Third Parties and Data Sharing: A Practical Guide 2021

Third Parties and Data Sharing

Introduction

As more businesses want to transform data into value, companies that exchange data directly with select partners are progressing. Third-party data can add substantial value in such arrangements.

For example, in the financial services industry. providers conventionally rely on third-party data to send pre-approved proposals or offers to consumers. Today, savvy marketers depend on non-bureau-based second-party data to offer insights. A credit card issuer who needs to grow the number of sign-ups for a co-branded card with retail partners can buy transaction data to recognize and classify the retailer’s frequent shoppers and then combine this data with its first-party consumer data to classify the consumers that lack a co-branded card.

It is quite common for an enterprise to share data with 500 third parties across different functional areas from marketing to supply chain to customer service.

What is a Third-Party Data Sharing Vendor?

A third-party data sharing vendor is a business entity that does engage in a direct relationship with your customers (first party) but has an agreement with your organization (second party) to analyze existing internal data or provide new data. Sometimes, third-party data is from multiple web platforms that is collated, cleaned, and then consolidated by a third-party data provider to enrich enriching existing data sets collated by your company.

Examples for Third Party

Some examples of third-party data sharing vendors are:

• Distribution channels Partners and resellers
• Suppliers
• Network Security tools
• Digital Marketing Systems (DMPs)
• Employee and customer screening and reputation services
• Monitoring solutions
• Customer Relationships Management (CRM) tools
• Media agencies

Explanation of Third-Party Data Sharing

Third-party data is any user information collected by an entity that does not have a direct relationship with that user. Most often, third-party data is accessed from multiple websites and platforms and then collected by a third-party data provider such as a DMP.

What Is a Data Sharing Agreement?

A data sharing agreement is a legal document that specifies the contractual terms that have been upon by the participating parties. It typically comprises a specific description of the data being shared, limited use restrictions, license grants, required data protection safeguards, and privacy and identification related guidelines.

What Is Third-Party Risk?

Third party risk comprises the following factors:

• Data breach
• Rapid response due to data breach where the process may get  more complicated.
• Non-mature data governance practices – you have little control over the practices and maturity levels of your third party partners.
• Loss of control.
• Traceability – tracing data back to its origin is complex, time consuming, and may rely on variables outside your control, such as tools, logs, and retention periods.

Mitigating Third-Party Risk and Why It is Essential

• Focus on sensitive and personal information.
• Make de-identification the default
• Know your third-party data flows and maintain an inventory.
• Know which business process depends on third party partners.
• Frequently review your policy ensure to eliminate obsolete third-party partners and avoid data proliferation.
• Implement a fourth-party notification process and make sure to treat the fourth party partners just like a third-party partner to avoid losing control.
• Actively manage risk – make sure organization leaders and executive team understand the need for data sharing and the related risks.