We have all heard about the much greater fines that can be levied against organisations that fail to protect their customers’ data or that inadvertently disclose that data. GDPR is now here and the fines can be eye-watering. What perhaps fewer companies realise is that these fines are just the tip of the iceberg in terms of the true costs of a data breach.
I don’t plan to devote much space to the reputational risk associated with poor data security but I’m sure I would get plenty of comments if I left this off the list. You don’t need me to fill in the blanks though...
Data subjects and class actions
Messrs. Stalkem & Pounce, your eager data protection lawyers, are gearing up for the class actions that are likely to follow some of the more serious and high profile data breaches. The fines you may get from the regulator – the Information Commissioner’s Office in the UK – do not provide any immunity from legal action by data subjects who can prove loss, distress or heightened risk to themselves emanating from the disclosure of their data.
I have no real idea how substantial these damages could be in practice but there are some precedents which give an indication of what may be decided by courts:
"Awards of between £2,500 and £12,500 were awarded to six asylum seekers when their personal data was inadvertently published on the Home office website (TLT v Secretary of State for the Home Department. Reference )". Source: Ashfords LLP.
Supplier or customer contracts
In many businesses there will be little in the way of threat from suppliers or customers taking action because of a data breach unless the data concerned was theirs. However, it is worth checking your contracts to ensure there is no 3rd party action that can be taken resulting from a data loss. It may also be worth considering whether your contracts with others should incorporate such a clause.
Could your business could suffer financially, reputationally or otherwise were one of your suppliers or customers to lose data, even if that were not data you had provided them? GDPR has heightened the focus on data security but many businesses are only just beginning to appreciate the reach of this new regulation so don’t get caught out.
Credit card fines
If you take credit card payments you need to look very carefully at how you are doing this and whether you are storing such highly sensitive data. If you don’t need to keep the customers’ card details then don’t keep them – the requirement for far greater security measures will involve you in layers of cost most businesses can do without. If there is a breach and data is lost then the fines from Card Schemes – Visa, Mastercard or others – will be passed down the chain to you.
There are considerable Card Scheme fines associated with non-compliance following a data compromise; these can range from tens to hundreds of thousands or even millions of pounds. Many non-compliant merchants have ceased trading because the fines could not be accommodated. The fines are passed from the Card Scheme to the acquirer and then onto the merchant.
It is too early to tell how many businesses will be damaged beyond repair by the fallout from data leaks and breaches but there are plenty of layers to the costs that may be involved. It’s worth taking some time to ensure you understand where your organisation’s vulnerabilities lie so that these costs are, at least, well understood.
Well, we’ve had GDPR for a few months now (July 2018) and gradually we’re all getting used to it albeit some of us still have a long way to go even to understand it properly. Now seems a good time to start a conversation about why GDPR is going to be good for business, good for consumers and not the ogre it has often been portrayed.
Away with the hyperbole
Data protection regulators around the EU now certainly have more teeth than was the case before May 25th but let’s not get carried away by talk of the maximum fines for data breaches under GDPR. It seems to me that the ICO (Information Commissioners Office) here in the UK has been at some pains to help businesses understand and implement the new data protection regulations and I suspect this approach will continue for some while. Where fines are to be levied I would expect them to be reserved for cases involving wilful and blatant flouting or disregard of the regulation. If you are planning to be in this category then open a savings account soon – you’re going to need every penny.
Most businesses will find they are sanctioned lightly in the first instance unless the breach is serious (large volumes of unencrypted data and/or data of a highly sensitive nature lost). But woe betide if you then fail to act as the GDPR is clear on the severity of any sanctions being linked to any past “form” on the part of the miscreant as well as their attitude to working with the regulator and rectifying the problem.
So wherein lays the risk?
Frankly, the biggest risks to most businesses lie in the need to respond to data subjects (the fancy GDPR term for consumers) when they ask to have copies of their data, in an electronic and portable format. For businesses that are collecting data at several different points, locations or through a variety of systems this will prove a nightmare if they have not established systems to collate all of this. And the GDPR only gives you a brief time in which to provide the data.
GDPR will be properly tested when organisations find they have to respond to requests for data held and they struggle to compile it accurately and completely within the designated time allowed.
And wherein the opportunity?
I think the best practitioners of data security and management will definitely steal a march on their less prepared competitors. As consumers become more aware of which businesses respect their data and treat it as something on loan rather than an owned asset so they will vote with their feet, as the expression goes. Trust will be built between customers and those businesses that embed respect for data throughout their organisation. Consumers will engage more openly with your content and your personnel and they will distinguish between the good, the bad and the ugly.
So let’s embrace GDPR as a good thing and learn to use it to our advantage. Let’s treat customers’ data respectfully and teach colleagues how to make the data for which we are custodians is made to be more valuable to us whilst in our hands.
Let’s stop scaremongering and start focusing on the plus side of the equation.