Five Things That Owners and Boards Need to Know About Privacy and Cybersecurity ComplianceClient Alert
Do you serve on a Board of Directors or serve in a similar advisory capacity for a company or organization? Do you own your own business? Here are five things you should know about privacy and cybersecurity compliance.
- Upholding Your Fiduciary Duties
As a fiduciary of an organization, you may already know that you have a duty of loyalty and duty of care, including the duty to keep investors and owners informed of the cybersecurity risks of the organization. You also have the duty to protect the organization from undue risk, balancing the organization’s ability to conduct its operations with appropriate levels of risk mitigation strategies.
- Basic Knowledge of Privacy and Cybersecurity Issues
To properly fulfill your fiduciary duties, you need to obtain and maintain a basic knowledge of cybersecurity and privacy issues and risks facing the organization. Lack of understanding is not an excuse, and it is expected that Boards familiarize themselves with the cybersecurity efforts in the organization, champion and drive the organization’s commitment to ensure adequate cybersecurity protections are established and maintained. Board members and owners are also strongly encouraged to engage in the organization’s training and awareness campaigns and gain additional awareness as it relates to advising organizations effectively.
- Maintain the Company’s Reputation and Public Perception
Privacy and cybersecurity compliance builds the foundation of trust and reinforces an organization’s reputation for honoring the privacy expectations of both customers and business partners. A company’s character and brand are driven by industry expectations, treatment of customer data, legal requirements and product development. Mishandling a security breach can have devastating effects on the organization’s reputation, financial, operational and other aspects of the business. Many companies do not recover from a data breach due to the lack of proper advance planning and proper oversight.
In the United States alone, there are several different government authorities that maintain varying levels and scopes of authority over organizations with respect to privacy and cybersecurity issues, including the Securities and Exchange Commission, Federal Trade Commission, Department of Justice, Federal Sentencing Commission, and State Attorneys General, to name a few. There are also non-governmental watchdogs, from privacy advocacy groups who lobby for stricter laws and regulations and plaintiffs’ attorneys who bring actions against organizations that fail to comply with laws and regulations as well as organizations’ own stated privacy practices.
- Board Personal Liability
Breaches of fiduciary duties can be a slippery slope: subjecting board members to personal liability if the failure to exercise a minimum level of care, such as ignoring cybersecurity risks of the organizations, delegating responsibility without oversight, and lack of proper skill or training to properly advise the organization in these matters. Penalties can range from debarment from eligibility to bid on future federal contracts, large fines and jail time for individuals.
What Owners and Board Members can Do Today:
- Call your insurance provider:
- Do you have a cyber insurance policy?
- Understand what is covered and make sure that the coverage is appropriate for your business risks.
- Meet with your technology experts to talk about current protections and risks that they are aware of. Understand where there may be gaps in current protections from a technology perspective and what recommendations the technology experts have to fill those gaps.
- Consult with legal counsel to identify the laws and regulations that apply to your business related to privacy and cybersecurity compliance.
- Assemble a cross-functional team of internal and external subject matter experts and professionals who handle critical data of the company to form a privacy steering committee. The Committee’s core responsible should be implementing and maintaining a compliance program that addresses the company’s privacy and cybersecurity risks.
Need conversation starters about privacy and cybersecurity for your board or organization? Contact Partner Allison Cole at email@example.com to discuss ways to address this important topic for your business.