Canadian companies rely on third party platforms more than ever. They use platforms for authentication, payment processing, analytics, communications, workflow automation, and customer management. These services reduce development time and deliver enterprise grade capabilities at a fraction of the cost. However, they also introduce risks that many companies overlook.
Third party platforms create contractual, operational, and privacy obligations for your business. If you do not understand these obligations, you may expose your company to financial penalties, data protection failures, or customer disputes. This guide highlights the most common mistakes Canadian businesses make when working with third party platforms and how to avoid them.
1. Assuming the vendor will handle everything
Many Canadian founders believe that a platform provider will manage all security, privacy, and compliance responsibilities. That assumption is incorrect. Most platform agreements shift the majority of obligations onto the customer. Vendors define themselves as processors or service providers, but they often disclaim responsibility for incidents unless they arise from specific and limited scenarios.
Your business must understand exactly which responsibilities remain with you. These responsibilities often include user access management, data retention, encryption settings, and incident reporting. You must confirm these items before adopting a platform.
2. Overlooking privacy implications of data sharing
Third party platforms often collect and process significant personal information. Some process data for analytics or product development. Others share data with subcontractors around the world. If you do not understand the data flow, you cannot meet your Canadian privacy obligations.
Review the following items carefully.
• Whether the platform transfers data outside Canada
• Whether the vendor uses the data for its own purposes
• Whether the vendor remains responsible for its subcontractors
• Whether the vendor will notify you promptly if an incident occurs
Canadian privacy law requires reasonable safeguards. You must ensure that every vendor you use meets that standard.
3. Accepting problematic terms of service without negotiation
Many Canadian companies click accept on platform agreements without realizing they can negotiate better terms. Even large vendors will negotiate when the customer operates in a regulated industry or handles sensitive information.
Common areas that require negotiation include the following.
• Data protection language
• Audit rights
• Liability caps
• Indemnity obligations
• Termination rights
A short review can prevent future disputes and protect your business from unfair terms.
4. Ignoring the risks associated with subcontractors
Platforms depend heavily on subcontractors. These subcontractors may provide hosting, security services, analytics, or support. If the contract does not require the vendor to supervise and remain fully responsible for these subcontractors, your company may bear the consequences of a subcontractor failure.
Your agreement should require the vendor to flow down all privacy and security obligations to every subcontractor. It should also require the vendor to obtain your approval before adding new subcontractors that may access personal information.
5. Failing to establish internal governance for platform use
Even with a strong contract, your company must implement internal governance. Employees often connect platforms in ways that bypass security controls. They may upload personal information to systems that were never designed to handle it. They may create authentication configurations that expose confidential data.
Create internal rules that control the following items.
• Who can authorize a new platform
• What data employees may upload
• How encryption settings must be configured
• How access logs must be monitored
Good internal governance prevents misuse and reduces privacy risks.
6. Not preparing for audits and security questionnaires
Larger customers often ask for security documentation when you work with them. If your business relies on third party platforms, you must understand how to describe your privacy and security posture accurately. You need documentation that explains how the platform works, where data is stored, and how the vendor meets security obligations.
You should collect the following from every major vendor.
• Data location statements
• SOC reports or security certifications
• Privacy documentation
• List of subcontractors
• Incident response details
This preparation helps you close deals faster and maintain trust with enterprise clients.
7. Not involving a technology lawyer early
A lawyer who understands platform agreements can explain your obligations in clear terms and negotiate stronger protections. They can identify gaps, propose amendments, and help you build a vendor management process that matches your industry.
By approaching platform adoption with a clear strategy, Canadian businesses can innovate with confidence, protect their data, and avoid costly mistakes.
Contact Onley Law Professional Corporation to get help today: contact@onleylaw.ca