What Are the Risks of Not Following GDPR?

As today's world is becoming more digital and as every bit of information has importance in business, personal data protection has become the need of the hour. The General Data Protection Regulation, introduced by the European Union in May 2018, aimed to secure the personal information of individuals so that it is processed responsibly by companies.

Failure to comply with the GDPR has serious consequences for all types of organizations. Fines, reputational damage, and so on are associated with severe risks to the success and survivability of a business. This article examines what GDPR involves, the implications of failing to follow its regulations, and how an organization can maintain compliance.

What is GDPR?

General Data Protection Regulation, or GDPR for short, is a data protection law applicable to all organizations handling personal data of individuals residing in the European Union and the European Economic Area. It also pertains to businesses from outside the EU offering goods or services to residents of the EU.

Key Principles of GDPR

Lawfulness, Fairness, and Transparency: Data must be processed legally and in a transparent manner.

Purpose Limitation: Data must be collected for specific, legitimate purposes alone.

Data Minimization: Only that amount of data shall be collected that is required.

Accuracy: Data shall be accurate and kept up to date.

Storage Limitation: Data shall not be retained longer than necessary.

Integrity and Confidentiality: Data shall be processed in a secure manner.

Those that do not comply with the principles are in danger of financial and operational penalties. Additionally, such organizations stand to lose customer goodwill.

Risks of Non-Compliance to GDPR

The risk for non-compliance with GDPR relates to financial and customer-trusting areas. They include:

1. Significant Financial Fines

One of the most well-recognised risks about GDPR is significant fines to be imposed on it. The GDPR has outlined two tiers of fines:

Tier 1: Up to €10 million, or 2% of the company's global annual turnover-whichever is higher-for infringements of less grave provisions.

Tier 2: Up to €20 million, or 4% of the company's global annual turnover-whichever is higher-for more serious infringements.

Fine Example:

Google was fined €50 million by the French data protection authority due to a lack of transparency in how it processed personal data. A proposed fine against British Airways of £183 million was issued following a data breach in which 500,000 customers had their personal information exposed.

2. Reputation Damage

Non-compliance with GDPR severely tarnishes a company's reputation. Living in an age where consumers are more sensitive about their data rights, a failure in safeguarding personal information leads to the following:

Loss of customer trust.

Negative media coverage.

Brand equity damage makes it difficult to attract and retain customers.

Example: Marriott's data breach, which exposed the data of more than 500 million guests, led to a fine of £18.4 million and damaged its public image.

3. Legal Consequences and Lawsuits

Organizations that fail to comply with GDPR can be taken to court by affected individuals. GDPR equips individuals with the following privileges:

Lodge complaints with their local data protection authority.

Claim damages for data breach or misuse.

This also exposes organizations to the risk of class-action lawsuits, resulting in greater financial and operational burdens.

4. Business Operations Interruption

A data breach related to GDPR can amount to investigations by the data protection authorities, which causes significant disruption to everyday operations. This includes:

Time-consuming audits and compliance checks.

Suspension of activities that involve processing data, which may disrupt business operations.

Example: If companies are found in breach of compliance, they may be made to shut down or suspend certain business functions until the requisite remediation takes place, which will contribute to lost revenue.

5. Loss of Competitive Advantage

Compliance with GDPR reflects a commitment to data privacy that is seen as a competitive advantage in the data-driven contemporary world. Non-compliance can result in:

Being considered an untrustworthy or unscrupulous organization.

Losing customers who switch to competitors that demonstrate respect for customer information.

Critical Organizational Exposures or Non-Compliance

1. Absence of Consent

Asking for crystal-clear and direct consent for collecting and processing data is one of the key leading principles in GDPR. There is non-compliance when:

Organizations make use of ambiguous, non-specific, or pre-filled consent boxes.

Data is collected without proper disclosure of how it will be used.

2. Insufficient Security of Data

Under the GDPR, an organization is expected to offer security for personal data. Failure to this includes:

Data is susceptible to cyberattacks and data breaches.

Exposure of sensitive information may include financial information or medical records.

3. Failure to Report Data Breach

Breaches of data must be notified to the relevant authorities within a period of 72 hours upon its detection. Failure to do so, or delays in the notification process, multiplies the fines by layers and makes an awful impression on the public.

4. Inadequate Data Governance

Non-compliance is mostly related to poor data governance in the following ways:

Outdated data is not deleted.

Access to the data/information is not given to concerned individuals after requesting it.

Minimizing the Odds of GDPR Non-Compliance

The organizations, therefore, have to be considerably proactive in terms of data protection to minimize risks of non-compliance. Strategies include:

1. GDPR Audit

A proper audit would help in the identification of gaps that may be hindering complete compliance. This includes:

Mapping data flows

Reviewing consent mechanisms

Assessing the security protocols on information

2. Data Protection Officer

The GDPR requires an appointment of a DPO for an organization dealing in large-scale processing. A DPO ensures compliance by:

Watching data practices.

Acting as a contact with regulatory authorities.

3. Training Employees

The employees are very vital in implementing the rules of the GDPR. Organizations should:

Educate the staff about the main principle of the GDPR and their roles.

Training on safe data handling practices.

4. Enhance Data Security

Install effective measures for the security of personal data, including:

Encryption of sensitive information.

Periodic vulnerability testing.

Authentication mechanisms that are secure.

5. Put in Place Clear Privacy Policies

Transparency is the name of the game in GDPR compliance. The organization is supposed to:

Establish legible, comprehensible privacy policies.

Policies should be readily available to the users.

6. Monitor and Update Practices

The GDPR is ongoing compliance. It is, therefore, very important that regular review and updates are made in:

Data protection practices

Third-party contracts to ensure that vendors are meeting the GDPR requirements

Real-Life Examples of GDPR Non-Compliance

British Airways
Fine: £20 million.
Cause: A data breach exposing personal and financial details of 400,000 customers caused by poor security measures.

H&M
Fine: €35.3 million.
Cause: Illegally monitoring employee activities and storing private data.

Clearview AI
Fine: £17 million (proposed).
Cause: Processing biometric data without proper user consent.

Conclusion

Organizations operating in today's data-driven world don't have the option to ignore GDPR. In fact, the risks—financial penalties, reputational damage, legal consequences, and operational disruption—very much outweigh the cost of compliance.

By embracing proactive data protection and embedding the principles of GDPR into their operations, businesses can avoid penalties and build trust with customers to have a competitive advantage in the marketplace.

Are you GDPR compliant? If not, it's time to act.