Ensuring the coexistence of outsourcing and great data security

Outsourcing is a great way for companies to offer services and benefits to their customers without investing too much of their resources. While it comes with great benefits, it also carries risks that are too sensitive to be ignored and could potentially destroy your business’s reputation.

That sounded very horrifying, right? Well, not everything is as bad as you may think. Knowing the potential challenges you can face while hiring a third-party provider ensures credibility by building safety strategies.

One of the most significant challenges is related to data security concerns, which you may have heard a lot about in recent days. While it is a risk, it shouldn’t stop you from outsourcing some of your services if you truly need it. That’s why we created this post, where we will share with you the most common data security risks and solutions that prevent them, so you can outsource with confidence.

What is data security?

Data security is the practice of protecting data from unauthorized access and from the growing spectrum of cyber threats that put sensitive information at risk of leaks and breaches. The main goal is to establish safety measures while still keeping data available for authorized personnel through encryption, verification, or digital access.

Many sources define data security as a process; if we go with that, then this requires structures and workflows that ensure data is safe. With said processes, you are safeguarding confidentiality, maintaining data integrity, and keeping compliant with regulations such as GDPR, HIPAA, CCPA, and ISO 27001.

Data security is important because it protects companies from facing legal issues that may arise from poor data protection. Businesses must identify where their data is located and how it is being used to create safe barriers around it.

When it comes to outsourcing, each company has its own way of ensuring data security. Outsourcing existence fully depends on delegation, and while you need to trust your provider with your service, when it comes to data security, you can’t just delegate. You both need to work together to find common ground to implement safety measures.

But how can you do this? Start by defining scope, ownership, and fully detailed responsibilities; this is what effective data security looks like. The first step is to create a strong contract where nothing is left ambiguous. Industry research shows that clear contracts and structured roles reduce misunderstandings and cost overruns by up to 30%, making them one of the strongest defenses against downstream security issues.

The best way to ensure a safe outsourcing journey is to actually recognize the vendor as your strategic ally. They are not simply a provider; they are a business partner that needs to be involved in your growth. With this mindset, you will take your time to find the right outsourced vendor, one that shows experience in your industry and reliable safety measures.

Data security risks related to outsourcing

Data security risks when outsourcing

1. Employee overload

Typically, the issue’s core stems from viewing outsourcing as a cost-cutting strategy rather than a growth strategy. This is where most companies fail, as they are only interested in spending less money, so they don’t care if they have understaffed teams.

When this happens, teams won’t have enough resources and people to identify potential cyber threats on time. Another mistake is when you don’t hire a dedicated team for your company. This means the team will be overseeing more companies, taking more time to flag issues and solve them. Missed threats bring legal trouble, which can cause irreparable damage.

2. Shortage of technical knowledge

When companies prioritize building the team fast instead of investing their time in finding the right talent, teams are built with inexperienced people. With this mindset, companies are just trying to fill in the gaps instead of having subject matter experts, sacrificing quality.

Also, believing that previous knowledge is enough without investing in proper training programs, where culture and technical knowledge are taught, is a great mistake. The goal is to build a specialized team, and if you are not able to find people with enough experience, then you must train them very often.

3. Non-compliance

When providers fail to meet GDPR, HIPAA, CCPA, or similar requirements, organizations face direct penalties, investigations, and operational disruptions. This is why companies are demanding certifications such as ISO 27001 and SOC 2 when they involve sensitive data.

Regulations evolve, so your team must stay up-to-date with updates and upcoming data certifications to prevent data leaks. After a company experiences a data security issue, up to 65% of customers lose trust, which results in lost revenue and reputational damage. In the worst-case scenarios, when the damage is too big, legal trouble comes.

4. Data leaks and cyberthreats

While outsourcing, you inevitably share some sensitive data that, if mishandled, increases the risks of cyberattacks. Not prioritizing safety measures when this data is being shared will only bring consequences beyond repair.

Accesses must be limited so that only authorized personnel can interact with certain data. The most common cyberthreats include: ransomware, malware, DDoS attacks, phishing, Corporate account takeover, or impersonating executives. Automated monitoring, strict access controls, and encryption reduce these vulnerabilities.

5. Lack of communication with the vendor

Up to 95% of data breaches tied to outsourced operations stem from human error, which usually originates due to time zone gaps, language barriers, and scattered teams. When the teams are not properly communicating, issues will not be flagged on time, and cyberattacks will increase. Communication is key to acting on time when a potential threat is happening.

Openly talking about a company’s policies, guidelines, access, and safety measures prevents people from making mistakes. Holistic points of view help departments work together in identifying risks that could happen. Collaboration is critical when it comes to ensuring data security.

6. Reputational damage

Recovering from a massive loss of customers after their data was exposed due to your company’s poor performance is harder than you think. Preventing cyberattacks and threats is a top-level priority for companies whose customers trust them with their data.

But when outsourcing is in the picture, your customers won’t care if a mistake from their end is what caused a data breach. They will blame you. It makes sense if you think about it, they are trusting your company, so whatever business you do with another vendor is your responsibility, and they will not blame the other party.

7. Legal troubles

Even though you are outsourcing a service, you are still responsible if the vendor fails to meet compliance regulations or happens to have a data breach. You should make sure your partner follows compliance requirements before hiring them; otherwise, it poses a risk to your company.

Some of the most common legal issues you can face by not meeting compliance requirements are: fines that can go up to 4% of your yearly revenue, injunctions, lawsuits, and customer restitutions for the damage.

8. The outsourced team boycotting data

Conflicting interests, confusing/challenging escalation workflows, dissatisfied employees, or a lack of transparency can lead to your outsourced team not reporting issues on purpose. If this happens, your business will be extremely affected and can face huge repercussions.

It is your responsibility to hire a vendor that ensures your data is safe with them. Also, you can make sure the outsourced team you build is dedicated to your company. If not, you can face the risk of them ignoring you to prioritize another account.

9. AI/Automation-induced data exposure

Some outsourced partners use AI tools to help them automate their repetitive tasks, which adds a layer of complexity to data security measures. To ensure a correct and ethical use of AI, they need to have a dedicated team of people supervising what it does to prevent it from drifting or analyzing unauthorized data.

AI is a great partner when used correctly, but as with everything in life, it is not perfect. Some cases report AI hallucinations, where technology compromises data or twists information to present it as a fact. Make sure the outsourcing vendor follows proper guidelines to avoid this.

Safety protocols to prevent them

1. Define a set of goals and SLAs

The key to a successful outsourcing strategy is to define goals and expectations from the beginning. This ensures that both the customer and vendor are aligned on what is expected from the provided service.

Outsourcing contracts typically include Service Level Agreements (SLAs), which outline the expected level of service and specify penalties for underperformance. It serves as a guarantee that the vendor will fulfill the expectations and will follow any needed guidelines to meet data safety measures in this case.

2. Continuous training is key

We live in a world where technology is constantly evolving, which is great for enhanced security measures, but at the same time, it brings more complex cyber attacks. Your team needs to stay up-to-date through continuous training to avoid being affected. Hiring experts who follow trends and prepare training material brings a great advantage, so don’t overlook the training process, even when outsourcing.

Human error can occur when outsourcing, and you need to make sure your employees avoid it as much as they can. Only through a culture of constant learning and improvement can this deed be achieved.

3. Hire external auditors too

Trust is the backbone of a great outsourcing strategy, but one can never be too prepared. You can hire external auditors who perform regular audits too; this brings to the table someone who will not be biased and comes with fresh perspectives.

Performing regular audits on your team and their process will highlight some gaps and areas of improvement that would otherwise be overlooked. Any help is welcome when it comes to data security measures.

4. Ensure the outsourcing vendor complies with industry standards

ISO 27001 is the international standard when it comes to data and information security management. With over 70000 organizations certified worldwide, it has become one of the most important compliance standards. The outsourcing vendor you hire should at least be certified with it, if not, you are risking an unsafe use of data where breaches can happen.

5. Encrypt certain data

Data encryption is a process where all information is transformed into unreadable text that needs a decryption key to be reversed back to normal. It is one of the most common data protection measures as it prevents companies from sharing sensitive data by accident.

When having an outsourced team in your company, you need to make sure that only the required data is being shared and that access is restricted to authorized personnel only.

6. Give only the necessary information and access

Your outsourcing team should only receive the necessary data to perform their tasks; anything else poses a great risk for your organization. Make sure the vendor’s requests are thoroughly evaluated before you share them with sensitive information.

7. Hire external companies to take care of your data

Using a dedicated security firm for oversight eliminates conflicts of interest, while an operational vendor focuses on service delivery, an independent security partner validates protections and reports objectively on risks. This separation improves accountability and reduces the likelihood of data being overlooked, deprioritized, or mishandled.

Hiring a dedicated partner to take care of your data security ensures the outsourcing vendor focuses only on providing a great service while the other company implements data protection measures.

Your data can be safe even when outsourcing

Outsourcing should not bring headaches to your business; instead, it should feel like a stress relief. The sole purpose of outsourcing is to take care of services your business can’t take care of, hiring a vendor to maintain your quality and exceed expectations. But in some cases, it is inevitable for some challenges to present themselves.

That’s why being prepared is important before hiring an outsourced partner. Doing due diligence on them and knowing the risks gives you an upper hand, as you can counter with some strategies. Now that you know about the data security risks that outsourcing has, you can avoid them easily.

At Horatio, we make sure that your business experiences great service from our side; that’s why we stay compliant with international standards. Contact us and let us take care of your needs while keeping your business and customer data safe.