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6 Reasons Why Data Privacy Is Important…

6 Reasons Why Data

Privacy Is Important
For Businesses
by Etienne Cussol CIPP/E, CIPM
September 1, 2023

I find that business owners often interpret data

privacy differently than their consumers. The
business owner references legal compliance, while
the consumer constantly feels watched.

But at the end of the day, we all use the same

internet, and different bits of information get tracked
about each of us.

The fact that data privacy affects us all is precisely

why it’s so important.

So, let’s look at why data privacy is important and

how it can benefit your business and protect your
consumers.

Table of Contents

1. Overview of Data Privacy

2. Why Is Data Privacy Important?

3. What’s the Difference Between Data

Privacy and Data Security?

4. Conversations About Data Privacy Aren’t

Going Anywhere

5. How Can Termly Help?

6. Summary

Overview of Data Privacy

In its simplest form, data privacy is the concept of
keeping individuals’ personal data as private as
possible.

But you may be thinking: How can I use that data if I

have to keep it private?

Well, privacy does not mean that you can’t collect,

use, or share personal data — it means that you
should do so while providing appropriate protection.

The good news is that data protection laws instruct

businesses how to protect personal data so they can
benefit from it fully, such as the:

General Data Protection Regulation (GDPR)

California Consumer Privacy Act (CCPA)

I’ll discuss these laws and others later on. But for
now, let’s explore why businesses collect and use this
information in the first place.

Read our comprehensive data privacy guide

for a thorough look at data privacy.

Why Do Businesses
Collect Personal Data?
For modern businesses, personal data is an essential
component that makes up the foundation of many
operations and is the means to keep them running.

If you’re a business that operates entirely or partly

online, chances are your revenues directly depend on
how much personal data you collect, use, or share.

That data might come from several sources:

It may belong to your customers for your

customer relationship management (CRM)
It may come from your website visitors for your
Search Engine Optimization and Marketing (SEO
& SEM)
It may originate from your end-users for usage
analytics

Either way, this precious information helps you

maintain quality customer services and products in
today’s online ecosystem.

Personal Data vs.

Sensitive Personal Data
When it comes to the data that businesses need to
keep private, I’m referring to a specific legal definition
of two terms: personal data and sensitive personal
data.

Personal data, sometimes also called personal

information, legally means any information that, alone
or combined with other details, could directly identify
an individual or a household.

Personal information includes attributes like:

Names
Email addresses
Home addresses
Phone numbers

However, due to its vulnerability, sensitive personal

data is subject to stricter requirements under most
data privacy laws and includes attributes like:

Political, philosophical, or religious beliefs

Race or ethnic origin
Gender identity
Sexual orientation
Health data
Biometric data
Personal identification numbers
IP addresses and precise geolocations

Why Is Data Privacy

Important?
There are several compelling reasons why data
privacy is important for businesses of any size, which
I’ll cover in great detail in this next section.

Fair warning, legal compliance is only one motive,

especially in our current digital landscape.

Here’s a quick summary:

It helps you comply with applicable data privacy

laws
It helps you gain and retain customer trust
It helps you build effective data management
practices
It helps minimize the risks and costs of a
personal data breach
It helps you adapt to tomorrow’s world wide web
It helps you keep up with changing technology

I asked data privacy attorney Gregory Manwelyan,

CIPP/U.S., why data privacy is important for
businesses of all sizes. He listed four vital reasons,
three of which impact entities far beyond complying
with data protection laws.

You can read exactly what he had to say on the

matter below.

“Prioritizing data protection

ensures legal compliance,
financial stability, and
sustained reputation,
fostering a culture of trust
among customers and
stakeholders. This is
important to businesses of
all sizes because legal,
financial, and reputational
repercussions can have a
severe negative impact on
any business. Those that fail
to adhere to privacy laws
can face costly (and possibly
critical) fines. Data breaches
can also lead to loss of
customer trust and loyalty,
as well as businesses
incurring costs for data
recovery, legal actions, and
reputation management in
the aftermath of a breach.
Adequate data protection
measures, such as
encryption, access controls,
and regular security audits,
are vital to mitigate risks.” –
Gregory Manwelyan, Data
Privacy Attorney, CIPP/U.S.

While legal compliance is undoubtedly a necessary

part of data privacy, its importance expands far
beyond meeting applicable legislative regulations and
guidelines.

Not only is the modern customer more internet-savvy

than ever before, but businesses face additional
challenges, like the rise in cybercrimes and data
breaches.

Becoming a privacy-literate business can help

mitigate those risks while enhancing consumer
trust — a true win for all involved, is it not?

Now, let’s take a deeper look into why data privacy is

important:

Data Privacy Helps You

Comply With Applicable
Data Privacy Laws
Complying with applicable data privacy laws is the
most apparent reason why data privacy is important,
especially for business owners who want to protect
themselves from legal liabilities.

Data privacy laws typically protect individuals based

in the region where the law passed but apply to
entities worldwide if they meet specific thresholds.

Your business could be impacted by more than one of

the following:

General Data Protection Regulation (GDPR)

Data Protection Act (U.K. GDPR)
California Consumer Privacy Rights Act
(CCPA/CPRA)
California Online Privacy Protection Act
(CalOPPA)
Connecticut Data Protection Act (CTDPA)
Colorado Privacy Act (CPA)
Children’s Online Privacy Protection Act
(COPPA)
Virginia Consumer Data Privacy Act (VCDPA)
Personal Information Protection and Electronic
Documents Act (PIPEDA)
Quebec’s Law 25
Australia’s Privacy Act of 1988
New Zealand’s Privacy Act of 2020
Protection of Personal Information Act (PoPIA)

The list above only represents a small portion of all of

the privacy legislation that exists throughout the
world.

Failing to comply with data privacy laws leads to hefty

fines and public backlash.

Depending on the law, your business may also be

required to stop its data processing activities.

Data Privacy Helps You

Gain and Retain
Customer Trust
One of the less obvious benefits of data privacy?
Privacy-literate companies gain and retain more trust
with consumers.

Trust is essential.

Today’s internet users are increasingly aware of how

their information is used by businesses — for the
good and the bad.

For example, consumers are more aware than ever

that tech giants like Meta, Google, Apple, and others
build their empires on personal data.

Check out these findings from a recent International

Association of Privacy Professionals (IAPP) report:

68% of consumers globally are ‘somewhat or

very concerned about their online privacy.’
But only 29% of consumers said it is ‘easy for
them to understand how well a company
protects their personal data.’

The gap between expectations for privacy and the

actual perception of privacy is significant as it
represents a great opportunity for businesses to build
long-term trust with customers.

Therefore, it’s no surprise that businesses that add

privacy to their value proposal or are transparent
about their data management practices gain more
consumer trust and retain better relationships overall.

Check out our list of some more alarming data

privacy statistics.

Data Privacy Helps You

Build Effective Data
Management Practices
Data management is the ability of a business to use
available information effectively, and implementing
proper data privacy protocols helps you do this more
efficiently.

When using personal data, effective management

helps your business:

Boost sales
Provide more relevant marketing content
Enhance the customer experience
Improve customer support

Privacy principles such as ‘purpose limitation’ and

‘data minimization’ actually benefit a business’
marketing, where sanitized CRM databases are
essential.

The crossover between marketing and privacy is easy

to overlook but can remarkably improve your
business’s ability to organize its campaigns and
communicate more effectively.

Secondly, efficient data management helps your

business provide better control to your customers
over their personal data.

Most data protection laws give individuals more

control over how businesses collect and use their
personal information.

For your business, that means setting up internal

personal data management, like:

Using Data Subject Access Request (DSAR)

forms to respond to customer requests
Publishing a privacy policy to communicate with
your users honestly
Using a cookie consent banner and preference
center to give consumers a choice

Additionally, data privacy practices, such as data

mapping, help address the challenges your business
may face regarding fulfilling consumer requests by
guiding you on how to manage personal data.

Data Privacy Helps You

Minimize Risks and Costs
of a Personal Data Breach
Another reason why data privacy is important? It
helps reduce the costs in the case of a personal data
breach.

A personal data breach happens when a security

incident leads to accidental or unlawful destruction,
loss, alteration, unauthorized disclosure of, or access
to personal data.

It can range from an email sent to the wrong

customer that includes sensitive information to the full
compromisation of an entire IT system by malware.

The financial costs of a data breach

Economically, the costs associated with a personal

data breach are very steep.

In part, the costs are because data protection laws

have fixed penalties and fines related to breaches
and the mismanagement of personal data.

For example, under the GDPR, fines can reach up

to €20 million, or 4% of the company’s global
revenue, for the most severe infringements.

In addition, some laws — like the CCPA — provide a

private right of action that can bring further costs to a
business.

On top of that, any security incident involves

operational costs for a company to review and
improve its systems so that the incident does not
repeat.

A report by IBM found that the average price of a

data breach in 2023 was $4.45 million, representing
a 15% increase over three years.

The reputational costs of a data breach

An overlooked cost of a personal data breach is how

it affects a business’s reputation.

Often, a personal data breach is brought to the

attention of regulators and the public, leading to
negative customer perception.

Exposure like this can take a long time to disappear,

usually inducing communication and public relations
costs.

However, businesses with robust, transparent privacy

practices regarding personal data management will
likely be less impacted by a breach.

While data breaches are always regrettable for a

business and the affected individuals, demonstrating
that you implemented data protection measures to
avoid the breach can help alleviate sanctions from
regulators and public scrutiny.

Check out the biggest GDPR fines issued so

far.

Data Privacy Helps You

Adapt to Tomorrow’s
World Wide Web
Data privacy is important because it helps you
prepare your business for the future.

Think about it.

The development of AI, the imminent end of third-

party cookies, and the yearly — if not monthly —
apparition of new data protection laws constantly
impact our online ecosystem.

Each of these brings specific challenges to

businesses, like how to:

Compliantly harness the power of AI.

Adapt marketing and advertising practices.
Compliantly follow new data protection
requirements.

What do all of these challenges have in common?

They’re all related to data privacy.

The businesses already taking the time to master the

general principles and practices around data privacy
have a massive head start in front of those that aren’t.

Data Privacy Helps You

Keep Up With Changing
Technology
Speaking of today’s online ecosystem, it’s evolving at
an incredible pace.

In-browser privacy-enhancing technologies, such as

Global Privacy Controls or Google’s Privacy
Sandbox, give website visitors greater control over
their personal information.

In the future, browsers will be at the center of privacy

preferences management, as users will be able to
manage their preferences within their browsers,
sending their preference signals to websites
automatically.

The businesses that adapt today to receive and

recognize these preference signals will be able to
provide a better online experience on their website
tomorrow.

Of course, it will take time for businesses to fully

adapt to all these new challenges (and by that time,
I’m sure we’ll be discussing even more changes to
the online environment).

But in the meantime, understanding data privacy will

provide your business with a much-needed stable
foundation.

What’s the Difference

Between Data Privacy and
Data Security?
Data privacy and data security go hand in hand, but
they represent two distinct processes.

While data privacy means keeping personal

information as private as possible, data security
refers to how you protect the information throughout
its entire lifecycle.

Data security includes preventing unauthorized

access but also helps recover lost data should a
cyberattack or other issue occur.

It even covers hardware, software, user devices, and

other technologies.

Why Both Are Important