Outsourcing can drive down costs and help you hire in days, but without robust data security measures, it can also expose your business to risk. In fact, nearly 60% of small businesses close within six months of a data breach ¹. That’s why data privacy and protection should be part of every outsourcing decision from day one.

In this guide, we’ll walk you through the most significant security risks, the certifications that matter, and the best practices to protect your business and customer information when working with offshore teams.

Why data privacy is critical when outsourcing

Whether your offshore team handles customer records, payment information, or proprietary systems, sensitive data is likely being moved across borders and into third-party hands, which introduces a new layer of risk. Not only do you need to worry about potential cyber threats, but also whether your provider meets compliance requirements like GDPR, ISO 27001, or local data privacy laws.

The consequences of poor data security can be severe. According to the IBM Cost of a Data Breach Report 2024, the global average cost of a data breach has surged to USD 4.9 million - a 10% increase over last year and the highest figure ever recorded.

One in three breaches now involve shadow data³ (information businesses didn’t even realise they were storing), making it more challenging than ever to track and protect sensitive assets.

That’s what makes data security in outsourcing so complex: without clear processes and transparency from your partner in data handling, you’re flying blind.

The biggest data security risks in outsourcing

Not every breach is the result of a sophisticated cybercriminal. Many data security failures come down to basic but critical gaps in training, policy, or oversight. When working with offshore partners, those gaps can be even harder to spot and fix if you’re not proactive.

Here are some of the most common risks to watch out for:

1. Unauthorised access to systems or client data
   When too many users have access (or the wrong people do), it increases the chances of misuse, whether accidental or deliberate. This is especially risky if role-based permissions aren’t in place.
2. Data leaks through unsecured channels or weak protocols
   Sharing files via unencrypted email or using outdated collaboration tools can expose sensitive information to unintended recipients or third parties.
3. Cyberattacks like phishing, malware, or ransomware
   Offshore teams are often targeted with phishing emails designed to trick them into giving up credentials or downloading malicious software, especially if security training is lacking.
4. Insider threats, both malicious and accidental
   Not all threats come from outside. A disengaged, disgruntled, or careless team member can become a major liability if they mishandle or intentionally leak data.
5. Human error from lack of training or awareness
   Simple mistakes such as sending client information to the wrong address or using weak passwords can expose your business to serious breaches, especially when teams aren’t regularly trained in data handling protocols.
6. Outdated infrastructure or lack of endpoint protection
   If your provider’s systems or devices aren’t properly secured, patched, or monitored, they can become easy entry points for attackers.

Outsourcing can expose you to these risks if your provider doesn’t have the right security controls in place, or if your business doesn’t enforce them. And while some of these issues may seem minor, they can escalate quickly into a serious breach with major financial, legal, and reputational consequences. Security needs to be a shared responsibility between you and your outsourcing partner.

How to vet an outsourcing partner’s data security controls

Not all outsourcing partners take security as seriously as they should. Due diligence is critical, especially before you hand over access to sensitive business or customer information.

Start by asking the right questions. A reputable provider should be able to give clear, specific answers backed by documentation, not vague assurances.

Here’s what to ask:

• Do you hold recognised security certifications like ISO 27001, SOC 2, or PCI DSS?
  These aren’t just badges — they show that the provider has passed rigorous assessments and follows globally accepted security standards. If they don’t have any certifications, ask why.
• What are your data privacy policies, and how are they enforced day-to-day?
  A good policy means nothing without clear implementation. Find out how they train their teams, what internal controls are in place, and how they stay up to date with changing laws like GDPR or APPs.
• What encryption standards, firewall protections, and access controls do you use?
  Data should be encrypted both in transit and at rest. Ask about their network security (firewalls, intrusion detection), as well as tools like VPNs and two-factor authentication.
• How is data stored, who has access, and what happens at the end of the partnership?
  It’s crucial to know where your data lives, how it’s segregated from other clients, and what protocols are in place for secure deletion once your engagement ends.
• Do you have a documented incident response plan?
  You want to know how quickly they detect, respond to, and report a breach. Ask for a walk-through of their process and whether they conduct simulations or tabletop exercises to stay prepared.

Also, ask for copies of certifications, audit results, or compliance reports. You can request a virtual tour or security overview session with their IT or compliance team.

If a provider is vague, unwilling to share information, or overly defensive, that’s a red flag. A transparent, security-conscious partner will welcome the conversation and be able to prove they walk the talk.