Protect Against Data Breaches

All companies, big and small, are at risk for data breaches. Most companies have legal obligations with respect to the integrity and confidentiality of certain information in its possession.  Information privacy and security is essential to  protect your business, safeguard your customers’ privacy, and secure your company’s vital information.

 

Recently, hackers gained access to Yahoo’s databases, exposing over 450,000 usernames and passwords to Yahoo, Gmail, AOL, Hotmail, Comcast, MSN, SBC Global, Verizon, BellSouth and Live.com accounts. This breach comes on the heels of a breach of over 6.5 million LinkedIn user passwords. With these embarrassing breaches, and the widespread revelation of their inadequate information security practices, Yahoo and LinkedIn were added to the rapidly growing list of large companies who have suffered massive data breaches in recent years.

While breaches at large companies like Yahoo and LinkedIn make the headlines, small businesses are equally at risk, and must take appropriate measures to keep their information safe. Aaron Messing, an information privacy attorney with OlenderFeldman LLP, notes that most businesses networks are accessible from any computer in the world and, therefore, potentially vulnerable to threats from individuals who do not require physical access to it.A recent report by Verizon found that nearly three-quarters of breaches in the last year involved small businesses. In fact, small business owners may be the most vulnerable to data breaches, as they are able to devote the least amount of resources to information security and privacy measures. Studies have found that the average cost of small business breaches is $194 per record breached, a figure that includes various expenses such as detecting and reporting the breach, notifying and assisting affected customers, and reimbursing customers for actual losses. Notably, these expenses did not include the cost of potential lawsuits, public embarrassment, and loss of customer goodwill, which are common consequences of weak information security and poorly managed data breaches. For a large business, a data breach might be painful. For a small business, it can be a death sentence.

LinkedIn presents a good example of these additional costs. It is currently facing a $5 million class action lawsuit related to the data breach. The lawsuit does not allege any specific breaches of cybersecurity laws, but instead alleges that LinkedIn violated its own stated privacy policy. Businesses of all sizes should be very careful about the representations they make on their websites, as what is written in a website terms of use or privacy policy could have serious legal implications.

Proactive security and privacy planning is always better than reactive measures. “While there is no sure-fire way to completely avoid the risk of data breaches,” says Aaron Messing, an information privacy lawyer with OlenderFeldman LLP, “steps can be taken, both before and after a breach, to minimize risk and expense.” To preserve confidential communications and to obtain advice on possible legal issues related to your company, consulting with privacy attorneys about your specific requirements is recommended. OlenderFeldman recommends the following general principles as a first step towards securing your business.

First, consider drafting a detailed information security policy and a privacy policy tailored to your company’s specific needs and threats which will to guide the implementation of appropriate security measures. A privacy policy is complementary to the information security policy, and sets the standards for collection, processing, storing, use and disclosure of confidential or personal information about individuals or entities, as well as prevention of unauthorized access, use or disclosure. Your policies should plan for proactive crisis management in the event of a security incident, which will enable coordinated execution of remedial actions. Most companies have legal obligations with respect to the integrity and confidentiality of certain information in its possession. Your company should have and enforce policies that reflect the philosophy and strategy of its management regarding information security.

Second, although external breaches from hackers gain the most publicity, the vast majority of data breaches are internal. Accordingly, physical security is one of the most important concerns for small businesses.  Informal or non-existent business attitudes and practices with regards to security often create temptations and a relatively safe environment for an opportunist within to gain improper or unauthorized access to your company’s sensitive information. Mitigating this risk requires limiting access to company resources on a need to know/access basis and restricting access to those who do not need the access. Theft or damage of the system hardware or paper files presents a great risk of business interruption and loss of confidential or personal information. Similarly, unauthorized access, use, or disclosure, whether intentional or unintentional, puts individuals at risk for identity theft, which may cause monetary liability and reputational damage to your company.

Third, be vigilant about protecting your information. Even if your company develops a secure network, failure to properly monitor logs and processes or weak auditing allows new vulnerabilities and unauthorized use to evolve and proliferate. As a result, your company may not realize that a serious loss had occurred or was ongoing.  Develop a mobile device policy to minimize the security and privacy risks to your company. Ensure that your technology resources (such as photocopy machines, scanners, printers, laptops and smartphones) are securely erased before it is otherwise recycled or disposed. Most business owners are not aware that technology resources generally store and retain copies of documents that have been printed, scanned, faxed, and emailed on their internal hard drives. For example, when a document is photocopied, the copier’s hard drive often keeps an image of that document. Thus, anyone with possession of that photocopier (i.e., when it is sold or returned) can obtain copies of all documents that were copied or scanned on the machine. This compilation of documents and potentially sensitive information poses serious threats of identity theft.

Finally, in the event of a breach, consult a privacy lawyer to determine your obligations. After a breach has been discovered, there should be a forensic investigation to determine what information was accessed and whether that information is still accessible to unauthorized users.  Your business may be legally obligated to notify customers or the authorities of the breach. Currently, there are no federal laws regulating notification, but 46 states and the District of Columbia have enacted data breach notification laws, which mandate various breach reporting times, and to various authorities.

 

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