Does My Startup Need To Care About Privacy?
Whether you are working at an established firm or starting out on your own with a new startup idea, there is a good chance that privacy laws are impacting your business. Now more than ever, new companies being created are cloud-based and centred around some form of collection of personal or confidential information. This collection can include anything from location information, email addresses for a newsletter and even IP addresses for targeting and remarketing campaigns. Though definitions of personal information can vary, most modern privacy laws are encompassing a broader scope of data types and include most anything that can be linked back to identify an individual.
The last few years have seen the unprecedented release of the most comprehensive and impactful privacy laws yet. Laws such as the General Data Protection Regulation (GDPR) and the California Consumer Protection Act (CCPA) have ignited a new era in privacy that includes more requirements and harsher penalties on those in violation of their terms. These laws are far-reaching and can apply to not only those based in their jurisdiction but companies worldwide that may collect information from their citizens. For example, even if your Canadian business sells mainly to Canadian customers but you have a significant amount of web traffic from Germany and you are collecting IP addresses from German citizens for your remarketing campaigns, GDPR can still apply your company.
That means that regardless if you are a multinational company with offices worldwide or you have a startup based in a garage but you are collecting personal information or using cookies on your website, you need to know what privacy laws apply to you and how to comply with them.
Why Your Startup Needs an Effective Privacy Program
It’s the Law
Deciding not to comply with privacy laws is risky business. Data breaches are at an all-time high and the financial consequences can be devastating if you do not have appropriate controls in place. Depending on how many records are exposed, authorities can impose fines anywhere from several hundred thousand dollars to several million dollars even if you’re a small-scale operation. These amounts can be detrimental to a company trying to grow and can simply bankrupt your business.
Though enforcement varies between each law, it widely known that authorities are only becoming more active in their targeting of companies who are in breach of their terms. Additionally, laws such as the Personal Information Protection and Electronic Documents Act (PIPEDA) in Canada which are more focused on a complaint-based approach can still have a major impact on your business if your users are unhappy with how you manage their data. Authorities can tie up your organization in legal costs and hearings and forever damage your public image.
Privacy Can Give You a Competitive Advantage
Beyond regulatory compliance, there are numerous other benefits for startups to take a proactive approach on privacy. First off, there’s a good chance that your clients take great concern in how you handle their personal information. Now more than ever, companies are in the spotlight for how they handle personal information and having a proactive and transparent approach to privacy can give both you and your clients a significant advantage over their competitors. Think about companies such as Equifax that have now been forever branded for their massive data breach. Taking a proactive approach to privacy goes beyond just ethics; studies have shown that consumers are actively including a company’s data privacy policies in their buying decisions and actions.
A 2019 Cisco survey of 2,601 adults found that not only do 84% of respondents care about how companies manage their data, 32% said that they have taken action and switched providers over their data sharing policies. This is a marked difference from only a few years ago and it means that people are becoming more proactive and will take action against companies who fail to properly manage the personal information they possess. This does not mean that you cannot take advantage of targeted marketing and train algorithms; however, it does mean that developing a transparent approach to managing privacy can be a gamechanger and give your company an advantage over your competitors.
It’s a Key Part in Building a Scalable Business Model
As most tech companies are centred around some form of data collection, the bigger your company gets, the more data you collect and the more complicated your data network becomes. Implementing an effective privacy program in the early stages of your company can be remarkably simple and affordable and can have an enormous impact on mitigating risk as you continue to scale. The longer you wait to design your privacy program, the more complicated and costly it will likely become. Mitigating risk is an essential component in ensuring your business model is truly scalable and can withstand the test of time and exposure. For tech companies, data breaches are often not a question of if but when, and if you don’t have the right policies and controls in place, it can ruin everything you have worked so hard to create.
You can think of building your privacy program as a sort of insurance for your organization. In the event of a data breach or a complaint against how your organization manages personal information, having a methodical and transparent approach can be the difference between a small bump in the road and a soul-crushing fine that leads to insolvency. Similar to paying your annual premiums for liability insurance, building and maintaining your privacy program must be a worthwhile investment to consider for your startup.
Not sure how start your privacy program?
Check out some of our other free resources to learn more about how you can start building your own privacy program or schedule a free 30 minute consultation with us and we can help you get started.
Published on July 27, 2020