A Data Privacy Checklist: 10 Things the CEO Should Do to Protect Against an E-tastrophe

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Protecting data has become increasingly difficult and expensive for companies. As we have seen, the liabilities for failing to do so can include not only business disruption, financial penalties, diminished consumer trust, government investigations and damage to a company’s reputation, but potentially the loss of the job for the CEO.

What can you, as CEO, do to protect your company? Here are 10 steps to consider:

1. Designate an executive to coordinate and be accountable for the cyber-security program.

2. Ensure that representatives from legal and compliance are assigned to the team.

3. Have your chief risk officer (or similar senior executive) identify material risks (both internal and external) to the security of the data the company holds, and explain different types of breaches and their ramifications to the company.

4. Ask the CIO to compare your company’s cyber-security measures against others in your industry and report back to the executive/cyber-security teams. Make sure you research “what is colocation” and other terms you might need to know.

5. Communicate with your peers across industries about what they are doing, and establish a network to easily inform each other and work through challenges and solutions before, during and after a cyber-security breach.

6. Have your HR department implement across-the-board employee training that addresses cyber-security risks.

7. Task your CIO with building a testing strategy and plan to identify potential security failures.

8. Periodically, bring in a third-party consultant to review your company’s cyber-security procedures.

9. Have your CFO lead an executive team discussion about how cyber-security breaches are addressed by your insurance.

10. Receive a monthly briefing from your CIO on changes in cyber-security rules and regulations, as well as any risks that the company was confronted with and how they were handled.

The FTC has settled almost every cyber-security action through a consent order—a settlement agreement enforceable by the government. These typically require that the company implement more fulsome cyber-security measures and provide detailed requirements for that implementation.

In addition, settling companies are often required to pay for independent, certified third-party professionals to conduct periodic reviews of their cyber-security. Failure to abide by the terms of the consent order can expose a company to a potential liability of $16,000 per day per violation. While FTC settlements routinely involve injunctive relief, they occasionally involve monetary penalties. The largest monetary penalty to-date in a cyber enforcement action—a November 2012 settlement with Google—imposed a penalty of $22.5 million.

Exposure to private plaintiff class action lawsuits may pose an even greater liability for your company, because even if your company is able to successfully defend such lawsuits, the cost of defending them can be substantial.

Data privacy is often an over-looked compliance risk. The liability risk for data privacy breaches is significant and one to which today’s CEO needs to pay close attention.

Timothy Cornell leads Clifford Chance’s U.S. Antitrust Practice and advises clients on antitrust issues, mergers and acquisitions, intellectual property and technology licensing, among other areas.

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