Data Security & Privacy: The Risks of Not Playing by the Rules

Achieving compliance is a complex and challenging process. But with the right systems and policies, you can stay ahead of the next data breach — and the regulators.

Peter Merkulov, Chief Technology Officer, Globalscape

May 24, 2017

6 Min Read

Data protection and privacy regulations affect organizations of every stripe. Whatever your business, if you have customers or employees, you have data that requires protection under some state or federal mandate. Such regulations are intended to ensure that proper precautions have been taken to protect potential victims of digital crimes such as fraud or identity theft stemming from malicious actors gaining access to data through hacking, technical malfunction, or human error.

It’s important to note before any discussion of regulatory compliance begins that following the rules doesn’t guarantee your systems and data will remain secure. As the saying goes, "compliance is a floor, not a ceiling," and so meeting the minimum standards under the law should be regarded as a starting point. Where you take your information security program from there depends on your industry, the kinds of data your organization deals with and its appetite for risk.

Data security and privacy regulations make up an expanding landscape comprising a long, overlapping and often confusing alphabet soup of laws and standards like HIPAA, SOX, FCRA, GLBA, PCI DSS, GDPR, PIPEDA, and others. Security and risk-management decision-makers must understand the nature of these laws and set security strategies accordingly or suffer the consequences of falling short of their demands. It’s not an easy task, but it is a manageable one when broken into its parts.

The first step involves recognizing the ways (apart from blatantly ignoring the regulations) an organization might inadvertently fall outside the bounds of compliance.

3 Conditions that Can Compromise Compliance

  1. Shadow IT: The most common conditions that can compromise a compliance program are the use and proliferation of so-called shadow IT (technologies that operate within the enterprise outside the purview of IT management); a failure to document compliance processes or enforce existing processes; and a lack of visibility into the means of collecting, managing, and storing data.

  2. Change: There will likely be gaps in even the most rigorous of compliance programs, especially since compliance is a dynamic, ever-evolving endeavor. Laws change, technology changes, the threat environment changes, and so processes must change in response. Data management that includes security policies, training and awareness programs, technology maintenance, and regular systems and response testing is required. “Set it and forget it” is not a real option.

  3. Non-compliance: The direct and indirect consequences of non-compliance can be unforgiving, exacting steep costs of time, resources, and reputation that can cripple an organization.

6 Consequences of Non-Compliance
Non-compliance means your organization is at greater risk of a data breach, and a data breach can come with a steep financial cost. Here are six ways a non-compliant organization might suffer in the event of a data breach:

  1. Lawsuits: A data breach doesn’t only affect the breached organization, but may also put at risk the associated employees, consumers, customers, partners, and service providers—any of which may decide to take legal action seeking justice and protection. Win or lose, a lawsuit can be an expensive proposition.

  2. Bank Fines: If credit card data is affected, banks may end up re-issuing new cards to their customers. When that happens and the banks incur associated costs, they will likely seek to recoup those costs from the organization whose breach prompted the action by levying fines or added fees.

  3. Governmental Audits: Any egregious breach of consumer data risks action by the Federal Trade Commission (FTC) acting on behalf of U.S. consumers. If the organization was found to be out of compliance and negligent, the FTC may not only fine the company, but also require expensive annual compliance audits for years the following the negligent behavior.

  4. Compensation and Remediation Costs: Among the many costs involved with a security failure are those associated with forensic investigations to determine the source and cause of the breach, fix the gaps that were exploited, and address any residual risk to consumers and others. Someone has to pay for free credit monitoring services, after all.

  5. Lost Revenue: A data breach may cause customers to lose trust in the affected organization. When that happens there’s a good chance that they will take their business elsewhere. Following a breach affecting 70 million customers in 2014, retail giant Target saw profits fall by $440 million the following quarter.

  6. Lost Reputation: When word of a data breach gets out, loss of reputation soon follows. In order to mend fences with all affected parties, organizations will incur costs associated with increased marketing, communications, and public relations campaigns. As the saying goes, a good reputation takes years to gain—but a moment to lose. 

3 Ways Data Management Matters
Given the risk of failure, it’s important to implement a strong data management program as a part of an organization’s security and compliance strategy. If you don’t know what data you have, where it’s stored, who has access, and how it is used, it’s impossible to keep it secure—and to prove compliance. Data management provides a framework for understanding how information moves through the enterprise. Here’s how data management helps with security and compliance:

  1. Workflow and Process Automation: Human error continues to be one of the weakest links in the security chain. Workflow and process automation remove the human factor from many tasks that might otherwise be vulnerable. Automating processes associated with vital applications and services, and doing so while the organization’s security and compliance functions operate in the background, lets users focus on their jobs while giving management greater peace of mind.

  2. Centralized Control and Visibility: Not knowing what’s happening in your network is unsettling — and can mean the enterprise is at risk of a breach. As networks grow more complex and as perimeters expand to include mobile devices, the cloud and more, IT administrators need even greater levels of transparency into the network in order to gain a top-down view of the infrastructure that’s required to achieve compliance and mitigate other security and performance risks.

  3. Custom Compliance Profiles and Reporting: Every organization has its own set of regulatory expectations and challenges based on industry, size, risk appetite, and a thousand other factors. One-size-fits-all doesn’t apply; specialized compliance tools offering customized data workflows and configurations ensure that, whether facing PCI DSS, HIPAA, SOX or some combination of these and other regulations, a tailored profile and reporting structure is needed.

Achieving compliance is a complex and challenging process, but with the right systems and a strong, customized data management policy, your organization will be positioned to stay ahead of the next data breach — and the regulators. 

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About the Author(s)

Peter Merkulov

Chief Technology Officer, Globalscape

Peter Merkulov serves as chief technology officer at Globalscape. He is responsible for leading product strategy, product management, product marketing, technology alliances, engineering and quality assurance teams. Merkulov has more than 16 years of experience in the IT security industry, specifically in product strategy and management. Merkulov has a Masters from Moscow State Institute of International Relations (University) MFA Russia MGIMO.

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