means businesses worldwide need to comply if they handle European citizens' information. In the wake of Brexit, the UK developed its own GDPR version, keeping it closely aligned with EU requirements to maintain consistent data protection standards.
The regulation builds on seven key principles for data handling:
Importantly for organisations, non-compliance with GDPR can lead to severe financial penalties—fines can reach up to €20 million or 4% of an organisation’s global annual revenue, whichever is higher.
Regulatory bodies across the EU have actively enforced these rules, issuing significant fines against companies that failed to protect personal data or misused consumer information. Beyond monetary penalties, violations can result in reputational damage, operational disruptions, and increased regulatory scrutiny, making GDPR compliance a critical priority for businesses handling personal data.
Today's businesses rely heavily on external vendors for everything from cloud computing to payment processing. While these partnerships drive efficiency, they also create data security challenges. GDPR recognises this reality and requires strong security standards across the entire data processing chain.
The regulation defines specific roles: data controllers (who decide how and why data is processed) and data processors (third parties handling data on controllers' behalf). This creates clear lines of responsibility, as organisations need to evaluate vendors carefully, put proper agreements in place, and keep checking that everyone follows the rules.
Several aspects of GDPR directly affect how organisations work with third parties.
Article 24 makes controllers responsible for security measures, including what their vendors do. This means keeping detailed records of how they assess and manage vendor risks.
Article 25 introduces "privacy by design" - security can't be an afterthought. Organisations need to consider security from the start when choosing vendors and entering contracts.
Article 28 gets specific about what processors must do, requiring documented security guarantees and explicit permission before involving subcontractors.
Security measures get particular attention in Article 32. Both controllers and processors need to implement appropriate safeguards like encryption and access controls. The level of security needs to match the sensitivity of the data - a one-size-fits-all approach won't work.
High-risk processing activities, especially those involving third parties, require Data Protection Impact Assessments under Article 35.
Finally, articles 44-50 address international data transfers. Moving personal data outside the EU/EEA isn't straightforward, as organisations can only send data to countries the European Commission has approved as having adequate protections, or they need to put specific safeguards in place through mechanisms like Binding Corporate Rules or Standard Contractual Clauses.
Building an effective GDPR compliance programme for third parties takes a systematic approach.
First, start by assessing potential vendors before signing contracts. Look at their security policies, how they've handled compliance in the past, and their track record with regulators.
Contracts need to be specific about security requirements and what happens if something goes wrong. Vendors should commit to reporting security incidents right away.
Technical security measures matter too. This means putting in place practical safeguards like encryption and multi-factor authentication, and regularly checking that they're working.
International data transfers need extra attention. Before sending data to vendors in other countries, organisations need to verify they'll protect it properly. Using standard contractual clauses helps, however, make sure vendors actually follow through on their commitments.
Keeping track of third-party security risks while staying GDPR-compliant is resource intensive, but it is a challenge that Risk Ledger tackles to help organisations effectively manage vendor compliance. Risk Ledger is a cutting-edge third-party risk management platform, dedicated to transforming supply chain security. The platform offers comprehensive, continuously updated risk assessments that reduce compliance burdens and enhance your organisation's cyber defences.
Risk Ledger uses a standardised assessment framework, mapped against all leading international standards such as ISO27001, NIST or the NCSC’s CAF, to assess vendor security controls consistently, helping organisations understand risks that might come from their vendors' own suppliers too. Crucially, one of the 12 security domains covered in our assessment framework deals specifically with data protection controls.
Instead of checking compliance once a year, Risk Ledger provides ongoing visibility into vendor security status, and notify organisations proactively whenever one of their suppliers’ security controls has changed. This means organisations can spot and fix problems before they turn into serious issues or regulatory violations.
The platform also makes documentation easier by keeping all vendor assessments and risk management activities all in one place. This saves time when preparing for audits or regulatory reviews.
Risk Ledger also creates secure ways for organisations to share data with their suppliers while following GDPR rules. This helps ensure everyone handles sensitive information appropriately throughout the supply chain.
Organisations that use Risk Ledger as part of their third-party risk management approach often find they can better manage vendor oversight and compliance processes. The platform helps reduce both regulatory risks and security threats while keeping operations running smoothly.
This approach to vendor management focuses on building stronger, more secure relationships with third parties while protecting personal data effectively. As organisations continue to rely more heavily on external vendors, having these kinds of structured and practical approaches to security and compliance becomes increasingly important.
Protecting data in digital supply chains has never been more critical. As the world becomes increasingly fragmented, geopolitical tensions are reshaping global data security challenges. Governments are imposing stricter regulations on cross-border data transfers, and businesses must now factor in the risks posed by data centre locations and third-party vendors operating in politically sensitive regions.
Nations such as China, Russia, and Iran have introduced their own data localisation laws, limiting how foreign companies can handle personal data. Meanwhile, new restrictions on international data flows—particularly between Western countries and adversarial states—are forcing organisations to rethink their supplier networks.
By adopting a structured and risk-based approach to data protection and TPRM, and by leveraging tools like Risk Ledger, businesses can ensure compliance with the data protection and supply chain security requirements of GDPR.
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