Data Privacy: How Regulations Affect Businesses

The upcoming artificial intelligence (AI) regulations in the European Union (EU) are a sign of what’s to come. Data privacy laws are becoming increasingly complex and numerous, making it imperative for businesses to find a solution that goes beyond simply addressing current challenges. Consider future trends in data privacy regulations and learn how to comply with them.

Today’s AI Solutions

The European Commission released its draft proposed regulation on April 21, 2021, three years after the implementation of the EU General Data Protection Regulation (GDPR). The regulation outlines rules for the use of AI systems and the data they gather, and, similar to the GDPR, applies to companies based in or associated with the European Economic Area (EEA). The regulators aim to close common compliance loopholes, such as the application of the regulation to AI data used in the EEA even if it was collected and processed outside the EU.

The draft regulation aims to guarantee that AI utilized in the European market respects individuals’ privacy and personal information rights. Specifically, it focuses on safeguarding against ethical and data privacy risks associated with AI, such as bias in data sets and discriminatory outcomes.

The proposed regulation covers AI providers, users, distributors, and importers and include rules for data risk management, transparency, conformity assessments, and other related matters. This regulation targets a novel technology that has not previously been subject to regulation. Nevertheless, it aligns with the overall trend of data privacy laws. As the systems handling our personal data have grown in size and influence, with the information they collect becoming increasingly specific, legislators and regulators have expanded their oversight to ensure that individuals’ privacy rights are protected.

A History of Protections

The EU has a long history of promoting data privacy protection, dating back to the 1995 EU Data Protection Directive. The US followed closely with the 1996 Health Insurance Portability and Accountability Act (HIPAA) and the 1998 Children’s Online Privacy Protection Act (COPPA). Over the past two decades, data privacy regulations have emerged and evolved globally, including the 2003 California State Data Breach Notification Law, the 2012 EU Right to be Forgotten, the 2018 EU General Data Protection Regulation (GDPR), and the 2020 California Consumer Privacy Act (CCPA) and its amendments. These are just some of the numerous regulations established to safeguard the privacy and personal data of citizens, customers, and users of various tools and platforms, both online and offline.

Personal Data Privacy Needs

Different regulations exist with varying requirements for compliance in different locations, but most of them address the same concerns regarding personal information.

• Notifications: Organizations must inform their customers about the data they collect, the purpose of collecting and processing it, and who it is shared with.
• Request for Personal Data: Customers have the right to request access to their personal data collected by organizations at any time.
• Consumer Consent and Opt-Out: Processing personal data without prior consent is not allowed.
• Deletion: Customers have the right to request the deletion of their personal data.
• Correction: Errors in customer personal data may be corrected.
• Data Security Solution: Companies must guarantee the security of personal data.

The expansion of data privacy regulations is a result of efforts by lawmakers to address the use of technology by both established and emerging industries to collect and monetize personal data, while also limiting the potential risks of data exposure and protecting the right to privacy. To enforce these data privacy rules, regulators have given them consequences. For instance, violations of GDPR can result in fines of up to €20 million or 4% of a company’s global annual revenue. In Europe, privacy regulators have imposed over $331 million in fines for non-compliance with GDPR regulations.

Due to the increasing scrutiny, every industry that handles personal information has experienced violations of data privacy regulations by some of its members. Once an industry starts collecting personal data, it becomes a target for malicious actors who aim to obtain the data for illegal and lucrative purposes.

The Impact of a Data Breach

The challenges faced by companies in adapting to new privacy laws are compounded by the fact that regulators consider more than just the ongoing management of personal data. Data breaches and leaks have become increasingly frequent, leading regulators to evaluate not only a company’s management of personal data before a breach but also its response to the incident. Following a breach, auditors will assess whether the company has taken sufficient steps to improve its procedures, and regulators may impose additional fines if they believe the company’s actions to prevent future breaches are inadequate.

The consequences of these costly lessons are felt across all industries. Visitors are now asked for consent before accessing websites through landing pages. Retailers implement privacy and spam policies that comply with the strictest regulations in the regions where they operate. Cyber insurance providers assess risk based on the amount and type of personal data held. Lastly, school policy managers are working to secure sensitive data effectively.

The Complex Landscape of Data Privacy

Companies from all industries are facing an increasingly complicated and diverse set of privacy regulations. Global corporations face difficulties in navigating conflicting requirements across different regions. The implementation of stricter regulations following data breaches adds to the difficulties in protecting personal data during day-to-day operations. The introduction of new technology also brings new regulations that affect existing operations and limit new opportunities, with the threat of fines or negative publicity always present like a sword hanging over the company.

Solutions and Tools

Businesses often address technological challenges with technological solutions. As privacy regulations become effective, the necessary tools for companies to comply also evolve. Currently, there is a whole industry dedicated to providing businesses with platforms that provide visibility into the storage, processing, and replication of personal data.

However, these solutions bring their own set of difficulties. For example, how to identify personal data amidst the massive amounts of information processed by a company? How to maintain constant awareness of personal data as it is entered, copied, deleted, and transferred? What to do when third-party solutions access personal data through integration with the network? How to address the addition of new databases or cloud repositories, or encryption of information? How to ensure the protection of personal data as it crosses regions with varying regulations? And how to comply with multiple laws affecting the same data simultaneously?

An effective solution for data privacy and compliance must be flexible enough to accommodate different regulations for current tools, as well as new technology and sources of personal data.

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