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Cyber Security: 3 Legal Implications and Risk Management

— March 4, 2022

Customers trust that when they share their information with the company, it will be safe.

Businesses that collect and store customer data must pay keen attention to cybersecurity. The impact of data breaches can be profound for both the customers and the organization.

The company could experience financial loss, reputational damage, and operational downtimes.

And, there are the legal implications of cyber security as well. Some affected customers may take the company to court.

But, that’s not all. There are now regulations around data management and protection. One of the most powerful regulations regarding data protection is the General Data Protection Regulation (GDPR). It falls under the European Union and came into effect in May 2018.

GDPR outlines security standards and privacy laws around data. Anyone who violates these will find themselves liable to harsh penalties. 

The law covers EU citizens in its entirety. What does this mean? You may not be a citizen nor live in any EU country. But, your business may collect data from EU citizens. Any breach of such information means the GDPR laws apply to you.

Other regulations include PCI DSS for companies that accept credit cards. Another is HIPAA, which protects sensitive patient information in the health insurance sector.

Let’s look at cybersecurity legal implications and risk management a little deeper.

Legal Implications and Risk Management in Cybersecurity

Let’s start by saying cybersecurity is no longer an option. Companies that collect sensitive client information must take steps to remain safe online. These include investing in secure cloud storage.

They must also install suitable security measures. So what are some of the legal implications and risk mitigation measures?

  1. Breach of Contract 

Businesses have contracts, which outline each party’s responsibilities. If one party does not live up to their end, the affected party can file a lawsuit. A data breach is a clear sign that the company did not protect the information.

It is essential to include a limitation of liability clause. It limits the amount of exposure the company faces. It ensures that the customers take the necessary steps to remain safe while online. The responsibility of cyber security should not lie entirely on the company. 

  1. Negligence 

A company can face litigation if it fails to take reasonable caution to protect data. Ensuring standards of care is one of the ways to avoid lawsuits. The company should have prudent or reasonable practices around cybersecurity.

These include complying with GDPR, HIPAA, and PCI DSS laws. The standards of care are specific to the business. They incorporate factors like resources, environment, data, and unique situations.

Every business must come up with its guidelines. You need to show that you are taking reasonable actions to protect data. That includes installing the right security measures like:

  • Anti-malware, anti-ransomware, and anti-virus. 
  • Extra layers of security like firewalls, multi-factor authentication, and user privileges.
  • Maintaining online privacy using residential proxies. Unlike datacenter proxies, residential proxies get the IP from the ISP. They connect to actual devices and physical locations, making them harder to detect as proxies. The residential proxies hide your IP address by providing an alternative one. It makes it hard for hackers to track your online activities, thus keeping your data safe.

Inadequate measures mean greater data compromise. The law could perceive these as deceptive or unfair practices.

Attorney and Computer Programmer are Charged in Cyberattack Scheme
Photo by Kaur Kristjan on Unsplash

The company should also communicate its security and privacy policy to clients. Failure to live up to this makes the company culpable for any breaches. 

  1. Regulatory Enforcement or Breach of Legal Obligation 

As the name suggests, regulatory enforcement means adhering to all regulatory requirements. Like in the case above, GDPR, HIPAA, and PCI DSS are some of them. Failure to adhere to the guidelines will expose the organization to litigation. 

The company must take time to understand the regulations. Under the law, ignorance has never been a defense. Avoiding litigation or exposure means taking the right steps. And, that is to ensure the practices, systems, and procedures adhere to requirements. 

Companies must engage the services of professionals to help understand the regulations. The cost is negligible if you compare it to what a lawsuit could mean to the company’s bottom line. 

Additional Risk Management Steps to Take 

Taking pre-emptive action can help mitigate cyber security or data breach lawsuits. There are ways to go about this. They include: 

  • Carry out a thorough risk assessment for areas of vulnerability around cybersecurity. It should cover the whole organization and supply chain. 
  • Have an information security management system (ISMS). It is useful for handling data security risks and threats and identifying vulnerabilities. The controls can protect the integrity, confidentiality, and availability of data. 
  • Carry out continuous independent audits around security measures and compliance. Certification from auditing companies is critical. It shows the company safeguards data with suitable security and privacy controls. They also ensure regulatory, legal, and contractual compliance. 
  • Keep up with the improvement of cybersecurity measures. Hackers are constantly evolving and innovating. The security system must keep up with the new and emerging threats. 
  • Put in place an incidence response plan. It should cover the steps the company takes to guard against litigation. It also outlines factors like notification requirements. Under the GDPR, the controller has 72 hours to notify the supervisory authority of a data breach. Lack of compliance could result in hefty fines, running into millions of pounds. 
  • Take cyber insurance to cover legal or operational costs arising from breaches. Lawsuits can be financially crippling. Reputational damage could also result in loss of business. Insurance can provide a way to keep the business open by taking care of some of the costs. 

Final Thoughts 

Customers trust that when they share their information with the company, it will be safe. In return, the company promises the customers that they will do all they can to secure the data. In an ideal situation, there should never be cases of data breaches. 

Yet, such incidences keep on rising every year. Cybercriminals keep evolving their methodologies, making them a nightmare for security specialists. Companies must take the right risk management measures.

Preemptive action can help avoid the legal implications of breaches. Remember, ensuring proper cybersecurity is no longer an option. It is a requirement for any company that handles sensitive customer information. 

And, regulatory enforcement means that there are responsibilities when handling client data. Failure to comply could cost you a lot.

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