How to Ensure Third-Party Vendor Compliance to comply with the DPDP Act

In today’s hyper-connected enterprise landscape, CISOs know that vendor and supply-chain risks can be just as dangerous as internal threats. Yet, many organizations still underestimate them.

According to Secureframe’s 2024 report, 73% of organizations have experienced at least one significant disruption caused by a third party within the past three years. Also, 7% of organizations that experienced a third-party security incident had sustained, significant adverse effects.These statistics show that third-party compliance can no longer be an afterthought. It must be embedded into your core risk management strategy.

India’s DPDP Act establishes accountability for third-party data processing but does not prescribe how organizations must implement vendor compliance, leaving CISOs responsible for defining risk-appropriate governance, controls, and oversight mechanisms. This article gives you clear actionable steps that can help CISOs ensure third party vendor compliance.

1. Start with governance and executive alignment

A strong third-party compliance program begins with governance and awareness. CISOs should lead the charge by establishing policies that cover all external partners—vendors, contractors, service providers, and even their subcontractors. Vendor risk often falls into a no-man’s land between departments. Security thinks procurement owns it. Procurement assumes legal is handling it. Meanwhile, vendors get onboarded with minimal scrutiny.

Build a cross-functional team

Bring together stakeholders from:

• The IT and security teams that are responsible for vetting technical controls to ensure vendors meet cybersecurity standards.
• The procurement department that manages the selection and onboarding of vendors, ensuring alignment with organizational processes.
• Legal and compliance stakeholders that draft contracts and include audit clauses to uphold regulatory and contractual obligations.
• Finance and other business units that work together to align the organization's risk appetite with its operational needs and vendor relationships.

Together, this team should define a vendor risk policy that outlines:

• Encryption and access control standards
• Background check requirements
• Data privacy and regulatory obligations
• Audit rights and breach notification protocols

Tie third-party compliance to board-level goals like operational resilience, brand trust, and regulatory readiness. This ensures sustained funding and visibility.

2. Map and classify your vendor landscape

You can’t protect what you don’t know. Many organizations don’t have a complete list of their vendors, let alone understand which ones touch sensitive data or critical systems. Before you can manage vendor risk, you need to understand who your vendors are and what they do.

• Document every third-party: Maintain a comprehensive list of all vendors, contractors, and service providers engaged by the organization.
• Map vendors to business functions: Identify and record the specific business units or processes each vendor supports (e.g., HR, IT, finance, marketing).
• Track compliance obligations: For each vendor, document the regulatory frameworks they impact, such as:
  • GDPR
  • HIPAA
  • PCI-DSS
• Categorize vendors by criticality: Assess the importance of each vendor based on the sensitivity of data handled, operational dependency, and potential impact of failure.

Use a tiered model:

• Tier 1 (Critical): Cloud infrastructure, payroll processors
• Tier 2 (Moderate): SaaS tools, marketing platforms
• Tier 3 (Low): Office supplies, non-sensitive services

For each vendor in your inventory, assign metadata to support risk analysis and compliance tracking like Risk level (High/Medium/Low), Required certifications (e.g., SOC 2, ISO 27001), and Regulatory roles (e.g., GDPR processor, HIPAA associate)

Even a simple spreadsheet or shared dashboard can help visualize risk exposure across your ecosystem.

3. Enforce risk-based onboarding and due diligence

The problem: Treating all vendors the same is a recipe for wasted effort and missed cyberthreats. Your cloud provider and your coffee supplier shouldn’t get the same scrutiny. Once vendors are classified, tailor your onboarding process accordingly.

Pre-contract risk review

• Assess breach history: Investigate the vendor’s past security incidents to understand their risk posture and response capabilities.
• Verify technical safeguards: Confirm the vendor’s encryption protocols and access control mechanisms align with your organization’s security standards.
• Check certifications and compliance track record: Ensure the vendor holds relevant certifications (e.g., SOC 2, ISO 27001) and has a history of regulatory compliance.

Automate risk assessment processes

Manual reviews are time-consuming and difficult to scale. Leverage automation tools to streamline vendor evaluations:

• Scan public databases: Use automated tools to check for known vulnerabilities and threat intelligence related to the vendor.
• Monitor compliance lapses: Continuously track vendor performance against regulatory requirements and internal policies.
• Automate questionnaires and document collection: Deploy digital workflows to gather security documentation, responses, and attestations efficiently.

Lock in security requirements early

Ensure that contracts reflect your organization’s risk tolerance and compliance expectations:

• Include security and compliance clauses: Define minimum security standards and regulatory obligations within the agreement.
• Establish audit rights: Retain the ability to audit vendor practices and controls periodically.
• Set breach notification timelines: Specify clear reporting windows for security incidents and data breaches.
• Define SLA penalties for non-compliance: Include financial or operational consequences for failure to meet agreed-upon service levels or security commitments.

Embed compliance into procurement workflows

• Collaborate with procurement and legal teams: Ensure that no vendor is onboarded without meeting baseline security and compliance criteria.
• Use standardized checklists during contract reviews: Apply consistent evaluation templates to validate vendor readiness and reduce oversight gaps.

4. Integrate third-party risk into resilience and reporting

Many vendor onboarding processes are either too lax (missing key checks) or too rigid (slowing down business). Neither is sustainable. A mature compliance framework treats vendor failure like any other outage.

Business continuity planning (BCP)

Incorporate third-party risk into your BCP to ensure operational resilience:

• Plan for cloud provider downtime: Identify critical dependencies and define contingency actions if your cloud vendor becomes unavailable.
• Establish backup vendors or failover plans: Maintain alternate providers or technical failover mechanisms to minimize disruption.

Incident response (IR)

Ensure your IR playbooks are vendor-aware and ready for collaborative action:

• Vendor breach notification procedures: Define how and when vendors must report security incidents.
• Joint investigation protocols: Outline roles, responsibilities, and coordination steps for investigating third-party breaches.
• Stakeholder communication plans: Prepare messaging strategies for internal teams, customers, and regulators in case of vendor-related incidents.

Track metrics that matter

Use dashboards to monitor vendor risk and compliance posture across the ecosystem:

• Number of high-risk vendors: Identify and prioritize oversight for vendors with elevated risk profiles.
• Open issues and overdue assessments: Track unresolved findings and missed review deadlines to drive accountability.
• Compliance status by tier: Visualize adherence to security and regulatory standards across Tier 1, 2, and 3 vendors.

5. Monitor continuously and adapt proactively

Static, point-in-time vendor assessments fail to capture evolving risks. Without real-time monitoring tools, like automated questionnaires, domain scans, and dynamic security ratings organizations risk missing early warning signs of vendor vulnerabilities.

Move toward real-time monitoring

Leading organizations are adopting continuous monitoring practices to stay ahead of evolving risks. Best-in-class CISOs leverage:

• Quarterly automated questionnaires: Regularly collect updated security and compliance information from vendors with minimal manual effort.
• Continuous domain scanning: Monitor vendor web properties for vulnerabilities, expired certificates, misconfigurations, and other risk indicators.
• Daily-updated security ratings: Use third-party tools to track changes in vendor security posture and receive alerts on risk score fluctuations.

6. Leverage technology and AI for scale

Manual third-party risk management processes are slow, inconsistent, and prone to oversight. Without leveraging GRC/TPRM platforms and AI-driven tools, organizations struggle to scale compliance efforts, detect anomalies, and respond quickly to emerging threats.

Key capabilities of GRC and TPRM Platforms:

• Automate workflows: Replace manual tasks with automated processes for onboarding, assessments, approvals, and renewals.
• Centralize documentation: Maintain a single source of truth for contracts, certifications, risk assessments, and audit records.
• Track approvals and certifications: Monitor vendor compliance status, renewal dates, and outstanding requirements in real time.

Deploy AI for smart compliance

Modern platforms integrate AI to enhance decision-making and reduce manual overhead:

• Parse audit reports: Automatically extract key findings and flag compliance gaps from lengthy audit documents.
• Detect behavioral anomalies: Identify unusual patterns in vendor activity that may signal emerging risks or non-compliance.
• Recommend remediation steps: Generate actionable insights and next steps based on risk severity and historical data.

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