The Importance of Data Compliance Today

Why is the importance of data compliance something that businesses should consider in 2021 and beyond?

In this blog post, we’re going to discuss the importance of data compliance, why it’s risen in prominence for SMBs in particular, and what businesses can do to ensure their organizations are in good shape for the future.

What Is Data Compliance?

Data compliance refers to the protocols and standards that administer how an organization keeps data secure from potential threats—typically in accordance with a stated industry regulation or law that must be followed.

The types of information that need to be in compliance vary depending on the industry or locale, but generally speaking will concern sensitive information relating to the business and its customers.

Why Is Data Compliance Important?

Data compliance is not just an extra layer of red tape that businesses have to contend with; they are designed to protect customers, employees, and the company itself.

Let’s talk about some of the key reasons data compliance is important for a modern organization.

Rising Attacks

The importance of data compliance has unsurprisingly become more pronounced in recent years as the potential for data breaches has increased.

Cyberattacks are a common occurrence for businesses today, and not restricted to large enterprises as they once were.

Small and midsized businesses are as susceptible to hackers as any other organization.

Naturally, larger organizations will still be targeted by malicious actors because of the vast data sets they possess, but attacks on smaller companies have increased dramatically—particularly in the wake of the pandemic.

75% of SMBs operating in US critical infrastructure have experienced at least one breach in their history.

This is because of a number of reasons, one of which we’ll talk about in a moment, but the rise is primarily caused by a lack of protection from businesses, often those who are not in proper compliance with quality information security standards.

Cyberattackers operate under the principle of the law of averages. They know that if they send out a certain number of phishing emails, they are bound to have success.

The key to defending against these kinds of cyberattacks is to be in compliance with data security standards, thereby cutting the odds that an organization will be breached by a significant degree.

Even something as simple as multifactor authentication and proper access controls (both of which are almost universally required by data compliance regulations) can prevent the majority of modern social engineering attacks.

Mulifactor authentication (MFA) can prevent as much as 80-90% of cyberattacks, according to figures cited by the US national security cyber chief.

More Use of Data

The other motivating factor behind the rise in cyberattacks is the growth in demand from businesses of all sizes to leverage and make better use of their data.

As business competitiveness relies more heavily on data-driven processes, the need for companies to make greater use of the information they store is more significant.

As a result of this, modern organizations handle more data than ever, allowing for decision making to be backed up with relevant information.

This in turn necessitates companies to protect this data and make sure that it’s being handled, communicated, and stored in a way that ensures it’s in compliance and safe.

An estimated 61% of organizations have experienced a compliance-related violation like the stealing of sensitive data in contravention of privacy laws.

As with the methods used in information security to protect data, businesses will likely need to put in place comprehensive controls for how their internal information is processed and stored.

For most organizations, this greater leveraging of information for operational purposes puts a responsibility of them to meet data privacy laws, especially as it pertains to customer information—this is a significant consideration in particular for healthcare and finance entities.

More Legislation

With businesses using more of their customers’ data than ever, and an increased emphasis from consumers on data privacy, a raft of new and amended legislation over the last 10 years has meant data compliance is more important than ever.

First there was GDPR, the EU-mandated law governing data privacy for all EU citizens (including those who use American websites—these site owners must be in compliance with GDPR for these users).

In GDPR’s wake, a number of US laws (though not as strict or as wide in scope) have been passed into law.

This includes the California Consumer Privacy Act (CCPA) and New York’s SHIELD Act.

Both of these laws have been enacted on the basis of a greater desire for data privacy, and calls for a federal law encompassing the whole country have been on the cards for several years.

In any event, just the introduction of CCPA and SHIELD covers 60 million US citizens alone.

Note, just like GDPR, both of these laws require all businesses that have customers residing in these states to abide by the privacy standards they set out—so a company in Florida must still have the correct data privacy standards to do business with California-based customers.

New York and California alone account for 20% of the entire US population.

As other states follow suit—more recently in June 2021, Colorado passed sweeping data privacy legislation—the need for businesses to have effective data compliance standards within their organization will be essential.

Reputation

As the saying goes, “It takes 20 years to build a reputation and five minutes to ruin it.”

This is as apt for data privacy as it is any other field.

Research suggests that 70% of consumers would stop doing business with a company if it didn’t adequately protect their data. Just 27% feel that businesses take their data security seriously.

Consumers are more conscious and vocal about their data privacy rights today than at any point previously.

What does this mean for businesses?

It means that in order to maintain trust with customers, they must take information security seriously and do everything in their power to ensure data is protected to the fullest degree.

One does not have to look further than one of the country’s biggest brands, Target, to see the effects of a data breach on a reputation.

The company’s 2013 breach caused their brand index rating to more than halve, and five years later had still not recovered to its previous level.

When you further consider that a brand like Target maintains a strong reputation among consumers but is still susceptible to the damage a breach can do, it should set alarm bells ringing for others to make sure they do not suffer a similar fate.

The reputational harm that data breaches cause businesses is a big concern—75% say a breach has prompted a negative view of their organization, which 82% report engaging with an investor relations (IR) firm to overcome reputational issues in the aftermath of an attack.

Bottom Line

The importance of data compliance for businesses today is clear.

This is because of several key reasons—the increase and pervasiveness of modern cyberattacks; the proliferation of data leveraging and handling among organizations; more legislation; and an increased emphasis from consumers on the importance of data privacy.

Unlike in previous years, SMBs are targeted heavily by modern cyberattacks, meaning that for those that neglect their data compliance, they are playing a dangerous game of chicken considering the drastic consequences that can occur because of a breach.

For companies today, it’s crucial that they know exactly what they should be in compliance with and how they can go about ensuring that they are meeting the data compliance standards they need to.

Businesses are expected by their customers to have a strong compliance policy for safeguarding their data. If you’re concerned about your organization’s data policy or compliance, speak with one of our experts about what DOT Security can do for you.