3 Overlooked Risks in Third-Party Contracts
Estimated read time: 3 minutes
Intro
Outsourcing is part of survival for SMEs and charities. Payroll, IT support, donor platforms, volunteer apps — these third parties keep the wheels turning. But too often, contracts with vendors are treated as tick-box formalities rather than strategic safeguards.
The hidden clauses inside those contracts can quietly transfer risk back onto you. And when something goes wrong, regulators won’t care whose logo was on the contract — they will hold you accountable.
What It Is
A third-party contract is more than a service agreement. It’s a governance document. It defines who carries responsibility, who holds liability, and who ultimately controls the data. Overlooking the fine print can leave organisations exposed to breaches, fines, reputational damage, and operational disruption.
Who It Affects
SMEs relying on outsourced payroll, IT, or marketing
Charities using donor databases, volunteer apps, or fundraising platforms
Boards and trustees responsible for organisational accountability under UK GDPR and the Charity Commission
The 3 Overlooked Risks
1️⃣ Liability Clauses
Most SMEs skim over liability. Vendors often limit or exclude their responsibility for data breaches. That means if data is lost, stolen, or misused, you pay the price — financially, legally, and reputationally.
2️⃣ Hidden Subcontracting
Many contracts allow vendors to subcontract without notice. Your data may be passed to unknown third parties across borders. This multiplies the risk of GDPR violations and weakens your ability to enforce accountability.
3️⃣ Exit & Termination Terms
When relationships sour or providers underperform, you should be able to switch quickly. But many contracts lack clear exit clauses, making it difficult to recover or delete your own data. This can create costly vendor lock-in and security gaps.
Practical Steps
Review liability clauses carefully — if the vendor is excluding all responsibility, push back.
Demand transparency on subcontractors — ask for disclosure and approval rights.
Negotiate clear exit terms — ensure your data will be returned, transferred securely, or deleted.
Document oversight — build vendor checks into your governance calendar (e.g., annual reviews).
Final Thought
Third-party risk is your risk. In the eyes of regulators and the public, excuses don’t matter — outcomes do. Treat vendor contracts not as “admin” but as critical governance tools. The strongest organisations are those that know how to balance cost with compliance.
At Mediajem Compliance, we help SMEs and charities strengthen their vendor governance. Contact us for a quick vendor contract review — before hidden risks turn into costly failures.
