What are the risks of ignoring data privacy in companies

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Published on Jan 17, 2023 and edited on Feb 1, 2023 by Carlo Cilento

Data privacy is widely viewed as a key business principle. As the use of data is becoming increasingly essential, the need for data privacy and protection is well. Stories of data breaches, hefty fines, and reputational damages have been widely covered. However, still, not every organization has the right measures in place. Reasons for this vary but come mostly down to ignorance or incapability.

This article will outline the risks of ignoring data privacy.

  1. Fines
  2. Liability
  3. Data loss
  4. Reputation
  5. Final Thoughts
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Let’s dive in!

Fines

The first and obvious risk of ignoring data privacy is that you can be fined for doing so. In many countries, there is an independent authority with the power to issue fines for data privacy violations- think of data protection authorities in the EU or the Federal Trade Commission in the US.

Each legal system has its own rules for calculating fines. Non-compliance can be quite expensive under the GDPR: in the EU, fines can be as high as 4% of a company’s annual global turnover, or €20M, whichever is higher. 4% of the annual turnover can amount to a lot of money for bigger companies: for instance, the Luxembourgish DPA fined Amazon for a record €746M last year.

Additionally, with fines usually comes an order to bring the data processing into compliance. This sometimes requires extensive changes to a company’s data architecture, which can be burdensome and may temporarily disrupt the company’s data processing operations.

Liability

You may be held liable for any harm a data subject suffers because of your privacy violations. Different legal systems protect individual rights with different tools and enforce this liability in different ways, but at the end of the day, you will be held accountable.

In today’s data-driven economy, companies process data from a large number of users and customers. If the legal system allows for class actions, even minor harm to individual customers can result in very high damages. And when class action is not available, a company might get involved in numerous legal procedures with individual customers, leading to significant legal costs.

It should also be noted that fines and damages are distinct notions: companies sometimes face both fines and damages for the same violations.

Data loss

Ignoring data privacy can lead to data breaches. If this happens, companies might lose control over valuable data that could give them an edge over the competition. This is why companies have comprehensive disaster recovery plans, and will typically process and store crucial data such as trade secrets on-premise rather than relying on a third party processor.

Ransomware attacks are also a real risk. They disrupt operations, ransoms are expensive, and because they are data breaches, they can cost companies a fine on top of the ransom!

Reputation

When it comes to privacy violations, companies often dread reputational damage even more than fines and liabilities. A reputation for bad data governance can turn customers and market partners away- especially when news of a data breach goes public, or when shady data disclosures are exposed.

The conditions for publishing a decision vary between legal systems: some authorities only publish decisions as an accompanying sanction for severe violations, while others publish all their decisions. For instance, the UKO ICO’s website contains an extensive database of all data breaches reported since 2021- you don’t want to end on that list!

Final Thoughts

Its widely understood that data privacy is important and also a general business principle. We’ve written about various actions you can take to protect the privacy of your data and be 100% GDPR-compliant.

We are aware of the risks of ignoring data privacy at Simple Analytics. As a privacy-first Google Analytics alternative, data privacy is one of our main pillars. We believe you can get insights into your website performance without collecting personal data. If this resonates with you, feel free to give us a try!

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