Data privacy risks are no longer a back-office issue; they are a leading concern for organizations aiming to protect sensitive information and maintain compliance. With strict regulations like GDPR, HIPAA, and the updated GLBA Safeguards Rule, non-compliance comes with costly consequences.
Which Regulations Cover Data Privacy Risks?
An important compliance shift for organizations handling U.S. consumers' financial data occurred under the Gramm-Leach-Bliley Act (GLBA), particularly its Safeguards Rule enacted in December 2022. The changes mandated essential practices like data encryption, risk-based data management, and secure lifecycle handling.
- Releasing periodic reports to boards of directors and governing bodies.
- Instituting secure software development practices.
- Identifying and managing data based on risk.
- Implementing and reviewing data access controls.
- Encrypting data both in transit and at rest.
- Establishing secure procedures for disposing data.
But GLBA is just the beginning. Global regulations like European Union (EU)’s General Data Protection Regulation (GDPR) and Digital Operations Resilience Act (DORA regulation), Brazil’s General Data Protection Law (LGPD), and the United States’ Health Insurance Portability and Accountability Act (HIPAA). These laws mandate that organizations within their jurisdiction employ effective data privacy practices to protect personally identifiable information (PII), or what the Safeguards Rule calls nonpublic personal information (NPI).
4 Biggest Data Privacy Risks of Non-Compliance
The stakes for data privacy compliance are high, as non-compliance can result in devastating consequences. Organizations can expect to face four major risks for non-compliance with data privacy laws: inadequate cybersecurity, expensive fines, high individual penalties, and reputational damage.
The Compliance (Cyber)Security Blanket
Non-compliance often reflects inadequate cybersecurity, putting sensitive data at risk. Ensuring compliance means implementing robust data controls, such as secure encryption, key management, and data access monitoring. After all, a major component of data privacy on your compliance is ensuring that consumers’ data is safe from the hands of bad actors who could use the data nefariously.
For instance, the GLBA requires financial institutions to, “protect against any reasonably anticipated threats or hazards” as well as “unauthorized access to, or use of,” customers’ data. The Federal Financial Institutions Examination Council, which audits financial institutions, dictates that these institutions should use strong data encryption and key management practices. These practices, of course, improve compliance and security alike. So, even if your organization doesn’t get slapped with a data privacy lawsuit, non-compliance with data privacy regulations reflects poor data controls, a significant liability for your organization.
Risks from Non-Compliance
- Increased susceptibility to cyber breaches.
- A domino effect of poor data security that adversely impacts customers.
Actionable Measures
- Implement end-to-end encryption of data in transit and at rest.
- Regularly assess your data access controls for potential vulnerabilities.
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The Financial Burden of Non-Compliance Fines
Non-compliance with data privacy regulations can result in severe monetary penalties. Fines like the GDPR (up to €20 million or 4% of annual global revenue) and the GLBA ($100,000 per violation) are designed to incentivize strong data practices. LGPD infractions carry a financial penalty of up to 2 percent of the sanctioned organization’s gross revenue, with a maximum fine of 50 million Brazilian Reals (about $9.7 million).
Key Example
Amazon Europe Core S.a.r.l. incurred the largest-ever GDPR fine when the Luxembourg National Commission for Data Protection levied a whopping $746 million fine on the technology giant for infringements related to Amazon’s advertising targeting system. Even moderate GDPR fines can exceed $10 million.
Individual Penalties and Accountability for Leadership
What’s more concerning than organizational penalties? Liability spread to individual employees and board members.
For instance, one individual who violated the U.K.’s Data Protection Act (DPA) in 2018 by stealing and selling customer records to rogue organizations incurred a 6-month prison sentence. Individual penalties under GLBA, meanwhile, are much higher—each violation of the Act can result in fines of up to $10,000 for directors and officers, license revocations, and up to five years of imprisonment.
The new Safeguards Rule requires covered entities to report annually to their boards of directors, effectively putting the protection of PII/NPI directly onto board agendas. So, while prison sentences for GLBA non-compliance are rare, accountable organizations’ board members in particular should be concerned with upholding the interests of their stakeholders via compliance.
Critical Takeaway
The updated Safeguards Rule requires detailed reporting to boards, putting the onus of data compliance directly in their lap. Non-compliance is no longer just an organizational downfall; it’s personal.
Reputational Damage is the Silent Risk
Even if fines and security risks don’t manifest immediately, the reputational harm resulting from non-compliance can be equally catastrophic. Word travels far and fast when organizations break the law— and as Warren Buffett famously said, “it takes 20 years to build a reputation and five minutes to ruin it.” This tarnishes public trust and deters future collaboration opportunities.
Effects of Reputational Damage Include:
- Lost customer confidence.
- Partnerships and alliances may dissolve.
- Diminished market share.
Alliance With Compliance
The updated GLBA Safeguards Rule confirms two truths for accountable organizations. First, data privacy is a constantly evolving practice. And second, organizations cannot rest on their laurels when bringing their practices into compliance with these laws due to their evolving nature.
Carrying out the necessary due diligence to ensure compliance with updated regulations is far less severe than risking penalties for noncompliance.
Perforce Delphix data compliance solutions help many banks — and other covered organizations — ensure compliance with a variety of data privacy-related regulations, including the GLBA Safeguards Rule, while also bolstering data security. Get the GLBA datasheet to learn more.
How Delphix Customers Avoid Data Privacy Risks
GDPR: Sky Italia
Sky Italia was under deadline to meet GDPR compliance requirements. With Delphix, they were able to achieve GDPR compliance in 5 months, so they could avoid data privacy risks.
HIPAA: Molina Healthcare
Molina Healthcare had strict HIPAA and security requirements, which put strain on the IT team. By using Delphix, they were able to avoid data privacy risks and ease the strain on the IT team.
Strengthen Compliance With Delphix
Meeting compliance requirements doesn't have to slow down your operations. Delphix delivers data masking capabilities that enable businesses to address data privacy risks and eliminate barriers to fast innovation. Delphix automatically discovers sensitive data values, including names, email addresses, and payment information. Then, it transforms sensitive values into realistic yet fictitious ones while retaining referential integrity.
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Comply with Privacy Laws and Protect Against Breach
With Delphix, teams can centrally define masking policies and deploy them across the enterprise for compliance with key privacy regulations, such as GLBA, GDPR, CCPA, HIPAA, and PCI DSS. And because masking transforms sensitive information, Delphix neutralizes the risk of breach in non-production environments that store vast amounts of sensitive data.
Integrate Data Masking and Data Delivery
The Delphix DevOps Data Platform combines data masking with virtualization to deliver compliant data to downstream environments for development, testing, analytics, and AI. Masked, virtual data copies function like physical copies but take up a fraction of the storage space and can be automatically delivered in just minutes.
Strengthen Your Compliance Against Data Privacy Risks
Discover how Delphix can help safeguard sensitive information and ensure automated compliance with privacy regulations. Request a no-pressure compliance demo today and see why leading businesses trust Delphix to mitigate data privacy risks and accelerate innovation.