Overcoming Data Security Risks in Outsourcing
In 2018, a fast-growing tech startup faced a nightmare scenario.
They outsourced their customer service to a seemingly reputable firm overseas. Initially, the decision seemed prudent — cost-effective, efficient, and smoothly integrated. However, within months, a chilling discovery surfaced.
An employee at the outsourcing firm, exploiting lax security measures, siphoned off sensitive customer data, selling it to the highest bidder on the dark web. The breach not only cost the startup millions in damages but also eroded the hard-earned trust of their customers.
This cautionary tale underscores a stark reality in today’s digital age: when outsourcing services involving sensitive information or critical business processes, the stakes of data security are exceptionally high.
A single data breach can cost a company not just financially — the global average cost of a data breach is $3.86 million as per a report by IBM — but also in terms of customer trust and brand reputation. However, with strategic planning and robust security measures, these risks can be mitigated, turning potential vulnerabilities into strengths.
Recognizing the Risks
The first step in mitigating risk is recognizing it.
When outsourcing, companies extend their boundaries, and with it, their vulnerability points. For example, in 2017, a major breach occurred when a third-party contractor for the U.S. Navy compromised sensitive data. This incident highlights the importance of not just securing one’s own systems but also ensuring that the partners’ security measures are up to par.
Setting High Standards
The key lies in setting high standards for data security, both internally and for the outsourcing partners.
Google, for example, maintains stringent security protocols for its vendors. These protocols are continuously updated to keep pace with evolving cyber threats, ensuring that any company handling Google’s data maintains their rigorous security standards.
Due Diligence and Continuous Monitoring
Conducting thorough due diligence before engaging with an outsourcing partner is crucial. This involves assessing their security policies, procedures, past performance, and compliance with relevant standards.
Post-engagement, continuous monitoring is essential. An Accenture survey revealed that 69% of organizations experienced an attempted or successful theft or corruption of data by insiders during the last year. Regular audits and monitoring can detect and prevent such incidents.
Ensuring Compliance and Legal Frameworks
It’s vital to ensure that outsourcing partners are compliant with global data protection regulations, like the General Data Protection Regulation (GDPR) in Europe. Microsoft, for instance, ensures compliance with international data protection laws, setting an example of how to manage data responsibly across borders.
Investing in Employee Training
Human error remains one of the leading causes of data breaches.
Investing in regular training for both in-house and outsourced teams on data security best practices is vital. A study by the Ponemon Institute found that companies that invested in extensive training reduced the cost of a data breach by $9.3 per compromised record.
Leveraging Technology for Data Protection
Advanced technological solutions like encryption, multi-factor authentication, and cloud security tools play a significant role in safeguarding data. Amazon Web Services (AWS) offers a prime example of utilizing state-of-the-art security technology to protect the data stored on its servers, including those used by outsourced teams.
Developing a Comprehensive Incident Response Plan
Despite all precautions, the possibility of a breach cannot be entirely ruled out. Hence, having a well-developed incident response plan is critical. This plan should include not just the steps to mitigate the breach but also clear communication strategies to manage stakeholder expectations. According to IBM, companies that had an incident response team and extensively tested their incident response plans experienced $1.23 million less in data breach costs compared to those that had neither.
Building a Culture of Security
Creating a culture of security where every employee, whether in-house or outsourced, understands the importance of data protection and is vigilant against threats is essential. Facebook, despite its challenges, has been proactive in creating a security-first mindset among its employees and vendors.
Choosing the Right Outsourcing Model
The choice of the outsourcing model can also impact data security.
Opting for cloud-based solutions with reputed providers can offer more robust security compared to traditional models. Salesforce, for example, uses a multi-tenant cloud environment that provides high levels of security for its clients’ data.
Insurance and Liability Clauses
Including insurance and liability clauses in contracts with outsourced providers can provide an additional safety net. This ensures that in the event of a breach, the costs and liabilities are clearly defined, providing financial protection to the company.
Outsourcing, in the context of our digital and data-driven world, poses unique challenges in data security. However, with a meticulous approach encompassing stringent security standards, continuous monitoring, legal compliance, technological solutions, and a strong culture of security, these risks can be effectively managed. Companies like Google, Microsoft, AWS, and Salesforce demonstrate best practices in securing outsourced operations, serving as a blueprint for others to follow.
In the end, the goal is not just to prevent breaches but to create an environment where data security is an integral part of the business ethos.
As the cybersecurity expert Bruce Schneier aptly put it, “The only way to secure data is to secure it no matter where it lives, no matter where it travels, no matter where it’s used.” This holistic approach to data security in outsourcing is not just a necessity but a strategic advantage in today’s interconnected business landscape.
