Privacy Regulations - Your Competitive Advantage
Privacy Regulations as a Competitive Advantage
Would it be an exaggeration to say that data breaches and major security incidents are the scourge of the digital age? Not when you realize that billions, not millions, of people have had their personal data compromised in several high-profile incidents since 2008. Privacy Regulations have arisen and continue to advance based on the numerous and growing risks to our personal data.
Data breaches are not rare events. According to Statista, there were 1,473 data breaches in the United States in 2019, representing more than 164.68 million sensitive records that were exposed. In the first half of 2020, 540 data breaches were reported.
What is a data breach exactly?
A data breach is defined as an incident in which sensitive, confidential or otherwise protected data has been accessed and/or disclosed in an unauthorized fashion. Data breaches may involve personal health information (PHI), personally identifiable information (PII), trade secrets, or intellectual property.
Data breaches have become a real threat for businesses and organizations of all sizes, including governments, as they work with large volumes of digital data that must be collected responsibly and stored safely.
These breaches are often the result of inadequate security measures, a lack of understanding of the contents of the data, and software vulnerabilities. But increasingly, these incidents involve privacy breaches as a result of inadequate internal policies or products, like smart home devices that can expose their owner’s personal data.
When data has been accessed in an unauthorized manner, data security and privacy are compromised. Why the distinction between data security and data privacy? Actually, it’s easy to miss the distinction.
Security and privacy are not the same.
Data security entails measures taken to protect information from cyberattacks, data breaches, and accidental data loss. These measures typically include encryption of data, robust data storage technologies, multi-factor authentication, and more.
Data privacy Data privacy relates to the policies that keep secure data from being unduly shared, so it’s no longer private.
Data privacy ensures individuals have control over their personally identifiable information (PII). It primarily involves the procedures and policies that govern how data is collected, dealt with, and stored.
Security and privacy protect different things: security protects your data and privacy protects your identity.
It’s possible to have data secured but not privacy protected. This can happen when everything possible is done to secure the data, but it’s collected passively without permission. In this case, a data privacy regulation about the collection of data is breached.
Data breaches cost companies dearly
The cost of a data breach can be devastating. Apart from the paralyzing financial impact, there is damage to reputation, loss of consumer confidence, loss of competitiveness, and operational disruption.
According to the Cost of a Data Breach Report 2020 by IBM and the Ponemon Institute, the average cost of a data breach in 2020 is $3.86 million globally. The report is based on a quantitative analysis of 524 recent breaches across 17 geographies and 17 industries. The US is the most costly country for data breaches, costing companies an average of $8.19 million per breach.
The cost comes from legal costs, lost business, lost operational time because time is taken up by efforts to deal with the breach, and fines for non-compliance with regulatory bodies like the GDPR (General Data Protection Regulation).
Being in breach of the GDPR can incur a fine of up to 4% of annual global turnover or 20 Million Euros (whichever is greater). Privacy regulations are only just starting to impose financial penalties, and we can all expect fines and other financial penalties to increase over time.
According to the report, the cost for organizations that had taken proper effective cybersecurity precautions was less than for those organizations that hadn’t done so.
Not surprisingly, customer PII was both the most costly type of breached record as well as the most targeted type of record.
Loss of reputation
The damage to an organization’s reputation as a result of a data breach can be devastating. News of a breach spreads like a wildfire, and overnight, an organization can be the object of ridicule and fury of irate customers. Negative press and angry exchanges on social media don’t do a company’s reputation any good.
Research shows that 65% of customers reported losing trust in an organization that experienced a breach, and 27% decided not to do business with the organization again.
A study by Interactions Marketing found that 85% will tell others about the breach, and more than 30% will leverage social media to publicly criticize the company or organization.
Privacy regulations also mandate the early and immediate communication to affected parties and government bodies at the first notice of a breach. Although some organizations have in the past hidden breach incidents; the penalties are severe, both financially and to an organizations reputation.
As soon as a data breach is discovered and through the ensuing investigation, a company’s operations are significantly disrupted. Business can’t continue as before because the organization must determine how the breach happened and what data has been lost. For this purpose, operations are often shut down completely.
This is a catch 22 situation: the business needs time for a proper investigation, but the longer that goes on, the more likely it is that customers will lose patience and abandon the business.
Network downtime is very costly. According to a study by Gartner, the average cost of network downtime is around $5,600 per minute, which works out to approximately $300,000 per hour. This is an average figure and will differ depending on different factors, but it’s a clear indication of how business operations and productivity can be affected.
Organizations are legally obliged to protect personal data. If it is shown that data has been compromised, affected individuals can take legal action. In this regard, there has been an increase in class-action lawsuits in recent years.
Examples of data breaches that led to lucrative lawsuits include Equifax, Target, Home Depot, Neiman Marcus, Sony, and Zynga. Apart from the compensation paid to victims, companies also accumulate vast legal fees. These costs can financially ruin an otherwise strong company.
Gaining a competitive advantage
From the above, it becomes clear that compliance with local and international personal data protection legislation and privacy regulations is paramount.
The protection of privacy is no longer important only for technology companies. Because all business is done digitally, the protection of privacy applies to all industry sectors. An organization’s ability to ensure data security will distinguish it from competitors who take a passive approach to the issue or ignore it altogether.
Enhanced customer loyalty
Businesses that prioritize informed consent will reap the benefit of customers who are more engaged and more loyal. The public at large is aware of the importance of having their data safe. If they know a company is compliant, they are likely to value the company more.
A recent study by Forrester surveyed 263 data and compliance decision-makers at organizations that either operate or do business in Europe and found that many anticipate GDPR compliance will transform their organizations through "increased loyalty, satisfaction, and engagement from customers, as well as brand differentiation and uplift for themselves."
In the digital age, proven privacy protection is fundamental to good business. Those organizations that can show that they take the issue seriously and proactively protect privacy will have a competitive advantage over others in the marketplace.
New products and services
With the rapid development of the Internet of Things (IoT), where everything will be hyper-connected, the protection of privacy is going to be a considerable challenge. Consumers are going to need products and services that can protect their privacy.
This is an opportunity for companies to develop innovative applications for smart devices that let users decide who will learn what information about them and who it is shared with for what reason. Companies can let consumers pay for this choice, creating an additional revenue stream. Rolling out products with privacy at the core will find approval and support from consumers.
Face the world with your reputation intact
A data breach can do irreparable damage to a company’s reputation, alienating customers, and disrupting operations for weeks or even months. It’s simply not worth the risk not to take data security and privacy seriously.
If you know that you are in compliance and are taking appropriate measures to protect the privacy and security of all data, you minimize the chances of a data breach while building a reputation as an organization that cares about its customers and their online safety.
To be compliant with new security protection legislation, you have to work with information security in a consistent and structured way. An information policy must be in place, and information has to be structured in the best possible way. By doing this, you make sure that staff has access to the right information at the right time, which often means that business efficiency increases.
To be compliant, companies must create a data map for the organization and in the process, create more streamlined processes, such as getting rid of duplications in data lists, and setting up practices that monitor the accuracy of customer data, including whether or not the information was obtained with consent. Websites can also operate more optimally when data collection is reevaluated to exclude superfluous data collection.
In the process of becoming compliant, an organization must develop an information policy, which forces the team to come up with techniques to structure and protect data securely. Solutions like Datahunter provide these teams with automated insights that quickly allow proactive data protection strategies to be implemented and new insights to improve products and services.
Businesses that curate data in responsible ways earn a competitive advantage over rivals as this practice forges more trusting relationships with customers, which ultimately will boost the bottom line.