Failure to Comply With Data Protection Regulations Can Cost Firms Nearly $15 Million
The average cost for organizations that fail to comply with data protection regulations is $14.82 million, a recent research study warned. These costs stem from a variety of issues, including disruption to business, legal settlement costs, and fees or penalties imposed by regulators.
The results of the report underscore the importance of preparing for upcoming privacy regulations such as the European Union (EU)’s General Data Protection Regulation (GDPR), which will take effect on May 25.
The Rising Cost of Complying With Data Protection Regulations
The effort required to comply with data privacy regulations is significant. The report estimated that audits, the development of incident response plans, staff certification and other compliance-related activities could add up to an average cost of $5.47 million, a 43 percent increase from 2011.
This jump reflects the increasing complexity of security risks and data privacy issues, the authors suggested. In addition, the average cost of establishing incident response strategies to achieve compliance increased by 64 percent between 2011 and 2017, while investment in technology went up by 36 percent.
The study, conducted by the Ponemon Institute on behalf of Globalscape, also noted that the cost of compliance varies from sector to sector, depending on the sensitivity of the data organizations must protect. For example, the average cost of complying with data protection regulations in the financial services industry is $30.9 million, versus just $7.7 million for media companies. Smaller organizations also tend to pay more for compliance, since larger firms are more likely to have in-house expertise and sophisticated data protection technologies.
Reducing the Cost of Compliance
The report revealed that the cost of noncompliance is 2.71 times higher than the cost of aligning with data protection regulations. The authors outlined several steps organizations can take to reduce expenses related to compliance. Centralizing the governance of compliance activities, for example, can save firms more than $3 million. Conducting compliance audits, meanwhile, can save up to $2.86 million.