Companies caught up in data security incidents are pressured by federal and state regulators examining whether they adequately protected sensitive data. Consumers affected by a data breach often pile on with class actions that may end up costing targeted companies millions of dollars. On top of that, the patchwork of cybersecurity standards that a company might try to comply with to avoid regulatory enforcement actions and class litigation liability can be bewildering.
The overarching cybersecurity standard most regularly tossed off as the corporate standard is “reasonable data security,” which of course begs the question of exactly what is reasonable. Companies cannot wait on others to answer that question, but instead should work to define the standard and influence the official standard setters.
Some states have taken steps to guide businesses and organizations on what level of security is needed to avoid enforcement for lax data security. In early 2016, California laid out the legal and ethical responsibilities of businesses to keep information safe. The California Office of the Attorney General outlined the “reasonable security” that companies should employ to avoid enforcement actions. Sen. Kamala Harris (D-Calif.), former California attorney general, said Feb. 16 when the report was released that companies should implement all 20 of the Center of Internet Security’s Critical Security Controls.
The Federal Trade Commission cites the need for reasonable security. The FTC, under its authority to regulate unfair and deceptive trade practices, may bring enforcement actions against companies that don’t implement reasonable data security standards to protect consumer information. Some companies, including Wyndham Worldwide Corp. and now-defunct medical testing company LabMD Inc., have challenged the FTC’s power to enforce the standard.
Cisco Systems Inc. Chief Security Officer Edna Conway told Bloomberg BNA that companies and organizations can’t wait for the judicial system, state legislatures and Congress to provide clearer cybersecurity standards. Companies need to “be aware” that courts are trying to establish their own reasonable security standard, she said. Therefore, companies need to start to self-regulate and establish a baseline standard so courts aren’t left in the dark, Conway said.
Companies should start being more active in “private-public endeavors,” Conway said. This will help get the ear of the government and standards setting bodies, she said. Additionally, companies need to be well-prepared regardless of what reasonable data security or cybersecurity standard is eventually adopted, she said. They must reach out to all vendors in their “eco system” to make sure their security protocols are up to snuff, Conway said.
Companies that are caught in a regulatory enforcement action or a costly class action may be okay if they prepare for the worst, Conway said. Adopting cutting edge protocols and using a flexible security architecture that can adapt to ever-changing guidance will help companies a long way when facing potential costly fines, she said.
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