General Data Protection Regulation (GDPR): What you need to know to stay compliant
GDPR is a regulation that requires businesses to protect the personal data and privacy of EU citizens for transactions that occur within EU member states. And non-compliance could cost companies dearly. Here’s what every company that does business in Europe needs to know about GDPR.
BY: Michael Nadeau May 29, 2019
SOURCE: https://www.itworld.com/article/3202771/general-data-protection-regulation-gdpr-requirements-deadlines-and-facts.html
Companies that collect data on citizens in European Union (EU) countriesl need to comply with strict new rules around protecting customer data. The General Data Protection Regulation (GDPR) sets a new standard for consumer rights regarding their data, but companies will be challenged as they put systems and processes in place to maintain compliance.
Compliance will cause some concerns and new expectations of security teams. For example, the GDPR takes a wide view of what constitutes personal identification information. Companies will need the same level of protection for things like an individual’s IP address or cookie data as they do for name, address and Social Security number.
The GDPR leaves much to interpretation. It says that companies must provide a “reasonable” level of protection for personal data, for example, but does not define what constitutes “reasonable.” This gives the GDPR governing body a lot of leeway when it comes to assessing fines for data breaches and non-compliance.
Time is running out to meet the deadline, so CSO has compiled what any business needs to know about the GDPR, along with advice for meeting its requirements. Many of the requirements do not relate directly to information security, but the processes and system changes needed to comply could affect existing security systems and protocols.
What is the GDPR?
The European Parliament adopted the GDPR in April 2016, replacing an outdated data protection directive from 1995. It carries provisions that require businesses to protect the personal data and privacy of EU citizens for transactions that occur within EU member states. The GDPR also regulates the exportation of personal data outside the EU.
According to an Ovum report, about two-thirds of U.S. companies believe that the GDPR will require them to rethink their strategy in Europe. Even more (85 percent) see the GDPR putting them at a competitive disadvantage with European companies.
Why does the GDPR exist?
The short answer to that question is public concern over privacy. Europe in general has long had more stringent rules around how companies use the personal data of its citizens. The GDPR replaces the EU’s Data Protection Directive, which went into effect in 1995. This was well before the internet became the online business hub that it is today. Consequently, the directive is outdated and does not address many ways in which data is stored, collected and transferred today.
How real is the public concern over privacy? It is significant and it grows with every new high-profile data breach. According to the RSA Data Privacy & Security Report, for which RSA surveyed 7,500 consumers in France, Germany, Italy, the UK and the U.S., 80 percent of consumers said lost banking and financial data is a top concern. Lost security information (e.g., passwords) and identity information (e.g., passports or driving license) was cited as a concern of 76 percent of the respondents.
An alarming statistic for companies that deal with consumer data is the 62 percent of the respondents to the RSA report who say they would blame the company for their lost data in the event of a breach, not the hacker. The report’s authors concluded that, “As consumers become better informed, they expect more transparency and responsiveness from the stewards of their data.”
Lack of trust in how companies treat their personal information has led some consumers to take their own countermeasures. According to the report, 41 percent of the respondents said they intentionally falsify data when signing up for services online. Security concerns, a wish to avoid unwanted marketing, or the risk of having their data resold were among their top concerns.
The report also shows that consumers will not easily forgive a company once a breach exposing their personal data occurs. Seventy-two percent of US respondents said they would boycott a company that appeared to disregard the protection of their data. Fifty percent of all respondents said they would be more likely to shop at a company that could prove it takes data protection seriously.
“As businesses continue their digital transformations, making greater use of digital assets, services, and big data, they must also be accountable for monitoring and protecting that data on a daily basis,” concluded the report.
What types of privacy data does the GDPR protect?
Basic identity information such as name, address and ID numbers
Web data such as location, IP address, cookie data and RFID tags
Health and genetic data
Biometric data
Racial or ethnic data
Political opinions
Sexual orientation
Which companies does the GDPR affect?
Any company that stores or processes personal information about EU citizens within EU states must comply with the GDPR, even if they do not have a business presence within the EU. Specific criteria for companies required to comply are:
A presence in an EU country.
No presence in the EU, but it processes personal data of European residents.
More than 250 employees.
Fewer than 250 employees but its data-processing impacts the rights and freedoms of data subjects, is not occasional, or includes certain types of sensitive personal data. That effectively means almost all companies. A PwC survey showed that 92 percent of U.S. companies consider GDPR a top data protection priority.
A new survey conducted by Propeller Insights and sponsored by Netsparker Ltd. asked executives which industries would be most affected by GDPR. Most (53 percent) saw the technology sector being most impacted followed by online retailers (45 percent), software companies (44 percent), financial services (37 percent), online services/SaaS (34 percent), and retail/consumer packaged goods (33 percent).
Who within my company will be responsible for compliance?
The GDPR defines several roles that are responsible for ensuring compliance: data controller, data processor and the data protection officer (DPO). The data controller defines how personal data is processed and the purposes for which it is processed. The controller is also responsible for making sure that outside contractors comply.
Data processors may be the internal groups that maintain and process personal data records or any outsourcing firm that performs all or part of those activities. The GDPR holds processors liable for breaches or non-compliance. It’s possible, then, that both your company and processing partner such as a cloud provider will be liable for penalties even if the fault is entirely on the processing partner.
The GDPR requires the controller and the processor to designate a DPO to oversee data security strategy and GDPR compliance. Companies are required to have a DPO if they process or store large amounts of EU citizen data, process or store special personal data, regularly monitor data subjects, or are a public authority. Some public entities such as law enforcement may be exempt from the DPO requirement.
According to the Propeller Insights survey, 82 percent of responding companies say they already have a DPO on staff, although 77 percent plan to hire a new or replacement DPO prior to the May 25 deadline. That hiring doesn’t stop with the DPO. About 55 percent of the survey’s respondents reported that they had recruited at least six new employees to achieve GDPR compliance.
How does the GDPR affect third-party and customer contracts?
The GDPR places equal liability on data controllers (the organization that owns the data) and data processors (outside organizations that help manage that data). A third-party processor not in compliance means your organization is not in compliance. The new regulation also has strict rules for reporting breaches that everyone in the chain must be able to comply with. Organizations must also inform customers of their rights under GDPR.
What this means is that all existing contracts with processors (e.g., cloud providers, SaaS vendors, or payroll service providers) and customers need to spell out responsibilities. The revised contracts also need to define consistent processes for how data is managed and protected, and how breaches are reported.
“The largest exercise is on the procurement side of the house—your third-party vendors, your sourcing relationships that are processing data on your behalf,” says Mathew Lewis, global head of banking and regulatory practice at legal service provider Axiom. “There’s a whole grouping of vendors that have access to this personal data and GDPR lays out very clearly that you need to ensure that all of those third parties are adhering to GDPR and processing the data accordingly.”
Client contracts also need to reflect the regulatory changes, says Lewis. “Client contracts take a number of different forms, whether they are online click-throughs or formal agreements where you make commitments to how you view, access, and process data.”
Before those contracts can be revised, business leaders, IT, and security teams need to understand how the data is stored and processed and agree on a compliant process for reporting. “A pretty sizable exercise is required by the technology groups, the CISO, and data governance team to understand what data fits within the firm, where it’s being stored or processed, and where it’s being exported outside the company. Once you understand those data flows and the impact on the business, you can start to identify the vendors you need to be most focused on both from an information security perspective, how you manage those relationships going forward, and how you memorialize that in the contract itself,” says Lewis.
The GDPR might also change the mindset of business and security teams toward data. Most companies see their data and the processes they use to mine it as an asset, but that perception will change, says Lewis. “Given GDPR’s explicit consent and firms needing to be much more granular in their understanding of data and data flows, there’s a whole set of liabilities that now exist with the accumulation of data,” says Lewis. “That’s quite a different frame of mind both for legal and compliance, but maybe more important for the way the business thinks about the accumulation and usage of that data and for information security groups and how they think about managing that data.”
“Data is leaving the firm in all kinds of ways,” says Lewis. “While the CISO and the technology groups need to be able to track all of that, you also need to put protection in place.” Those protections need to be spelled out in the contract so the outside firms understand what they can and cannot do with the data.
Lewis notes that by going through the process of defining obligations and responsibilities, it prepares a company to handle GDPR compliance operationally. “If one of your vendors says, ‘You were hacked last night,’ did they know who to call and how to respond as part of meeting the regulatory requirements,” he says.
The 72-hour reporting window that the GDPR requires makes it especially important that vendors know how to properly report a breach. “If a vendor was hacked and you’re one of thousands of clients, do they notify your procurement department or an account person or someone in accounts receivables? It could come in all kinds of ways,” says Lewis.
You want a clearly defined path in the contract for the information to get to the person in your organization responsible for reporting the breach. “A regulator is not going to say you shouldn’t have had a breach. They are going to say you should have had the policies, procedures, and response structure in place to solve for that quickly,” says Lewis.
Larger companies might have thousands of contracts to update. Complicating that challenge is that it needs to be done late in the compliance process. Before you can define responsibilities and responsibilities, you must know exactly what data you have, where and how it is processed, and the data flows. “That’s left a lot of institutions racing toward the deadline trying to complete the technical and operational issues and having to play catch-up on putting the right contract in place to enforce that. A lot of firms have not done any renegotiation of contract terms.”
That begs the question: What happens if the contracts aren’t all in place by the May deadline? Lewis sees several risks to not completing the contracts:
Operational: If you haven’t agreed on what your processes will be with a vendor, it’s not clear how you will be operating under GDPR.
Vendor management: Under GDPR, you need to know how your vendors operate including their security framework and how they manage data. Without that knowledge, you don’t know the risk they present.
Regulatory fines: Lewis notes that the EU is known for its willingness to levy steep fines for regulatory non-compliance. If a breach occurs, not having contracts in place might well work against the company. “Not having a contract is an indication you don’t know what your vendors are doing, and that is a larger management issue about what infrastructure you’re using and how you’re treating the data,” says Lewis. “It gives the regulator an idea of how organized you are and how well you understand your data flows.”
What happens if my company is not in compliance with the GDPR?
The GDPR allows for steep penalties of up to €20 million or 4 percent of global annual turnover, whichever is higher, for non-compliance. According to a report from Ovum, 52 percent of companies believe they will be fined for non-compliance. Management consulting firm Oliver Wyman predicted that the EU could collect as much as $6 billion in fines and penalties in the first year.
That prediction appears to be overblown. A DLA Piper report, just under 60,000 breaches were reported to EU authorities between May 25, 2018 and January 28, 2019. However, regulators issued only 91 fines, the highest one for €50 million on Google for processing personal information without obtaining proper permissions.
One particularly difficult requirement will be the right to be forgotten, described below. Nearly two-thirds (66 percent) of the Solix survey respondents say they are unsure if they can purge an individual’s personal information forever by deadline.
That leaves a lot of organizations vulnerable to fines. The smaller-than-expected number of fines has not fully answered the question of how penalties will be assessed. For example, how will fines differ for a breach that has minimal impact on individuals versus one where their exposed PII results in actual damage? Regulators have admitted that they do not have the resources to handle the volume of reported breaches they've received, so it will take time for identifiable precedents to be established.
For now, the ability to show a good-faith effort to comply should protect companies from harsh penalties. In a speech last year, Liz Denham, the UK information commissioner, had this to say to organizations concerned about GDPR fines:
“…I hope by now you know that enforcement is a last resort.... Hefty fines will be reserved for those organizations that persistently, deliberately or negligently flout the law. Those organizations that self-report, engage with us to resolve issues, and demonstrate an effective accountability arrangement can expect this to be a factor when we consider any regulatory action.”
Which GDPR requirements will affect my company?
The GDPR requirements will force U.S. companies to change the way they process, store, and protect customers’ personal data. For example, companies will be allowed to store and process personal data only when the individual consents and for “no longer than is necessary for the purposes for which the personal data are processed.” Personal data must also be portable from one company to another, and companies must erase personal data upon request.
That last item is also known as the right to be forgotten. There are some exceptions. For example, GDPR does not supersede any legal requirement that an organization maintain certain data. This would include HIPAA health record requirements.
Several requirements will directly affect security teams. One is that companies must be able to provide a “reasonable” level of data protection and privacy to EU citizens. What the GDPR means by “reasonable” is not well defined.
What could be a challenging requirement is that companies must report data breaches to supervisory authorities and individuals affected by a breach within 72 hours of when the breach was detected. Another requirement, performing impact assessments, is intended to help mitigate the risk of breaches by identifying vulnerabilities and how to address them.
What does a successful GDPR project look like?
It’s hard to imagine a company that will be more affected by GDPR than ADP. The company provides cloud-based human capital management (HCM) and business outsourcing services to more than 650,000 companies globally. ADP holds PII for millions of people around the world, and its clients expect the company to be GDPR compliant and to help them do the same. If ADP is found non-compliant with GDPR, it risks not only fines but loss of business from clients expecting ADP to have them covered.
ADP’s global focus and scale in some ways has been an advantage. It already adheres to existing privacy and security regulations, so the leap to GDPR compliance is not as high as it might have been. “We are already familiar with privacy laws in Europe. We are not starting from scratch with GDPR,” says Cecile Georges, chief privacy officer for ADP. “GDPR triggers the need for us to comply not just as a company, but also as a service provider. We help our clients comply with GDPR.”
Despite ADP being better prepared than many other companies, Georges says its GDPR project is large and global. It began about a year ago, but the project builds on earlier work. “We started even before GDPR was discussed,” she says. The company began data flow mapping and privacy assessments on new products several years ago.
Georges sees the early start on data flow mapping as key. “If we had not started the data flow mapping a long time ago, I would be less confident than I am speaking to you now,” she says. “Data flow mapping is required to do inventory of products, and processing PII is a first step to data protection impact assessments that are required. We’ve also implemented privacy by design in our new offers and products.” She adds that ADP supports its “privacy by design” policy with training for its developers.
ADP’s GDPR project pulls in people from many areas of the company, and Georges believes this is necessary for success. “We are involved in the organization, all the operations, and the functional groups. It’s not just a pure privacy or compliance project. It really involves the entire organization and we are coordinating with project managers across the company to make sure we implement the right processes across the organization,” she says.
Mechanisms for securing PII such as encryption are already in place at ADP. “From a security standpoint we came to the conclusion that it’s more about communicating with our clients, making sure they have the right information about what we are doing,” says Georges. “They may have to convey that message to their employees or to their own clients.”
Because ADP is a data processor for other companies, ADP has taken the optional step of defining Binding Corporate Rules around protecting PII. “With the implementation of Binding Corporate Rules as a data processor, we hope that our customers understand that we want to make their lives easier and we commit to protect their personal data in accordance with the standards required in the EU, regardless of where the European data is processed, accessed, or hosted” says Georges.
Georges says she hears from other companies that aren’t yet on track for GDPR compliance. “The clock is starting to tick,” she says. “If a company has not started to look into what they need to do, they first need to understand what it means for them in terms of their business. Understand first to what extent they are affected by the new regulation and then do a gap analysis. That is the starting point of any project to assess what they need to do.
She also encourages companies to take an operational approach. “My recommendation is to have representatives of all the functions in the organization and not consider it a pure privacy or pure legal compliance project,” Georges says. “It would take too much time for operations to understand exactly what they need to do, whereas if you involve them from the beginning they can tell a lawyer or privacy professional, ‘We are already doing this,’ or ‘Technically, we can’t do this, but this is how we can address this requirement.’”
“There are different ways of applying GDPR depending on your business and the tools you have in place. The business people can assess that,” says Georges. “Once they have done the assessment and decided what to do, then they have to document what they are doing.” Georges is referring to the GDPR’s accountability principle, which requires companies to document how they’ve become compliant. “The documentation piece will be key.”
What should my company be doing to stay GDPR compliant?
Multiple research reports show that many if not most organizations are still not fully GDPR compliant. If your organization is not confident of its regulatory compliance status, and you have determined a significant risk from non-compliance, following these steps can get you on the right path.
Set a sense of urgency that comes from top management: Risk management company Marsh stresses the importance of executive leadership in prioritizing cyber preparedness. Compliance with global data hygiene standards is part of that preparedness.
Involve all the stakeholders. IT alone is ill-prepared to meet GDPR requirements. Start a task force that includes marketing, finance, sales, operations—any group within the organization that collects, analyzes, or otherwise makes use of customers’ PII. With representation on a GDPR task force, they can better share information that will be useful to those implementing the technical and procedural changes needed, and they will be better prepared to deal with any impact on their teams.
Conduct periodic risk assessments: You want to know what data you store and process on EU citizens and understand the risks around it. Remember, the risk assessment must also outline measures taken to mitigate that risk. A key element of this assessment will be to uncover all shadow IT that might be collecting and storing PII. Shadow IT and smaller point solutions represent the greatest risk for non-compliance; ignore them at your own peril.
And there are a lot of them. According to Matt Fisher, IT thought leader and senior vice president at Snow Software, more than 39,000 applications are known to hold personal data. “The iceberg effect poses a serious risk to organizations’ GDPR compliance as many are focused on the 10 percent of applications holding personal data that are visible at the water’s surface,” he says.
Fisher cites the change in how organizations allocate their IT and technology spend, with business units expected to own about half of it by 2020. “As IT teams lose sight of the applications in use across the organization, they lack overarching visibility into the applications that could threaten GDPR compliance,” he says.
“Getting started [on the risk assessment] is the biggest obstacle,” Fisher says. “As a first course of action, organizations must get a full picture of their entire IT infrastructure and inventory all applications in their estates. This, coupled with specific insight about which applications can process personal data, dramatically minimizes the scope of the project as well as the time spent on it. Suddenly, the impossible becomes possible.”
Hire or appoint a DPO if you haven't already done so: The GDPR does not say whether the DPO needs to be a discrete position, so presumably a company may name someone who already has a similar role to the position as long as that person can ensure the protection of PII with no conflict of interest. Otherwise, you will need to hire a DPO. Depending on the organization, that DPO might not need to be full-time. In that case, a virtual DPO is an option. GDPR rules allow a DPO to work for multiple organizations, so a virtual DPO would be like a consultant who works as needed.
Create and maintain a data protection plan: Most companies already have a plan in place, but they will need to review and update it to ensure that it aligns with GDPR requirements. Review and update periodically.
Don’t forget about mobile: According to a survey of IT and security executives by Lookout, Inc., 64 percent of employees access customer, partner, and employee PII using mobile devices. That creates a unique set of risks for GDPR non-compliance. For example, 81 percent of the survey respondents said that most employees are approved to install personal apps on the devices used for work purposes, even if it’s their own device. If any of those apps access and store PII, they must do so in a GDPR-compliant manner. That’s tough to control, especially when you factor in all the unauthorized apps employees use.
Document your GDPR compliance progress: “With the clock ticking, organizations must demonstrate that they are making progress against completing the Record of Processing Activities (RoPA)—article 30 of the GDPR regulation which is centered around taking inventory of risky applications—to avoid being an easy target for regulators,” says Fisher. “Establishing the RoPA, is the essential piece to focus on at this stage in the game as it enables organizations to identify where personal data is being processed, who is processing it and how it is being processed.”
Implement measures to mitigate risk: Once you’ve identified the risks and how to mitigate them, you must put those measures into place. For most companies, that means revising existing risk mitigation measures. “Upon taking inventory of applications and completing the RoPA, the GDPR team can now spot and investigate any risks associated with the data and determine the appropriate level of security deemed necessary to protect that data,” says Fisher.
Create a plan to report your GDPR compliance progress: “With the clock ticking, organizations must demonstrate that they are making progress against completing the Record of Processing Activities (RoPA)—article 30 of the GDPR regulation which is centered around taking inventory of risky applications—to avoid being an easy target for regulators,” says Fisher. “Establishing the RoPA, is the essential piece to focus on at this stage in the game as it enables organizations to identify where personal data is being processed, who is processing it and how it is being processed.”
Implement measures to mitigate risk: Once you’ve identified the risks and how to mitigate them, you must put those measures into place. For most companies, that means revising existing risk mitigation measures. “Upon taking inventory of applications and completing the RoPA, the GDPR team can now spot and investigate any risks associated with the data and determine the appropriate level of security deemed necessary to protect that data,” says Fisher.
If your organization is small, ask for help if needed. Smaller companies will be affected by GDPR, some more significantly than others. They may not have the resources needed to meet requirements. Outside resources are available to provide advice and technical experts to help them through the process and minimize internal disruption.
Test incident response plans: The GDPR requires that companies report breaches within 72 hours. How well the response teams minimize the damage will directly affect the company’s risk of fines for the breach. Make sure you can adequately report and respond within the time period.
Set up a process for ongoing assessment: You want to ensure that you remain in compliance, and that will require monitoring and continuous improvement. Some companies are considering incentives and penalties to ensure that employees follow the new policies. According to a survey by Veritas Technologies, 47 percent of respondents will likely add mandatory GDPR policy observances to employee contracts. Twenty-five percent might withhold bonuses or benefits if a GDPR violation occurs, and 34 percent say they will reward employees for complying with GDPR.
Do all of this with an eye to improving your business: According to a survey by Varonis Systems, 74 percent of respondents believe that complying with GDPR requirements will be a competitive advantage. Compliance will boost consumer confidence. More importantly, the technical and process improvements necessary to meet GDPR requirements should enable efficiencies in how organizations manage and secure data.
— Millennium Knight has been helping companies get into compliance for many years. Engage us today if you need help getting your compliance in order.