Companies must pay for data breaches

Heavy penalties and a loss of investor confidence will soon make our online data more secure

In the past several days, the files of the Attorney General of California and a database that includes the health records of the Singapore prime minister and most of his island-nation’s citizens, have been compromised in data breaches. Indeed, ever since the issues of Facebook sharing the private details of some 80 million of its users broke this spring, there is a growing awareness of just how vulnerable each and every one of us is when it comes to the way social media platforms and companies share our personal details and records of our browsing and web habits.

Over the past month, too, Facebook has gone to great pains to promote a new, more responsible privacy policy, one that it says restricts the way our information is shared with third-party apps and companies. Last Wednesday, Facebook shares went into a freefall, losing 21 per cent of its value and wiping an estimated $130 billion (Dh478.14 billion) off its market capitalisation as its growth was curtailed and user expectation severely dented by its failure to adequately protect privacy data. The blow is indeed a sharp one for its shareholders and investors, but it does send a clear message that its failure to protect its users is a severe lapse of judgement.

Any company that engages in the untoward or unscrupulous sharing of privacy data should take note of the market reaction to Facebook, and they would do well to be prepared for a similar hit should they be found wanting. There is a reality that despite the hours of enjoyment users take from sharing photographs and updates on any range of social media platforms, the ultimate benefit comes in the profits made by the companies and shareholders of these companies. At the end of the day, they are business enterprises profiting from our online presence and profiles.

Since May, every company with an online presence in the 28 member-states of the European Union is faced with a new operating reality, one where the privacy of every individual who lives in the social and political bloc is protected under stringent data protection regulations. Failing to adhere means companies face the potential penalty of paying 4 per cent of their global profits. That’s a punitive sanction that provides a very strong incentive for all to keep personal records and privacy data of users very safe and secure.

The lesson for all from these past months of data leaks and lapsed privacy provisions is that any company that is found wanting faces the wrath of regulators, investors and the marketplace.