In the digital age, data is an essential tool for businesses in every industry. However, as the most valuable data comes from customers, collecting it can carry significant risk. A necessary way for a company to protect itself from that risk is to develop a comprehensive data privacy policy. Here are four problems companies without a data privacy policy face.
1. Legal Compliance Issues
Perhaps the most serious issue a business faces when it lacks a data privacy policy is potential legal and regulatory exposure. Depending on where it operates, businesses often must have such a policy to comply with local data privacy laws. The EU’s General Data Protection Regulation (GDPR) is the most well-known example. It not only dictates that businesses operating in the region have a data privacy policy, but it also specifies that it must be:
- Easy to locate and understand
- Free to easily access
- Transparent and accurate
- Kept updated
- Made obvious to users before any data collection
2. Liability for Undisclosed Data Use
Failing to disclose what data a company collects clearly can open it up to liability for using any collected data. It can lead to massive fines and punitive judgments. Consider the gigantic $887 million fine levied against e-commerce giant Amazon for such a violation. Although they’re still contesting the fine, it’s unclear if or when it will be reduced. For most other companies, that would be an extinction-level event for lack of the legal wherewithal even to mount a challenge.
3. Data Collection Creep
One of the benefits of having a defined data privacy policy is that it spells out what data the business collects. Without one, businesses can easily fall victim to data creep, which is the tendency to collect far more data than necessary. That creates additional data governance and compliance headaches. It’s especially problematic if any collected data falls under specialty regulations like HIPAA. Even more stringent data protection requirements may apply in those cases, and there’d be no way to meet them. Putting a comprehensive data privacy policy in place helps fight data creep and encourages data minimization.
4. Reputational Damage
For most businesses, there are few things worse than falling victim to a data breach. One of them would be falling victim to a breach involving data that customers didn’t know was collected in the first place. In that situation, the business would face the unenviable task of blindsiding customers with the news that they’d kept data without permission and lost control over it. That would take an already significant reputational problem and supercharge it.
Suffering any data breach whatsoever can do significant reputational harm as it is. Consider retailer Target’s consumer perception struggles after its credit card data breach. Now imagine what would have happened if the breach had involved data the company’s customers hadn’t knowingly supplied.
Data Privacy Policies Make Good Business Sense
At the end of the day, a data privacy policy is little more than a simple document. However, it can have an outsize impact on a business’s future. That said, it should be apparent to any business leader that developing a comprehensive data privacy policy makes good business sense. And for companies yet to do so — the clock is ticking.
