Monday, December 14, 2009

11 Reasons Why Privacy Helps the Bottom Line

In dire economic times such as these, companies are scouring their internal functionalities seeking ways to run "leaner and meaner." Operations and personnel that do not ostensibly contribute to profit are at risk. And nowhere are employees more vulnerable than in New York City, the nation's center for financial services, an industry particularly devastated.

Because the influence of privacy on profit is not immediately apparent, managers searching for excisable fat will doubtless be attracted to the privacy function, concluding that it makes no contribution to the bottom line. But although many view privacy solely as a legal concept, it often provides important commercial benefits. Where privacy does indeed contribute to profit, chopping away at privacy will be counterproductive, slicing off meat and bone, rather than fat. If management is not educated to this fact, the privacy function will be at unnecessary risk.

There are 11 reasons why privacy may benefit the bottom line, which should be raised with management.

1.) Reduced risk of sanctions. The most obvious result of good privacy is that it helps keep the company "out of trouble." Regulatory authorities, domestic and foreign, are increasingly enforcing privacy laws. The Federal Trade Commission, the state attorneys general, the data protection authorities of the European Union and other regulators are seeking out privacy violations at an increasingly energetic pace.

The adverse ramifications of alleged violations include counsel fees and a major diversion of management and other employee effort, even if the organization is ultimately exonerated.

In the event a violation is found, monetary sanctions may run as high as $1 million or more. And some sanctions require a costly modification of practices (even though it might not have been costly if adopted initially).

In the United States and some other nations, disclosure of a major data security breach will likely result in private litigation, including class actions, greatly increasing the level of counsel fees and potential damages. And even if the company is successful in its defense, the mere governmental, or even private, allegation of impropriety will have an adverse effect on some existing and prospective customers, as discused below in connection with customer churn and damage to brands.

 Read the 10 other reasons -> LTN

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