Data Privacy And Security Risks

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imagesCA0GPX63If there is one issue which causes sleepless nights for business executives, it has to be data privacy and security.  While the laws are still being updated and drafted for new technologies and new threats, businesses need to address these issues now.

Financial and healthcare companies already face legal requirements for protecting consumer data.  These have been in place for many years but federal and state agencies are increasing regulation and enforcement actions.  Data breach and customer notification laws are in place in every state.  A federal uniform standard has not been enacted.

The plaintiffs’ bar is quickly latching onto class actions and other private enforcement actions to seek redress for consumers who have suffered privacy invasions.  With new technologies and new ways to capture and use personal information, the risks are increasing and lawmakers will be forced to respond by passing more legal strictures and regulations around such data.

In the big picture, companies face three basic types of risks: (1) external; (2) internal; and (3) human error.imagesCAJXUF02

External risks for data breaches occur when someone outside the organization “breaks into” the organizations information network to try to secure items of value – such as financial information, credit card numbers, personal codes and other information of value.  External actors obtain the information to sell to others in the “information black market” or use the information themselves to carry out fraud schemes.  For example, one of the important tools for healthcare fraud is Medicare and Medicaid identification numbers which are commonly sold in the information black market.

Internal risks for data security focus on when an organization’s employees or authorized users access the information network to secure personal information for their own benefit.  The employees or authorized third parties will steal the personal information for their own benefit to sell to other criminals or carry out their own schemes.

The third, and perhaps most overlooked risk, is human error.  Many times a security breach is the result of human error or security lapses.  An information security network may be improperly designed or implemented leaving some employees at risk for error and causing harm to the organization.  Even if network security controls are in place, employees or authorized affiliates or third parties can make mistakes.

It is obvious to point out that not all data breaches are alike.  Whatever the cause, poor planning and security steps can have a devastating impact on an organization.  The clean up process, the notifications and remedial steps can hinder an organization for years.  Civil lawsuits and possible state and federal enforcement actions are increasing and can result in fines and penalties.

imagesCADND47HEven aside from these obvious consequences, organizations can suffer serious reputational harm.  Public disclosure of data breaches is more common today.  Consumers, however, are taking greater account of these infractions because of increased sensitivity to the protection of personal information.

Information security does not mean adoption of a boilerplate policy with no change in network security protocols or systems.  As usual, information security starts with an assessment of existing security and identification of deficiencies and risks.  Once that is done, organizations need to determine what information needs to be secured and what types of rules and protections are needed to protect that information.  A holistic approach enables an organization to allocate information security resources to areas of greatest need based on a ranking of deficiencies and risks.