What Are the Potential Ramifications of Data Breaches for Businesses?

In any sector, a data breach can have extensive financial consequences for a business. Here are some key questions businesses should consider.

Can Business Entities Be Liable for Individuals’ Criminal Acts?

In general, corporations tend to avoid liability when people experience some type of harm caused by a criminal’s illegal actions. However, companies will be liable if they had reason to know of a potential harm and failed to take precautions. Everyone can appreciate the danger presented by cyber criminals, and it is incumbent on corporations to implement defensive measures to prevent data breach liability.

What If a Business Outsources IT?

Many businesses rely on IT service providers to protect them against having their data compromised. However, a third party’s responsibility will not exculpate a business for the financial harm that its customers’ suffer from a data breach. Businesses may sometimes be liable for the acts or omissions of other businesses with whom they have an agency relationship.

Are There Legal Obligations to Respond to Data Breaches?

Depending on where they operate, many businesses have to enact certain cybersecurity procedures as a matter of state law. There may also be a statutory obligation to notify customers of a data breach.

Ultimately, it is imperative to have effective data management policies. Businesses need to prepare themselves to prevent and respond to breaches.