Businesses can get into serious legal trouble if they don’t take care of customer data. But, that’s not the only reason that data privacy is important. Improper access to data and data breaches can have profoundly negative consequences on your employees and your users. Handling personal data correctly not only protects your business, but also shows that you’re treating your customers and employees ethically—and ensures that their data is safe from prying eyes.

To meet those lofty goals, businesses need a comprehensive approach to data privacy grounded in modern best practices.

What is Data Privacy?

Before diving into the mechanics of data privacy, it’s important to understand the field’s evolution and how we got to where we are today.

A History of Data Privacy

The Privacy Act of 1974 is arguably the first data privacy act passed anywhere in the world. Given the rise of electronic databases across government agencies and the ease of sharing data between them, there were new avenues for potential abuse of private information. In passing the law, the US government established four principles that have heavily influenced subsequent data privacy laws.

First, it requires government agencies to show individuals a copy of any records it keeps on them. This is very similar to the “Right to Access” that appears in later laws. Second, it outlined “fair information practices,” which were designed to better manage how government employees collected and used personal data. Third, it restricts how agencies should share personal data with individuals and other agencies, though law enforcement was generally exempted from this practice. Fourth, it allowed people to sue the government for mishandling the data, establishing that data privacy was important and deserved a legal remedy when it was violated.

The next major data privacy law came in 1998, with the Health Information Portability and Accountability Act, or HIPPA. One of the critical innovations of this approach to data privacy was the acknowledgment that some kinds of personal data were more sensitive than others and required greater safeguards. In this instance, medical information was put in the spotlight. While it has transformed how the medical industry handles personal information, it was only a glimpse of things to come.

While the Privacy Act of 1974 and HIPPA focused on governmental and medical records, recent laws have focused on personal information of nearly every type and across all industries. The General Data Protection Regulation, which went into effect in the EU in 2018, heavily restricted how companies could use data, required consent for data use, and created a “right of deletion” for personal data held by companies. Likewise, the California Consumer Protection Act, which went into effect in 2020, places a strong emphasis on consent when processing personal data and allows for legal remedies in the case of a data breach.

Why Do Companies Retain Records, Anyway?

Given the headache of managing data in the modern regulatory environment, it’s fair to wonder why companies do it. Here are the core reasons companies collect, store, and manage data as a part of their regular business.

Provide Core Business Services

The first and most important reason companies collect and store information is to provide their core business services. Imagine that you’re a retail company trying to fulfill an online order without the customer’s name, address, or credit card information. It would be impossible! Nearly all businesses need some customer information to run their business. However, for many organizations, the complexity of the data collected is much higher.

For example, a mortgage company may need detailed information about employment and pay and one or multiple credit reports. And it may need to hold onto them for a while, or request updates, as the customer in question shops for a home during a changing economic environment. Or a medical company may hold extensive information about a patient’s health and healthcare, with records that date back years. Doctors need that information to provide the right care to their patients.

Your company may differ from those listed above. However, the fact remains that there are likely fundamental business processes that you would be unable to run without collecting and using customer data.

Analyze and Project Business Performance

Customer data may also be needed to analyze and project business performance. Historical reporting often tangentially or directly requires customer data. Without it, there would be holes in the report and gaps in the business’ understanding of how it was doing. However, historical reporting is only part of the equation. Businesses need to innovate to remain competitive and want to find ways to increase their sales and revenue. Data, especially customer data, may hold the secrets to unlock these advances.

Meet Regulatory Requirements

Sometimes, organizations must hold on to personal data for a certain period to meet regulatory requirements. This is more common when the organization or the information it keeps are related to finance, medicine, or education—but it can happen in any industry. It’s important to ensure that your business complies with these laws, as failing to do so can result in severe fines and a significant hit to your company’s public reputation.

Learn More About Data Privacy Regulatory Compliance

Handing data is a core part of just about any business operation today. Given that it’s so central to what businesses do, it’s important that they both manage data as efficiently as possible and comply with the privacy laws worldwide that dictate what they can’t and must do with their data.

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