Data Privacy and ESG Risk: 7 Critical Issues Every Business Must Answer
As businesses go digital and their products and services grow more complex and data-driven, privacy and security concerns relating to this data have emerged as major sources of risk for them. Due to how often personal data is collected and used, data privacy and cybersecurity have become material environmental, social, and governance (ESG) issues (MEIs) for companies in a wide range of sub-industries.
To effectively manage data privacy and cybersecurity-related ESG challenges, the following is a list of seven questions that should be addressed by any firm.
Question One: Digitization is a key part of the transition to a greener economy. How can my company balance the risks of data privacy and cybersecurity with the benefits of digitization?
Most firms manage cybersecurity as a MEI by excelling in three areas:
- Data privacy and security policy: A company’s public statement of privacy and cybersecurity commitments.
- Data privacy program: Gives evidence that a corporation has adopted controls that reflect applicable privacy laws, regulations, and industry standards.
- Cybersecurity program: Demonstrates that a corporation has put in place industry-standard security controls to reduce the risk of incidents and breaches.
Organizations that want to create strong cybersecurity programs should follow ISO/IEC 27001’s information security management system standards.
Question Two: What can my company do now to make privacy an ESG priority?
Setting a few manageable short-term goals related to staff training and governance is a great way for businesses to start addressing ESG issues linked to cybersecurity right away.
When it comes to cybersecurity, a company’s employees are both one of its most valuable assets and one of its most dangerous weaknesses. To make cybersecurity an ESG priority, firms can educate staff at all levels about typical risks and how to report them and perform continuing awareness exercises.
Companies should also create and implement data privacy and cybersecurity governance structures, data subject policies, and risk assessments.
These evaluations should regularly examine, document, assess, and mitigate the company’s risks linked to privacy policies, contractual privacy requirements, internal dataflows, potential threats and vulnerabilities, and data and organizational protection.
Question Three: What essential questions should our organization’s leadership be asking about cybersecurity?
Global CEOs identify cybersecurity as the top danger to growth, yet many firms are still unsure how to handle this MEI in a world of quickly expanding technology. Corporate leaders should start by asking questions about their organization’s exposure to threats, governance practices, and plans in case of a breach or other cybersecurity incident. As a starting point, consider the questions listed below.
- Threat Encounters
Questions about vulnerability might include, “How exposed is our organization to cybersecurity threats? Where are our major flaws? What data privacy and cybersecurity incidents have our colleagues had, and what was the impact? The answers to these questions will differ depending on the business model, industry, and geography.
- Governance Procedures
When it comes to governance, corporate leaders should ask questions like, “How do our data program and cybersecurity program use best practices?” What is the function of our leadership in the case of an incident?” As discussed in question four below, governance is critical in managing cybersecurity as a MEI, and executives should strive to foster a culture of data privacy and protection.
- Response to Incidents
As cybersecurity and data privacy threats continue to grow in number and complexity, business leaders can’t afford to put off making a plan for a quick response. “What are our business recovery strategies in the case of a cyber incident?” And what are the levels of defense we have in place?” are both good questions to start.
Question Four: What role does corporate governance play in mitigating cybersecurity risks?
Building strong cybersecurity and cyber resilience programs from the top down is the best way to build a culture of data privacy and protection. Businesses that follow best practices will create a specialized role to handle privacy and cybersecurity issues.
In addition, boards of directors and senior management should also understand technology, learn about best practices for cybersecurity, and take the lead in supporting and promoting privacy and cybersecurity risk management.
Moreover, business leaders must equip their staff to detect and respond to cybersecurity risks. This means setting up a formal way for people to report incidents, making a strong response plan, and making sure employees at all levels know how breaches will be handled.
Question Five: What are some of the most important components of effective privacy, data, and cybersecurity policies and programs?
A strong data privacy and security policy, data privacy program, and cybersecurity program are needed to handle cybersecurity and data privacy issues effectively.
- Policy on Data Privacy and Security
An effective data privacy and security policy displays a commitment to promptly notify data subjects of a data breach or policy change. Corporate leaders should ensure that their data privacy and security policies demonstrate a commitment to implementing the most up-to-date data protection standards, obtaining user data only through lawful and transparent means, and ensuring that third parties with whom data is shared follow the company’s policy.
- Program for Data Privacy
A strong data privacy program should have governance frameworks for privacy management, frequent employee data privacy training, and clear and accessible ways for data subjects to raise privacy issues.
- Program for Cybersecurity
Effective cybersecurity programs should incorporate cybersecurity governance structures as well as operational measures to detect and respond to data breaches and cyberattacks. These elements should be subjected to internal and external security audits, assessments, and penetration testing on a regular basis.
Question Six: What are the long-term risks of a data privacy breach or cyberattack, and how can my organization recover from one?
More and more businesses are realizing that cyberattacks are inevitable, whether they happen directly to their own data infrastructure or through their supply chains.
Risks from data breaches and cybersecurity incidents, like those from other issues, range from operational and corporate disruptions to reputational harm and legal repercussions. Recovery usually takes time and requires putting money into the policies and programs outlined in question five. Organizations that put a high priority on building this essential infrastructure will be better able to handle the fallout from increased cybersecurity and data privacy risks.
Question Seven: How does my ESG risk profile change because of cybersecurity?
In general, around 20% of cybersecurity risks are considered to be unmanageable, owing to the fact that some of the risk is tied to acts made by individuals outside of the firm, such as hackers.
Some businesses, such as banking, are particularly vulnerable to cybersecurity threats. Businesses in such industries will be assigned a higher default exposure score, which will be factored into their ESG Risk Rating evaluation.
Some companies will have their exposure scores raised above the default levels for their industry because of operational factors. For example, mobile game companies that process a lot of personally identifiable information, social media companies that make a lot of money from selling user data, and companies that process financial transactions (e.g., credit card companies). Several sectors, like commercial services and banks, have relatively few major exposure indicators (MEIs), making cybersecurity a crucial part of their risk assessment.