Technology companies are most vulnerable
The annual global cost of cybercrime is estimated to hit US$6tn in 2021, up from US$3tn in 2015.(i) James Arthur, partner and head of cyber consulting at Grant Thornton UK agrees. “Technology companies are particularly impacted.”
“It is important for technology companies to develop a digital risk strategy based on their most strategically important data assets,” says James. “After all, they typically hold more data than non-tech companies and often lead the way in adopting new technologies, which can create cyber vulnerabilities.”
B2C technology companies also house and process huge volumes of sensitive, personal information. It is therefore no surprise that IT was the most targeted sector for web application cyber-attacks last year.(ii)
Added together (and as revealed in our previous cyber research) this means that technology companies are now more vulnerable to cyber attacks and customer data breaches than ever before. This not only exposes them to hefty regulatory fines, but also business-crippling reputational damage.
Get ahead of regulators
In the last three years, technology companies made great efforts to comply with new data privacy and protection regulations, not least GDPR. Most large technology companies are now compliant, but they must remain vigilant. Data protection regulations are becoming stricter and the penalties for non-compliance are increasing. What’s more, customers are becoming more aware of privacy issues and are prepared to punish companies for not taking it seriously.
Technology companies must respond by going above and beyond the minimum required by the regulator on privacy. “Tech companies today need to go beyond the basics to ensure compliance because these companies service their clients in a regulated industry and are largely data controllers, while their clients may be data processors,” confirms Akshay Garkel, advisory partner at Grant Thornton India.
“Cloud service providers may be required to maintain 10 out of 20 (for example) data controls for minimum compliance. But they shouldn’t stop there. In the spirit of ensuring security and privacy they might want to go at least four or five notches above the minimum expected from the regulator because clients will demand it.”
The tightrope between privacy and analytics
But a careful balance must be struck. Customers will appreciate technology companies going the extra mile on privacy, but not if it restricts their ability to receive personalised offers or the development of products tailored to their individual needs.
Individual companies aside, overbearing privacy law prevents the use of data to drive positive societal outcomes, be that in relation to healthcare, disease monitoring or traffic accident reduction. So, governments and regulators must also be careful not to enact overly restrictive privacy laws.
“The balance between data protection and using data for the public good is a key debate for society,” says Nick Watson, partner and technology sector lead at Grant Thornton UK. “Germany has very strong privacy rules, but this has resulted in traffic accident data not being collected on particular stretches of roads. Therefore, they weren’t able to collect data that would have pinpointed a particular accident hotspot. You could take data privacy to a level where even non-personalised data is not collated on a group-wide, anonymous basis. In this case society would lose out.”
The middle-man in surveillance
Judging how far to go on privacy has become more complex because, like it or not, many technology companies are now surveillance intermediaries. Whether it be messages sent on social media, recordings from Echo devices or location data stored on smart phones, technology companies possess information that is useful for fighting crime.
There is no question that they must comply with the law regarding requests for information, but they have discretion over how swiftly they reply and the depth of information they provide.
Many now wonder whether law enforcement data requests should be processed without question, or heavily scrutinised in the interest of preserving privacy.
In the past, some technology companies resisted rather than cooperated with law enforcement. But as technology companies unwittingly accumulate more and more vital evidence, there is controversy in some markets about which data is shared, how much and for what purpose.
After all, being perceived as uncooperative with counter-terrorism forces is far more damaging than not adhering to the absolute strictest privacy standards.
Strengthen protection of digital assets
How should technology businesses respond to rising digital risk? First and foremost, they must classify, categorise and map out their digital assets to understand the specific risks and value associated with them.
Armed with this insight, they should develop and implement a nuanced, risk-based digital risk strategy that fortifies the digital crown jewels – those deemed most critical to the business and its customers.
Of course, one company’s most valuable data may be completely unimportant to another. For example, fintech companies highly value customers’ financial information, entertainment technology companies place high importance on consumer preference data and high-tech companies treasure their IP.
This approach sounds sensible. But a surprisingly large number of technology companies do not do this, and instead rely on an outdated one-size-fits-all approach to cyber security and data privacy based on perimeter security.
Orus Dearman, managing director of risk advisory services at Grant Thornton US, explains how this classification process can lead to practical change that reduces vulnerability.
“We assisted a technology company client in performing a data categorisation process to enable them to efficiently identify sensitive and personal information within their databases and networks as part of an overall data inventory. This allowed the company to deploy data protection resources where they are needed and would have the most impact,” he says. “Now, if anyone wants to change anything to do with this data or these systems, the privacy team is brought into the process as part of the workflow.”
Bin useless data
In contrast, data revealed to be not at all useful to the business and not required for regulatory and compliance purposes should be deleted or appropriately anonymised. This reduces the risk of it being compromised.
Naturally, technology companies can be reluctant to delete information due to concerns they might need it for an audit or that it is essential for something they are unaware of. Data mapping helps realise interdependencies, which can assist in deleting data.
But data asset categorising doesn’t just reduce risk. It also creates value. This exercise might identify a dataset or combination of datasets that can be used to improve the efficiency of internal operations or gain insight into customer preferences.
When strategy changes, so should data categorisation
Technology companies must remember two things when profiling data assets. First, it is not a one-off exercise. They must constantly map out their digital assets as the nature of the threat changes and as their business priorities evolve.
Second, this task cannot be left to the information security officer or head of IT. It is a critical business decision that must align to business objectives. Senior business leaders must be involved in the process.
Drive competitive advantage through trust
There is a real opportunity for B2B technology companies to market themselves around digital trust. Those that demonstrate readiness to respond to a cyber threat, responsibly handle customer data and empower customers to manage privacy controls stand to gain a competitive advantage.
To start building trust, technology companies must offer value-added cyber security solutions such as malware and ransomware screening that plugs vulnerabilities as part of their core offering. Customers will also be impressed with suppliers that conduct comprehensive cyber security audits and produce independent assurance reports.
“Reports that demonstrate capability, security, and a serious commitment to risk management (such as SOC2 or ISAE3402) are without question a way for technology companies to differentiate themselves from the competition,” says Matthew Green, technology advisory partner at Grant Thornton Australia. “The more astute clients are now starting to ask for the validation and the ongoing assurance that the organisation is maintaining an appropriate level of data security and are requesting those reports as a way of demonstrating it.”
There are a number of security standards that technology companies can use to demonstrate best practice digital resilience. But because every technology company is different, these merely provide a starting point. Technology companies should evaluate what their customers want when it comes to privacy and security and prioritise this.
Consumers value control
The jury is out on whether B2C technology can truly differentiate themselves through digital trust. Still, there is no harm in making it incredibly easy for customers to identify and delete data that is held about them and manage privacy settings.
B2C technology companies must also make privacy policies crystal clear. Today, most are displayed in tiny lettering across multiple pages, making them impossible to decipher.
“Privacy should be an enabler and not hinder innovation. Companies who have embraced good privacy practices should use that as a branding platform in the market,” confirms Orus.
“Clearly communicating privacy policies in a transparent way is essential. The general trend for technology companies is to develop a user hub that allows users to see what data is being held about them and allows them to opt in and out of various things."
"Privacy regulations such as the GDPR and upcoming California Consumer Privacy Act (CCPA) require clear and concise privacy notices for applicable data subjects. However, for those of us that don’t fall into the GDPR or CCPA buckets, many user agreements are over a hundred pages long, so they can still be made more user-friendly.”
Our five recommendations
- Categorise data assets according to their strategic importance. Those that will disrupt the business or customer experience or cause untold reputational damage if compromised should be heavily protected.
- Regularly review your data asset categorisation in collaboration with senior business leaders. This categorisation must align with business objectives, which may change over time.
- Don’t just think about the minimum required from the regulator when implementing data protection controls. Instead, consider what regulations may look like in the future.
- Collaborate fully with valid requests for data and information and know the extent to which data should be provided.
- Demonstrate your commitment to data protection by having your cyber risk practices tested regularly by an independent third-party. This will help to build trust.
When it comes to protecting your business to become immune to a cyber attack or data breach, one size does not fit all. However, technology companies can bolster their resilience by applying some or all of these recommendations so long as they tailor their actions to suit their unique position, and that of their clients.
Find out more about managing digital risk by contacting one of our cybersecurity advisors.