Privacy policies are no longer optional for small- and medium-sized businesses (SMBs). These protocols are fundamental for SMBs as they aid with legal compliance when collecting and using personal data from users. There is an increasing emphasis on data privacy in the digital age, and, without an online privacy policy, companies face many risks.
In this article the professionals at our managed IT services company in Edmonton and Western Canada will cover the serious risks of not having a privacy policy as a small- or medium-sized business. We will also explore, in great detail, how privacy policies can mitigate those specific risks.
Understanding Privacy Policies
When understanding privacy policies, it is best to start with the basics. These policies are legal documents that clarify how a company will collect, store, utilize, and protect a user’s personal information. They’re particularly important and legally required for businesses that collect data, including contact information and email addresses, for analytics, payment processing, and more.
Privacy policies play a significant role in building trust with clients before data collection takes place. They reinforce transparency between a business and a client, ensuring that the use of data is not hidden or shared (such as with third parties) without the knowledge of the customer.
Legal Implications of Lacking a Privacy Policy
Now, there are several legal implications of lacking a privacy policy; many laws and regulations stipulate that businesses need to have these legal documents in place. Some of the laws and regulations that businesses need to comply with in the context of privacy policies include:
The Consumer Privacy Protection Act (CPPA): This legislation aims to ensure consumer personal information and privacy rights are protected. It is a regulation that emphasizes the importance of businesses getting clear consent from consumers before collecting their data.
The General Data Protection Regulation (GDPR): This legislation may be a European Union law, but it applies to Canadian organizations that manage the personal data of EU citizens. It states that organizations need to have a transparent privacy policy in place that shares exactly how a user’s personal data will be collected and used.
The importance of observing these regulations is seen in the consequences of non-compliance. Failure to comply with the CPPA can lead to fines of up to 5% of revenue or $25 million CAD, while failing to comply with the GDPR can lead to fines of up to 3% of revenue or $10 million CAD.
Impact on Customer Trust
Additional risks, such as the erosion of consumer trust, can come from lacking a privacy policy as an SMB in Canada. If you don’t have a privacy policy, your brand’s reputation can be called into question, and there is a strong correlation between your customer’s loyalty and data protection.
According to the Canadian government website, 57% of Canadians read privacy policies before they use a business’s service, showing that these legal documents are important for customers who use your brand. So, since customers value privacy policies, lacking a set of clear data practices can lead to competitive disadvantages for your small- or medium-sized business.
Security Risks and Data Breaches
Lacking a data policy or having an unclear one can also potentially lead to vulnerabilities and data breaches. Unclear policies may mean that the correct data protection steps aren’t followed. Businesses may fail to encrypt data, lack a coordinated response to cyber threats, fail to contain data breaches, or over-collect customer data.
One example of a security incident is the case of Equifax in 2017. In this incident, users’ data (19,000 Canadian records) were stolen by hackers. This is a clear example of a breach of privacy in which Equifax lacked the right data handling approaches, and with more robust privacy policy and security measures, the company may have been able to minimize the breach.
Financial and Operational Risks
We have mentioned the fines that businesses may have to pay for non-compliance with privacy policy laws. Yet there are additional costs you will need to be aware of. Some of those additional costs include:
Higher insurance premiums: Since insurers may consider non-compliance a sign of ineffective data management approaches, they may consider such companies a greater risk to insure. They may increase the premiums for cybersecurity insurance because of the greater chances of data breaches or regulatory fines.
Increased legal fees: In scenarios where a business faces regulatory inspections and fails to protect client or employee data, the company may have to pay legal fees to cover its defence. It may also face increased legal fees in lawsuits that could result from data misuse.
Tips for SMBs to Mitigate Risks
It’s well worth taking specific actions to mitigate risks that can occur if you lack a privacy policy. Your first step should be to learn and understand the specific laws that apply to your company.
You can then work alongside a legal expert to draft and create a clear privacy policy that does not contain complex legal jargon. This step ensures customers understand precisely how their data is gathered and used. However, your work doesn’t end with the first privacy policy you create. It’s important to periodically update the privacy policy when your company’s regulations or operations change.
One of the last important actions to take is to ensure your customers and employees can access the privacy policy. You need to share it with all users and ensure they understand its contents, which you can do by publishing it on the company website, including a link to it in the web page footer, publishing it in an employee handbook, or utilizing consent forms.
Advantages of Having a Privacy Policy
Having a privacy policy has several advantages. The policy can help you build customer trust and loyalty since customers are likely to notice your company’s transparency when it collects personal information from them. As a result, they may feel that they have more control over the data collection and trust your company more.
Additionally, a privacy policy can enhance your business operations and brand professionalism. It minimizes the chances of data breaches and reduces the likelihood of any downtime that such data breaches create; this, in turn, supports business continuity. But it further boosts your brand professionalism by showing that your company is accountable for the protection of client data.
A privacy policy also keeps your company protected from financial or legal risks when you are collecting information. It helps you obtain meaningful consent from clients and, therefore, reduces potential liability related to privacy law violations.
Minimize the Risks of Not Having a Privacy Policy with Tech Masters
In the digital age, a privacy policy is mandatory. If you don’t yet have a privacy policy, you face legal, financial, and reputational risks, which can lead to a loss of revenue, lack of client trust, and company downtime. But with proactive steps, you can keep your business protected.
We advise establishing a privacy policy as soon as possible if you do not have one. Then, to adhere to privacy laws and minimize data breaches, experts such as our professionals at Tech Masters can help.
Offering methods that minimize data breaches and disaster recovery knowledge, our managed IT service experts are ready to help you. Contact us for your free consultation. Protect your client and employee data and minimize the risks of not implementing a privacy policy with Tech Masters.
