Why Invest in Privacy Risk Management?
For companies and public organizations running on limited budgets, it can be difficult to see the benefits of investing in privacy. In our experience, executives and boards do not usually ask how mitigating privacy risks can help them; they ask what similar organizations are doing, and what the potential penalties of privacy violations might be. When these are the criteria for decision making, there is very little incentive to do more than the minimum standard. Once basic privacy policies and procedures are in place, it is easy for organizations to slip into complacency.
Yet privacy, information technology, and information protection experts are emphasizing that managing privacy risk is more important than ever. Organizations hold more digitized information than ever before, and the increased use of portable devices, shared systems, and online portals creates new opportunities for information theft and hacking. Recent business and world news illustrate how data risks have materialized in the form of major breaches of citizens’ personal data. Affected organizations, particularly in the public sector, are under pressure to make changes.
Contrary to the typical narrative in management, we would suggest understanding risk management as an investment rather than an overhead cost. We suggest three ways of understanding privacy risk management beyond the usual focus on the harms of data breaches.
- Risk management is business process improvement. Many privacy or security risks can be solved through business process improvements. In our experience, many of the recommendations in risk assessments have to do with processes. For example, a common issue with online portals is that the handoff between registration and billing for account holders is unidirectional: there is no process to confirm that registered users have paid their fees, or to suspend their accounts when their registration has expired. Filling this gap addresses the privacy issue of unauthorized portal access, and also generates revenue.
- Risk management is automation. Similarly, if privacy or security risks are a result of manual processes that can be automated, risk mitigation can be sold as increased efficiency. For example, if two departments host their own data sets pertaining to user profiles, investing in an automated validation tool will eliminate redundant efforts and reduce errors requiring staff attention.
- Risk management is a selling point for funding or investment business cases. Risk and compliance managers can show how risk mitigation is a differentiating factor in the eyes of external funders, clients, and business partners. Business cases for external funding or investment and responses to requests for proposals can cite risk management as a differentiating factor with regard to external competition.
These three principles can work for private or public sector, major or small organizations. Risk management provides both product and service companies with a competitive advantage by differentiating them from others. Government organizations facing funding cuts can leverage process improvements to improve employee utilization and limit outsourcing.
Privacy is best understood as an investment factor that improves bottom lines and provides a competitive advantage. Such an approach changes the question from, “What is the minimum I have to pay to manage this risk?” to “What is my return on investment?”