In today’s intricate regulatory landscape, an effective Third-Party Risk Management (TPRM) strategy must prioritize privacy and robust data management. Companies that neglect to embed privacy within their vendor relationships expose themselves to significant compliance and security risks.

For risk managers, keeping pace with new regulations is increasingly challenging. With stringent laws like GDPR in Europe and CPRA in the US, institutions must enhance vendor due diligence and establish clear data retention policies. Simultaneously, the focus on operational resilience is intensifying, particularly with frameworks like the Digital Operational Resilience Act (DORA) emphasizing how organizations manage relationships with cloud service providers and data processors.

The rise of generative AI (GenAI) adds another layer of complexity, introducing new risks related to data privacy and compliance. TPRM strategies must adapt to ensure that vendors' AI practices align with organizational risk tolerance and regulatory demands. Additionally, institutions must consider ethical and geographic risks – such as the impact of natural disasters on operations. For instance, following recent flooding in Florida, can you pinpoint third-party assets at risk?

The solution lies in leveraging data. Organizations must not only focus on the data third parties' access but also on effectively identifying these vendors. As risk assessment factors become more sophisticated, data analytics can reveal risks and provide real-time visibility.

This data-driven approach allows organizations to communicate risk insights clearly to upper management, facilitating informed decisions about third-party relationships and compliance. This aligns with the principle of ‘privacy by design’, embedding proactive measures into processes from the outset to integrate privacy and data protection throughout vendor relationships.

Take data retention, for example. Many vendors fail to manage data disposal effectively, retaining client information far longer than necessary. While policies may dictate retention for a limited time – six months to a few years, with a maximum of seven years for legal reasons – vendors often keep data indefinitely.

However, many institutions struggle with the initial step: consolidating data from multiple sources into a single repository. Instead, they continue to operate in silos, which undermines a comprehensive approach.

The good news is that TPRM technology has evolved to combat fragmented data landscapes. We are moving away from cumbersome spreadsheets towards automated data ingestion and continuous monitoring, which streamline the risk management process.

Modern TPRM platforms centralize essential data across privacy, security, and governance functions. This integration enhances visibility into data flow and sharing practices while simplifying compliance and risk assessments. By centralizing these processes, organizations can make more informed decisions based on comprehensive insights.

The goal is to create an end-to-end workflow that harnesses data ingestion to define risk appetites and establish appropriate risk levels for each vendor. For example, if an institution works with 300 vendors, it can prioritize its assessments: a deep dive into the top 50, moderate evaluations for the next 100, and high-level screenings for the remaining 150. This tiered approach ensures resources are allocated effectively where they are most needed.

However, managing privacy and third-party risk requires more than advanced tools; it demands robust governance to transform data into actionable insights. Without the right frameworks, organizations risk accumulating vast amounts of data without deriving meaningful value.

Technology and governance must work together to create a cohesive ecosystem that maximizes data value while minimizing risk. It is essential to involve the right people to build an effective program in this evolving data landscape. Navigating these complexities alone can lead to unsuccessful outcomes.

Engaging with experts – both internal and external – can help create a stronger framework to tackle data management challenges. Collaboration is key to ensuring your organization adapts effectively to changing regulatory environments and emerging technologies, allowing you to act proactively based on best practices in privacy by design and security.

Capco plays a critical role in ensuring the success of technology solutions, by helping organizations establish solid governance frameworks. Through this collaboration, Capco ensures businesses can fully leverage TPRM technology by building the governance foundations needed for long-term success.