The Cost of Data Privacy Negligence (And How to Avoid It)

Neglecting data privacy in your business is like forgetting to lock your house doors and then leaving the country to enjoy your holidays. Sooner or later, someone will take advantage and break in.

Similarly, if your business collects, stores, and analyzes customer data on a daily basis but neglects data privacy and security, you’re immediately exposed to several risks and large legal penalties. And in the process, you’ll experience financial loss and lose the trust of your customers.

“When you work with digital analytics, you deal with your users’ trust. Their data is valuable, and your top priority as a company should be to protect it,” - Onur Alp Soner, CEO at Countly.

We have previously talked about the importance of data privacy in analytics. Let’s now look at everything that could go wrong if you neglect data privacy.

The Cost of Neglecting Data Privacy and Security

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Curious to know what may happen if you neglect data privacy and breach data protection regulations? From legal and financial repercussions to damaging your brand image, we’ve included them all in the following list.

1. Facing Legal and Financial Repercussions

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Legislation like the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA) have set the bar high for data protection standards worldwide. These laws aren't just suggestions; they're requirements.

If you fail to comply with all required regulations, you will be fined and face major problems that come with it, from financial loss to losing the trust of your customers and damaging your brand for good. Failure to comply can be costly. Fines for breaching data protection regulations are not trivial. Under the GDPR, for example, businesses can be fined up to €20 million or 4% of their annual global turnover, whichever is higher.

And it's not just theoretical. In 2020, a well-known airline was fined £20 million for a data breach affecting millions of customers.

But, as mentioned above, it's not only about the fines. The associated costs of a breach (legal fees, investigation costs, and compensatory measures to affected parties) can make the financial burden even worse.

2. Losing Customer Trust

Once your customers’ trust is broken, it is incredibly hard to regain. A data breach or privacy slip-up immediately tells customers that you’re not being careful with their personal info and are not protecting their data privacy and security. This can lead to a direct loss of business as customers look elsewhere for a company they can fully trust with their sensitive data.

In other words, this can translate into:

• Customer Churn
  Companies experiencing a data breach see an average increase in customer churn rate of 4%. This means a loss of current revenue and future income that these customers would have brought.

• Brand Damage
  Rebuilding a brand after a breach can take years. Surveys indicate that 60% of consumers would likely avoid doing business with a company that had experienced a data breach affecting personal information. This immediate fallout can lead to significant drops in revenue.Check out more of these stats on IBM's Cost of a Data Breach Report 2023 and SecurityHQ's summary and analysis of the IBM Report.

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3. Significant Loss in Resources

A data breach doesn’t just mean lost data; it means lost time and resources. Fixing the breach, managing the fallout, and trying to rebuild your reputation takes effort away from growing your business. This can leave you scrambling and set back your business operations significantly.Which can also mean:

• Unexpected Costs
  The aftermath of a data breach includes increased security measures, legal fees, and compensations, leading to higher operational costs. On average, the cost of a data breach globally stands at US $4.88 million as of 2024, with much higher figures in sectors like healthcare and finance.

• Stock Market Impact
  Companies that suffer a breach often see an immediate impact on their stock price, with an average decline of 5% on the day a breach is announced. The long-term impact can vary, but it often takes months, if not years, for stocks to recover to pre-breach levels.

In this context, a good example we stumbled upon is that of Yahoo, which experienced a data breach that wasn't discovered until the company was in the process of being acquired by Verizon.

The breach significantly reduced Yahoo's value, resulting in the acquisition price being cut by $350 million. The breach had widespread ramifications, affecting over a billion user accounts and highlighting the long-term financial impact and operational downtime that can result from a data breach.

The incident underscored the importance of swift detection and response to breaches, as the longer a breach goes undetected, the more severe the financial and operational repercussions can be.

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4. Intellectual Property Threats

Your business’s secrets, strategies, and innovations are on the line. Poor data management can lead to leaks and theft of your intellectual property.

This affects your competitive edge, leading to significant financial loss.

To break it down, here’s an in-depth look at how this lack of data privacy and security unfolds:

Unintentional Leakage

Often, IP leakage is not the result of a deliberate act but occurs due to negligence or lack of awareness among employees. Poor data management practices, such as insufficient access controls or lack of encryption, can allow sensitive information to inadvertently leak. For example, an employee might mistakenly send a confidential document to the wrong person, leave printed materials in public spaces, or store sensitive information on unsecured devices.

Malicious Theft

On the other hand, there are instances where individuals with access to sensitive data may exploit weak data management for personal gain or malicious intent. This could be an insider threat, such as an employee stealing trade secrets or external hackers breaching the company’s defences to extract valuable data. Cyber attackers often target companies with weak security measures, using sophisticated techniques to infiltrate their networks and steal IP.

Weak Access Controls

Poor data management often results from inadequate access controls that fail to restrict data access to authorized personnel only. Without strong authentication measures and strict access permissions, sensitive data can easily fall into the wrong hands, leading to IP theft or leakage.

Lack of Data Encryption

Failing to encrypt sensitive data is a common data management flaw. Encryption converts information into a code to prevent unauthorized access, making it an essential tool for protecting IP. Data can be easily intercepted during transmission or stolen from compromised systems without encryption.

Inadequate Data Tracking and Auditing

Proper data management includes tracking who accesses and modifies data. Without comprehensive logging and auditing, unauthorized access or alterations to sensitive IP might go unnoticed until it’s too late.

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How to Create a Data Privacy Plan: A Step-by-Step Plan

Here are six steps you can take to create a data privacy and security plan to ensure your business will not face any of the abovementioned risks.

Step 1: Evaluate Your Current Data Privacy and Security

• First things first, you’ll need to audit the entire process of how you collect data, how you store it, and how you process that data.
• If done correctly, the audit should help you identify all possible risks within your data infrastructure and make it easy to pinpoint your weak points.
• Determine which data protection regulations apply to your business. For instance, you might not need to comply with COPPA but may need to comply with other regulations. This also depends on your location and who uses your services.

Step 2: Establish a Clear Data Privacy Policy

• If you already have some data privacy guidelines in place, it’s important to update them or develop some clear guidelines on how you are supposed to handle sensitive information.
• Define specific roles and responsibilities for data privacy governance.
• Establish protocols for responding to data breaches and security incidents.

Step 3: Strengthen Data Security Measures

• From firewalls to encryption and multi-factor authentication, you will have to have a plan in place with all the new data security measures you will have to implement to strengthen your data security measures.
• It’s important that you limit data access and allow only authorized personnel to access specific data  
• To minimize risks, we recommend conducting regular security updates

Step 4: Use Top-Notch Data Privacy Tools

• Use privacy-focused analytics tools to monitor data access and detect any anomalies
• If possible, implement automated compliance solutions to stay on top of all regulations you need to comply with so you never have to face a lawsuit
• Utilize first-party security platforms that can offer you real-time alerts for any possible data breaches (more on this later)

Step 5: Educate and Train Employees

• It’s important that you foster an awareness culture so all employees are equipped with the knowledge to recognize phishing and social engineering threats
• Conduct several data privacy training for employees if you need to

Step 6: Monitor, Review, and Improve Continuously

• If you’ve followed all the five steps above, just know that it doesn’t end there. You will have to keep auditing, monitoring, and reviewing continuously.
• To make it more efficient, we recommend using a privacy-led digital analytics tool to assess data security effectiveness.

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Choosing a Data-Privacy Compliant Analytics Tool Can Go a Long Way

As a digital analytics tool, Countly is built around data privacy simply because, for the past 10 years, we’ve understood the following:

• An inadequate or inappropriate analytics tool can further emphasize the risk of data breaches.
• Effective data management is not only about securing data but also about how it’s analyzed and shared within the organization.
• Poorly chosen analytics tools may lack sufficient security measures, leading to vulnerabilities where sensitive information can be exposed.

Additionally, using analytics tools that do not comply with industry standards or regulatory requirements can lead to breaches. If these tools do not offer end-to-end encryption, robust access controls, or data masking features, they can become weak points in the data security framework.

Tools that do not provide clear audit trails can prevent businesses from tracking how data is being accessed and used, making it challenging to identify and respond to breaches promptly.Choosing the right analytics tools is crucial. These tools should not only provide the necessary analytical capabilities but also align with the company's data security and privacy standards.

‍‍“Your data should be yours. You shouldn’t have to depend on external vendors to process or access information that is core to your business. Self-hosted solutions ensure your data stays in your hands, where it belongs,” - Onur Alp Soner, CEO at Countly.

‍Companies should opt for tools that are recognized for their security features, offer customizable access levels, and are regularly updated to combat new security threats. Implementing strict usage policies and training employees on the secure use of analytics tools are additional steps that can help protect data from unintended exposure.

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Turning the Tide: Data Privacy as a Benefit

Proper data privacy can be a blessing for your business. It builds trust, solidifies your reputation, keeps you on the right side of the law, and ensures that your operations run smoothly without the threat of data breaches looming over. It can also serve as a key differentiator in the competitive market, showing potential customers that you are a safe and trustworthy choice.

When you treat data privacy as an integral part of your business, you avoid risks, create value, build trust, and set your business up for long-term success.

Curious to learn more about Countly? Request a free demo today.

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