What You Should Start Doing Today to Prepare for GDPR and Privacy Shield
GDPR will apply to almost all organizations who monitor or process the personal data of European citizens, without any regard to the physical location of the processor or controller. Although the penalties for non-compliance with GDPR will not be enforced until mid-2018, organizations that collect or process the personal data of EU citizens may have a lot of work to do to be ready. Likewise, although the Privacy Shield has encountered some roadblocks to its adoption, it seems likely that it will be adopted in some form and companies considering the Privacy Shield have some preparation to do before they can adopt it. We recommend that companies consider the following to prepare for GDPR and Privacy Shield:
- Perform a data inventory to understand what personal data your organization collects, how it is processed, where it is stored, how it is protected, and who may have access to it. Put processes in place to conduct Privacy Impact Assessments if your organization may be engaging in high-risk processing (it is likely that you will need to perform such an assessment if your organization handles any of the particular special categories of personal data).
- Begin drafting or revising your written information security policies to ensure the appropriate technical, administrative, and physical measures to protect personal data and employ proper training for all your employees. Ensure that procedures are in place to continually monitor compliance with these policies prior to, during, and after processing of personal data. Begin performing a gap assessment and consider participation in certification programs.
- Maintain detailed records of the processing performed on personal data.
- Review your product development process to ensure that privacy risks are considered early in the process and that your products and services only collect and maintain the minimum amount of personal data necessary for the proper performance of the products and services.
- Review and revise your methods of obtaining consent from data subjects to ensure that specific, informed, unambiguous opt-in consent is provided before processing data.
- Review your ability to comply with the data subject’s right to be forgotten and new data portability rights. You must be able to erase personal data and transfer the data to another provider when technically feasible.
- Review your cyber-incident response plans and update if necessary to be able to implement notification to Supervisory Authorities within 72 hours of a breach.
- If you are using BCRs or SCCs for trans-Atlantic data flows, you should review them for compliance with the new requirements of GDPR. Draft addendums to SCCs and other contracts as necessary to address the onward transfer restrictions of the Privacy Shield. This includes ensuring that downstream entities comply with limitations on purpose and meet all of the Privacy Shield requirements, including remediating any unauthorized processing by the downstream entity.
- Begin to search for qualified Data Protection Officers (DPO). Under GDPR, organizations that regularly or systematically gather personal data as part of its core activities, or that process large amounts of sensitive personal data, will need to appoint a DPO who has the authority and independence to inform the organization of their obligations under GDPR, monitor compliance, train the organization’s internal staff, and conduct internal audits. The DPO will also act as the organization’s point of contact for data subjects’ inquiries, withdrawals of consent, right to be forgotten requests, and other related rights.
- Review insurance policies for scope and limits of coverage. Consider if your policy includes global or enterprise coverage, what types of data issues are covered, and the potential for increased costs and liabilities under GPDR and the Privacy Shield.
Companies should be aware that GDPR shifts the issue of privacy and personal data protection even further from an information technology issue to a Board of Directors and C-suite issue. GDPR will have a tremendous impact on the day-to-day operations, costs, and potential liabilities of the company that demands board level attention. Furthermore, under Sarbanes-Oxley in the United States, public companies may need to disclose GDPR’s increased operational costs and potential for high liabilities to their investors.
Impact to Your Business
The rejection by the Article 29 group puts the U.S. Department of Commerce and the EU Commission, who jointly proposed the Privacy Shield after almost two years of negotiations, in a difficult situation. The decision leaves U.S. organizations with significant uncertainty on how to continue to provide services to EU residents and puts these organizations at risk to further enforcement actions by European Data Protection Authorities. However, the Privacy Shield was not necessarily an easy solution for many organizations, including those thinking of registering for the Privacy Shield, if and when it is adopted. In addition, Privacy Shield may be invalidated by the European Court of Justice for similar reasons that Safe Harbor was invalidated. While the Privacy Shield, if and when adopted, would be one of the permissible methods to transfer personal data between the U.S. and the EU, the decision to join is one that every U.S. organization should not take lightly, as it is just one of several mechanisms to provide for trans-Atlantic data transfers, such as the EU Standard Contractual Clauses (SCCs) and Binding Corporate Rules (BCRs). Although both are more complex as compared to the Privacy Shield, their relative certainty may be the best option for trans-Atlantic data flow at this time. However, the adequacy of each of these methods is also expected to be reviewed by the Article 29 group following the approval of the Privacy Shield by the European Commission. Furthermore, companies will almost certainly need to repeat some efforts to put these methods in place to comply with the upcoming GDPR.
Although GDPR is intended to harmonize data protection in all 28 member states of the EU, there are certain provisions of the new regulation left to local laws (for example, in the area of processing health information and the age of consent), which will lead to continued complexity for compliance by all organizations. Although it will not be required to be fully compliant with GDPR for two years, organizations need to become familiar with the provisions of GDPR and begin planning for implementation now, because once GDPR is enforced, violations for non-compliance with could result in penalties up to four percent of the organizations worldwide revenue or 20 million Euros, whichever is greater.