Employment Law Reporter - May 2016

by Ervin Cohen & Jessup LLP

The Age of The Data Breach : The Top 5 Best Practices

What will you do? We live in The Information Age. Increasingly, business success depends on the ability to obtain, maintain and intelligently utilize increasing amounts of digital information. Unfortunately, it is also The Age of the Data Breach. The total average cost of data breaches paid by organizations was $6.5 million.[1] Losses result from not only the loss of important data, but from required responses to government regulators, as well as class actions and other litigation. Ubiquitous mobile devices, proliferating privacy laws and waves of persistent hacking attempts by sophisticated cybercriminals threaten your success daily. To safeguard the private information of your business, your clients and your employees, you must be actively engaged in cyber defense and information governance. You must: identify & assess (risks), protect (through appropriate safeguards), detect (the occurrence of a privacy or security event), respond(rapidly and effectively) and recover (your critical business services and reputation).  But…how?

What should you do? Several states and federal laws require businesses to adopt a formal, Information Governance Program. Those that do not nonetheless insist on “reasonable security,” which requires employing physical, technical and administrative safeguards – which are the core of any Information Governance Program. Studies show that if consumers believe that your business takes seriously the privacy and security of their personal information, they are more likely to trust your business with their information over a competitor. Thus, even if not required, an “InfoGov” program can provide a competitive advantage.

Our “Top 5” Best Practices incorporate these overlapping layers of protection in the Age of the Data Breach:

1.    Designate a “Privacy Official” and/or Information Security Officer. Put someone in charge. Give them responsibility and authority to get things done, and empower them to speak truth to management. Buy-in from the c-suite and the board of directors is critical to the success of any risk management program. To build and nurture a culture of privacy and security, a responsible party must always be available for questions, complaints and notifications, and a central repository for institutional knowledge regarding privacy and security incidents should be established. By employing “privacy by design” and “security in depth”, you embed information governance in every one of your business processes. Culture is critical.

2.    Assessment & Review. How can you protect the crown jewels of your business if you don’t know what and where they are? Truly, information is power. A business’ data is often its most valuable possession. Over 50% of global business assets are intangible assets – information assets – and are thus vulnerable. You must know what you have, where you keep it, how and why you store or transfer it (including to third parties), how you secure it, who needs access to it, when you may no longer keep it, and how you must dispose of it. You cannot protect your data if you do not understand it.

3.    Written Policies, Standards & Procedures. Every business needs a “Privacy and Security Package” that includes: an Acceptable Use Policy, an Incident Response Plan, a Disaster Recovery (or Business Continuity) Plan, a Vendor Privacy Agreement, and appropriate Privacy Notices. An Incident Response Plan is paramount: a data breach incident is like a fire or other disaster. If you have not rehearsed what to do, you will move slowly and make errors, when it is most critical for your business to react quickly and effectively. Among its other purposes, the Privacy and Security Package neatly outlines the roles and responsibilities of your management, employees and third parties before, during and after a breach.

4.    Employee Training & Education. Perhaps nothing is more important to good Information Governance Program, or is a better value, than privacy and security training of all employees and management. Ultimately, people are any business’ greatest strength (if you have a good program) or greatest weakness (if you do not). Training enables employees to keep up with the cybercriminals, and avoid negligent exposure of sensitive data. It is an integral component of any system of physical, technical and administrative safeguards.

5.    Cyber Insurance. Cyber insurance allows a business to shift the risk of a data breach. But carriers want to know that your “risk profile” is appropriate and reasonable. A third-party assessment can provide that comfort level. Coverage is available for businesses of all sizes; however, the terms of coverage are not yet standardized, exclusions are many and varied (and often exclude all expected benefit of the policy), and a “crime endorsement” or “rider” to a general liability policy may sometimes accomplish related, but different, objectives. A competent broker is a must.

For more information on how data breaches impact California businesses, visit the California Attorney General’s February 2016 Report: California Data Breach Report (available at oag.ca.gov/breachreport2016), which includes the twenty standards that the California Attorney General states every California business must follow in order to meet a minimum level of information security.

[1] 2015 Cost of Data Breach Study: United States, by Ponemon Institute LLC


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Ervin Cohen & Jessup LLP | Attorney Advertising

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