Fundamentals of Data Compliance

By on
data compliance
Art Kovalenco /

Data compliance delivers benefits to organizations far beyond simply avoiding potential fines for not fulfilling regulatory requirements for collecting, handling, securing, and safely disposing of sensitive data. Not only does compliance enhance your company’s reputation for trust among customers and partners, it also minimizes the risks of a data breach. Compliance improves the overall quality of the data your business relies on increasingly for its success, and it enhances your organization’s operational efficiency and provides a competitive advantage.

The fundamentals of data compliance begin with devising and implementing a comprehensive data security policy that meets your current data handling and security requirements. The policy must be comprehensive, up to date, and adaptable to accommodate new rules, new technologies, and other changes in the compliance landscape. 

A solid compliance strategy does more than just ensure that your organization meets its fiduciary responsibility to protect the data it relies on for its day-to-day operation. Data compliance is now the key to building and maintaining a trustworthy relationship with your customers and business partners.

What Is Data Compliance?

Data compliance identifies the laws, regulations, and standards that apply to your company’s data activities. Compliance entails meeting requirements for the safe storage, legitimate use, and appropriate disposal of sensitive consumer information throughout the data lifecycle:

  • When data is generated, collected, or created
  • Managing data to ensure accuracy and validity
  • Storing and transmitting data securely
  • Accessible to authorized users on demand
  • Used for authorized purposes only
  • Modified and updated as necessary
  • Destroyed in a timely and thorough manner

Your company’s data protection policy is intended to account for the security of all data in its possession and to confirm that your organization meets all applicable data standards and regulations. Even when the policies aren’t required by law, they help demonstrate your company’s commitment to data security. The policy encompasses these areas:

  • Data protections required by law
  • Data protection strategies implemented by individuals, departments, devices, and IT operations
  • Legal and compliance stipulations pertaining to data protections
  • Roles and responsibilities assigned to data custodians and others accountable for specific activities

Data protection audits confirm your organization’s compliance with various regulations governing data practices. The audits identify gaps in your current data processes to enhance your network’s ability to deter data breach attempts.

Why Is Data Compliance Important?

Ensuring your firm’s compliance with applicable data regulations prevents having to pay penalties for non-compliance and avoids potential lawsuits that can harm your company’s reputation. However, data compliance provides many other benefits for your organization:

  • Confirms the effectiveness of your data security measures in detecting and preventing data breaches and other threats
  • Demonstrates to customers, partners, and stakeholders that they can trust you to keep sensitive data safe
  • Mitigates risk by identifying and bolstering any potential weak areas in your data handling practices
  • Improves the accuracy and confirms the validity of your data as part of your compliance audit
  • Identifies inefficiencies in data management processes to streamline workflows and reduce the likelihood of errors or bottlenecks
  • Lets you operate in international markets by ensuring compliance with data regulations specific to Europe and other regions
  • Enhances your customers’ confidence in you by showing them your commitment to data security and regulatory compliance
  • Clarifies your firm’s overall data governance operations by integrating compliance with risk management and data quality initiatives
  • Helps you gain a competitive advantage by leveraging data compliance as an asset that distinguishes your firm in the marketplace

Data Regulations to Know

Many regulations governing the collection, storage, use, and disposal of sensitive data apply only to businesses in specific industries, such as healthcare or finance, or to firms operating in Europe or other regions. U.S. government agencies must meet data standards set by the National Institute of Standards and Technology (NIST) that many private firms adhere to voluntarily.

These are the most common data compliance regulations affecting organizations in the U.S. and overseas:

  • NIST Cybersecurity Framework (CSF) is a voluntary standard that describes best practices for mitigating data security risks.
  • NIST SP 800-53 Rev. 5 (2020), Assessing Security and Privacy Controls in Information Systems and Organizations, serves as a standard for protecting IT systems and the data they process and store.
  • International Organization for Standardization (ISO) 27001 and 27002 present a framework and guidance for planning and implementing information system security.
  • Payment Card Industry Digital Security Standard (PCI DSS) protects sensitive consumer information during credit card and debit card transactions.
  • General Data Protection Regulation (GDPR) is the European Union’s set of laws designed to safeguard the privacy of EU residents.
  • California Consumer Privacy Act (CCPA) applies to companies that do business in California and guarantees residents the right to know how their private data is being used, and to prevent their data from being collected and shared.
  • Health Information Portability and Accountability Act (HIPAA) applies to electronic protected health information (PHI) and other sensitive patient data.
  • Federal Risk and Authorization Management Program (FedRAMP) gives federal agencies guidelines for evaluating cyber threats and assessing the risks they pose to sensitive data.
  • Federal Information Security Management Act (FISMA) defines the actions that federal agencies can take to improve the security of their data and information systems.

ISACA is an international organization that assists security and auditing professionals by providing a control framework called Control Objectives for Information and Related Technology, or COBIT, that covers IT management, governance, security, and compliance.

Several new data regulations that will take effect in 2024 promise to bring more attention to data compliance as a cornerstone of an organization’s security protections.

  • PCI DSS version 4.0: The first compliance deadline for the updated standard is March 31, 2024, at which time companies will need to comply with 13 new requirements. Among these is the need to define a “customized approach” to compliance.
  • Federal Trade Commission (FTC) Safeguards Rule amendment: On May 13, 2024, a new rule takes effect that requires financial institutions to notify the FTC of data breaches that affect at least 500 customers. They are already required to notify the Securities and Exchange Commission (SEC) of such breaches.
  • SEC breach disclosure rules: Smaller reporting companies must comply by June 15, 2024, with a new SEC rule that requires more extensive reporting of cybersecurity incidents.
  • Florida, Oregon, and Texas data privacy laws: On July 1, 2024, new laws will take effect in the states that set rules for handling the sensitive data of consumers residing in those states. A similar law will take effect in Montana on October 1, 2024, and Washington state’s broadening of its My Health My Data (MHMD) Act applies starting March 31, 2024, for larger businesses and June 20, 2024, for small businesses.
  • Federal zero-trust model: In January 2022, the Biden Administration issued a memorandum describing the government’s zero-trust architecture. All federal agencies are required to complete 19 specific tasks by the end of fiscal year 2024 (September 30) in line with the five zero-trust pillars of the Zero Trust Maturity Model devised by the Cybersecurity and Infrastructure Security Agency: Identity, Devices, Networks, Applications and Workloads, and Data.

Data Compliance Challenges

Once you have your firm’s data protection policy in place, the primary challenge of data compliance is keeping the policy up to date as new data laws take effect and new technologies arrive. For example, machine learning (ML) and other AI techniques promise to enhance data security by identifying and mitigating risks instantly via automated response workflows. Blockchain likewise improves trust by automating data authentication and verification, which reduces the threat of fraud, data corruption, and data manipulation. 

In particular, zero-trust security models support innovative approaches to data compliance, but the systems can be complicated to implement:

  • Classification of the sensitivity of specific data
  • Encryption of sensitive data at rest and in transit
  • Masking or replacing sensitive data with a token to allow its use without exposing private information
  • Fine-grain segmentation of data to restrict access to the minimum required for each request
  • User and device authentication based on the need to know and each user’s risk profile
  • Data loss prevention applied to copying, printing, emailing, or otherwise sharing sensitive data

Overcoming data compliance challenges entails 10 steps:

  1. Understand your company’s legal requirements.
  2. Classify and manage your data.
  3. Create and implement privacy policies that include consent management.
  4. Implement data security measures based on established industry and government standards.
  5. Train employees and promote data-security awareness in their day-to-day work.
  6. Conduct data policy audits and assessments on a regular basis.
  7. Plan for a range of incident responses.
  8. Maintain records of compliance efforts and document compliance activities.
  9. Be aware of the data protections in place at the vendors and third parties your business interacts with.
  10. Monitor compliance efforts continuously and regularly update your compliance strategy.

Organizations that embrace data compliance as a means of enhancing their internal operations and external relationships can transform the process into an asset that improves their bottom line and helps them achieve their short-term and long-term goals.