7 Major Legal Repercussions Companies Could Face Due to Lack of Cybersecurity Measures

We’ve gathered insights from seven experts, including a partner and a cybersecurity specialist, to shed light on the legal repercussions companies could face because of a lack of cybersecurity measures. Their responses range from the risk of data breach class-action lawsuits to the potential loss of lucrative government contracts. Dive into these insights to understand the importance of robust cybersecurity measures in today’s digital landscape.

  • Risk of Class-Action Lawsuits
  • Yahoo’s Data Breach as a Cautionary Tale
  • Lawsuits and Fines
  • Damage to Company Reputation
  • Facing HIPAA Violation Charges
  • Non-Compliance with GDPR
  • Losing Lucrative Government Contracts

1. Risk of Class-Action Lawsuits

A lack of cybersecurity measures can expose companies to legal repercussions, including data breach class-action lawsuits. When a data breach occurs due to insufficient cybersecurity safeguards, it often exposes sensitive customer or employee data, such as personal information and financial records.

This can lead to identity theft, financial losses, and emotional distress for the individuals affected. In response, affected parties may file a class-action lawsuit against the company, seeking damages for the harm they suffered.

To mitigate this risk, companies must invest in robust cybersecurity measures to safeguard data and reduce the likelihood of data breaches and subsequent legal actions.

James Miller, Partner, GDPR Advisor

2. Yahoo’s Data Breach as a Cautionary Tale

A lack of cybersecurity measures can expose companies to various legal consequences, one of the most common being data breach-related lawsuits. When a company fails to properly protect sensitive customer or employee data, it may be at risk of a data breach, leading to “Data Breach Lawsuits.”

A good example was Yahoo, which experienced one of the most famous data breaches ever, affecting up to 3 billion accounts (exposing names, email addresses, phone numbers, dates of birth, etc.). This resulted in a $35M fine and 41 class-action lawsuits. All this was due to hackers spear-phishing Yahoo employees; all it took was one of them to click the link.

This could have been avoided in several ways, beginning with proper employee security training, but ultimately rooted in the company’s security posture. Using tools such as SAMMY, the OWASP SAMM management tool, businesses can start their cybersecurity journey.

Michaella Masters, Growth Strategist, Codific

3. Lawsuits and Fines

A lack of comprehensive cybersecurity measures can significantly expose companies to legal repercussions. Inadequate protection against cyber threats can result in data breaches, including sensitive customer or employee information being compromised. This can lead to a cascade of legal consequences, including lawsuits, fines imposed by authorities for non-compliance with regulations such as GDPR or HIPAA, and penalties for breaching contractual obligations to safeguard data under their control.

The fallout from data breaches can also extend to reputational damage, as consumers and partners may lose trust in a company’s ability to protect information effectively. The costs associated with public relations efforts to repair this damage can also be substantial on top of any settlement payouts or fines.

These risks highlight the necessity of proactive cybersecurity strategies as an integral part of every company’s risk management and operational framework.

Colter Ets Hokin, Cybersecurity Specialist, Check Point Software Technologies

4. Damage to Company Reputation

In the absence of robust cybersecurity measures, companies expose themselves to a plethora of legal repercussions. When a breach occurs, sensitive customer data can fall into the wrong hands, leading to potential misuse. This can subsequently result in lawsuits for negligence or even breach of contract.

For instance, in the United States, companies can face severe penalties under the California Consumer Privacy Act (CCPA). Similarly, in the United Kingdom, the Data Protection Act 2018 imposes stringent regulations on data protection and privacy, while in Canada, the Personal Information Protection and Electronic Documents Act (PIPEDA) governs the collection, use, and disclosure of personal information. Violations of these laws can result in hefty fines and damage the company’s reputation.

Rick C., Licensed Paralegal and Legal Assistant, Kahlon Law

5. Facing HIPAA Violation Charges

A big one that we deal with is HIPAA regulation. HIPAA and similar frameworks create legal expectations on handling certain data, such as human patient data. Outside of general irresponsibility and lack of adherence to our policies, a major cybersecurity incident could expose us to HIPAA violation charges.

Trevor Ewen, COO, QBench

6. Non-Compliance with GDPR

A lack of cybersecurity measures can expose your company to legal repercussions. One big consequence is non-compliance with the GDPR because of a lack of security measures.

A lack of appropriate protection measures can expose your data subject’s data online. This can be because of your or your data processor’s security. Either way, this can lead to major fines depending on the type of breach:

  • Minor breaches: up to €10 million or 2% of global annual revenue for the previous year, whichever is higher.
  • For severe violations: up to €20 million or 4% of global annual revenue for the previous year, whichever is higher.

It is, therefore, crucial for data controllers to ensure that their data processors have sufficient security measures in place.

The impact also goes beyond financial penalties, affecting your company’s reputation and customer trust and potentially resulting in civil lawsuits and regulatory investigations.

Søren Jensen, Junior Digital Marketer, CyberPilot

7.  Losing Lucrative Government Contracts

If you want to work with the federal government, you must meet their cybersecurity standards. If anyone involved with the contract sees a gap in your cybersecurity, they’ll have no choice but to go with one of your competitors—plain and simple.

You can probably get away with poor cybersecurity when partnering with some private companies, but the government is very risk-averse with its data. At the same time, signing contracts with the government can be very lucrative. Prepare your cybersecurity infrastructure now to be a more appealing partner in the future.

Corey Donovan, President, Alta Technologies

Don’t Just Brace for Impact, Take Action: Implementing Expert Tips for Cybersecurity

Okay, now that we’ve sufficiently scared you with all the things that could go wrong, let’s flip the script. It’s time to focus on what you can actively do to safeguard your company from these legal quagmires. Grab a notepad or open up a fresh Google Doc—these expert-backed tips are your blueprint for a secure digital fortress.

1. Make Cybersecurity a Top Priority in Budget Planning

  • Allocate a designated budget for cybersecurity measures.
  • Consider it an investment, not an expense. It’s like buying insurance—you hope you never need it, but it’s invaluable if something goes wrong.

2. Educate and Train Your Team

  • Conduct regular cybersecurity training for employees.
  • Teach them how to recognize phishing emails, the importance of strong passwords, and other basic yet crucial security practices.

3. Regular Audits and Risk Assessments

  • Schedule regular security audits to identify vulnerabilities.
  • Use tools like OWASP SAMM, recommended by Michaella Masters, to assess and improve your security posture.

4. Legal Consultation

  • Consult with a legal team to understand the implications of laws like GDPR, HIPAA, or CCPA on your operations.
  • Ensure your privacy policies are up-to-date and compliant.

5. Third-Party Vetting

  • Before entering a partnership, vet the other company’s cybersecurity measures.
  • Ensure that they meet your standards and the standards of legal regulations in your industry.

6. Be Transparent with Customers

  • Be open about your security measures without giving away sensitive operational details.
  • Transparency builds trust, and trust is good for business.

7. Prep for Government Contracts

  • If you aim to work with the government, meet their cybersecurity standards.
  • A lapse here could mean missing out on big, lucrative contracts. Like Corey Donovan said, the government is risk-averse but a lucrative partner.

Cybersecurity Game Changers: Next-Level Strategies to Boost Your Defense

Alright, you’ve got the basics down—awesome! But why stop there? Let’s dive into some next-level strategies to elevate your cybersecurity game further. These tips are your way of going above and beyond to protect your business, reputation, and relationships. Ready to geek out on some advanced tips? Let’s do it.

1. Multi-Factor Authentication (MFA) All the Way

  • Make MFA mandatory for accessing any sensitive company data or systems.
  • It’s an extra layer that can make a difference in securing accounts.

2. Embrace Endpoint Security

  • Ensure every device connected to your network is secure.
  • Utilize endpoint security software to monitor and control endpoint devices.

3. Data Encryption

  • Don’t just store data; encrypt it.
  • Use strong encryption algorithms to protect both stored and transmitted data.

4. Regularly Update & Patch Software

  • Outdated software is a treasure trove for hackers.
  • Ensure automatic updates are enabled, and consider a patch management tool to keep everything up-to-date.

5. Invest in an Incident Response Plan

  • Have a detailed plan for how to respond when (not if) a security incident occurs.
  • Conduct dry runs to test the plan’s effectiveness and tweak as necessary.

6. Monitor and Analyze Network Traffic

  • Use network monitoring tools to detect suspicious activities in real time.
  • Consider AI-based solutions that learn and adapt to new types of cyber threats.

7. User Behavior Analytics

  • Monitor patterns of user behavior to identify unusual activities.
  • Anomalies could indicate a compromised account and should be investigated immediately.

8. Isolate Critical Systems

  • Segment your network to isolate mission-critical systems from general access.
  • It limits the potential damage from a cyber-attack.

9. Ethical Hacking

  • Consider hiring an ethical hacker to identify vulnerabilities in your system.
  • They think like the bad guys but work for the good of your company.

10. Foster a Culture of Cybersecurity

  • Make cybersecurity everyone’s responsibility.
  • Everyone should be aware, educated, and involved, from the top brass to the new intern.

Implementing these advanced strategies will protect your business and place you miles ahead in the cybersecurity race. Cyber threats are evolving, and so should your defenses. Think of cybersecurity as a living, breathing part of your company that grows and adapts—just like everything else in the business. You got this! 🛡️💻