How to Audit Third-Party Cloud Vendors for Data Privacy Risks

Cloud vendors are necessary for running a modern IT operation, but choosing the wrong one can lead to risks. Businesses store sensitive data with these providers, trusting them to protect the information and client privacy. Unfortunately, without a robust audit, handing it over can be a recipe for disaster.

An audit must go beyond the basic surface check for IT leaders and company decision-makers. In addition to compliance certifications, companies must dig deep and conduct a privacy risk assessment that uncovers vulnerabilities and how to address them. Here are seven strategies to conduct a thorough audit before signing up with a cloud vendor.

1. Go Granular

Before you sign an agreement, examine the entity’s privacy practices in their smallest parts. Review how it handles data, notifies about breaches and pays attention to past incidents. The IT team should consider how it segments data from different clients. Other clues to how well the business’s privacy practices work are found in encryption standards and geographic data residency requirements, such as those in the General Data Protection Regulation (GDPR).

In the third quarter of 2024, 422.61 million data records were compromised. Nearly any vendor and small business is at risk, so ensuring a cloud vendor thinks of the different entry paths and has plans for breaches can reduce incidents.

2. Look at the Risk-Management Framework

Knowing how providers handle ongoing risk gives a big picture of their health. The third-party cloud network should continuously monitor for anomalies and test its systems to identify emerging threats.

Does the company undergo third-party assessments? How fast are issues fixed when identified? Look for the vendor with scheduled penetration testing, incident simulations and firm remediation timelines.

3. Assess Whether the Vendor Treats Privacy as a Mission

Talk to the firm about how it integrates privacy. Is it part of product design? How deep does the culture go? What happens if a high-level employee quits or is fired? What steps does the business take to protect data that the worker had access to? These enterprises must prioritize data protection to retain customers.

One survey showed consumers are willing to pay between $100 and $200 annually for a comprehensive privacy product. Ensuring they prioritize protection allows them to charge a premium.

4. Evaluate Regulatory Alignment

Cloud vendors may say they follow regulatory requirements, but part of an audit should look more closely at what they do rather than what they say. Map and compare the organization’s practices against industry standards and regulatory requirements. For example, if a one claims to be GDPR compliant, ask how it handles data subject access requests.

5. Test Transparency by Looking at Reporting

Reports show that 353 million people’s data was exposed in 2023. It isn’t a matter of if, but when client data gets exposed. When a breach happens, you want a trustworthy partner to navigate it with transparency and a plan.

Dig into what the brand reports. Does it notify of incidents? How much does it inform when a breach occurs? You can learn much about leadership’s values by seeing what it shares and how it spins situations.

Will the business share an audit log? What reports can the IT team access? A tailored dashboard lets leadership track and assess problems.

6. Dig Into Subcontractor and Supply Chains

Nearly every cloud provider relies on subcontractors. When it comes to data handling, such layering requires additional auditing measures. Oversight is crucial to ensure supply chains protect customer data.

IT leadership must demand full disclosure of additional parties and how the vendor ensures they follow protocol. Know every party involved in the data downstream.

7. What Is the Exit/End of Contract Plan?

Leadership must plan for when the contract with the cloud ends. The document should spell out data retention and deletion, how and when it happens. Decision-makers should ask for a demonstration that ensures no breadcrumbs of data are left behind.

Ensure the firm purges backups and wipes sensitive information upon the contract’s end. Validating the exit strategy in the beginning lessens the risk of shadow data.

Rigorous Audits Build Relationships

Cloud vendors are a necessary component of running a successful organization. Although putting critical details into a third party’s hands carries risk, IT managers can reduce the possibility of breaches by pushing for in-depth audits.

Audits protect data and strengthen trust with stakeholders. Successful brands ask for evidence and keep firms accountable to meet high standards.

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ABOUT THE AUTHOR

Zac writes for ReHack as the Features Editor and covers cybersecurity, IT, and business tech. His work has been featured on publications like AllBusiness, CyberTalk, and BLR. For more of his writing, follow him on Twitter or LinkedIn.