What are the Risks Associated with Collecting Personal Data?

• 24 Nov 21


Personal data breach

Nearly every company deals with personal data. Indeed, data is the fuel for the knowledge economy, and is often crucial for the operations of any business.

Unfortunately, the occurrence of various high-profile data breaches by some of the largest companies in the world over recent years has led to an increasing focus on privacy rights and an increasingly strict data enforcement climate.

This means that the risks associated with companies collecting personal data have also grown substantially in recent years.

In this article, we highlight 5 key risks that companies face when collecting personal data.

Risk 1: High cost of data compliance

Companies that collect personal data are required to comply with a wide range of data privacy regimes across the world. This is due not only to the cross border nature of personal data transactions, but also due to the extra-territorial nature of various data privacy regimes.

In this regard, it would be prudent for companies to take reference to the high watermark of data privacy standards across jurisdictions, in order to ensure compliance with all regimes. This means that the costs that companies would need to expend to comply with such standards could potentially be high.

In particular, data privacy regimes across the globe generally require companies to adopt measures to safeguard personal data in their possession.

Depending on the amount of personal data in the company’s possession, the potential costs that a company may incur in drawing up such security measures (e.g. state of the art technology) could be very high, and could prove to be a drain on the financial resources of a company.

Risk 2: Who is responsible for ensuring compliance with data protection legislation?

Collecting the personal data of a large number of individuals also means the companies will need to be accountable towards more individuals over how their personal data is used.

Data subjects may even have the right to request for companies to provide information on how their personal data is used, and companies are required to provide such individuals with accurate information on this – this may depend on the jurisdiction as well as the nature of the personal data in question (i.e. whether the personal data is particularly sensitive, such as where it relates to matters such as the individual’s religion, sexual orientation etc).

A failure to provide accurate responses within a stipulated timeframe may expose companies to severe liabilities.

Risk 3: Risk of data breach

Companies that suffer a data breach and are found to have failed to implement adequate security measures could be subject to very stiff penalties from regulators.

Even if a company is not found to have been liable for such breaches, the negative publicity surrounding such data breaches could have a huge impact on the company’s reputation in the marketplace.

Such negative effects on the company’s reputation could result in individuals refraining from furnishing their personal data to the company moving forward, and this may hurt the company’s operations and revenue streams.

Risk 4: Wide personal data definition

The risks that we have highlighted above are exacerbated by the fact that personal data is generally widely across many jurisdictions. The general definition of personal data is “data that can be used to identify an individual”.

Accordingly, personal data potentially covers an extensive range of information – not just information such as names and contact details. The ambit of personal data could even include information such as a person’s bank account number.

What this means then, is that companies remain susceptible to the risks that we had highlighted above in relation to a wide range of data. Companies should thus be extremely careful to ensure that their data collection and processing practices as a whole remain stringent and top notch.

Risk 5: Risk of data breach can never be completely eliminated

The unfortunate reality is that the risks that we had highlighted above can never be completely eliminated.

Whilst measures can certainly be taken to alleviate these risks, the truth is that the greatest reason for data breaches remains human error. Human error often remains the weakest link in any compliance chain, and we all err from time to time!

Besides, even if the humans involved remain cautious, computer hackers out there often devise new ways and means to breach computer security systems – the enemy is far stronger than many of us expect.

In this regard, companies always need to be on their guard. While personal data may be indispensable for the operations of a company, they must be treated with extra care all the time. Vigilance is key. Even if you have been religiously compliant with the applicable privacy laws, data security breach can still be a problem.


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*The above content does not constitute, nor is it offered as, legal advice of any kind. GLS Solutions Pte Ltd is not a law firm and any support provided pursuant to this entity is not regulated legal advice or legal opinion.  


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