Facing up to the General Data Protection Regulation

Europe’s updated data protection rules, the General Data Protection Regulation or GDPR, become effective May 25 and could presage tougher regulation in other parts of the world.
By: | April 27, 2018 • 4 min read

On May 25 Europe adopts the General Data Protection Regulation (GDPR), a long-planned overhaul of how businesses collect and process data. The current regulations go back more than 20 years to a pre-Facebook era when the internet’s potential was still being explored, so the new set of data protection rules was overdue.

As Risk & Insurance® reported last year, the impact of the GDPR extends beyond the European Union. Once it takes effect it will affect not only companies across the EU’s member states, but any business or public sector organization that collects and processes data about its residents.

Failure to comply with it will result in heavy fines. In many European countries, according to Aon and DLA Piper, those fines appear to be uninsurable.

As HR departments are the guardians of large amounts of personal data, many have sought guidance on what steps they should be taking in preparation. This has produced an Amazon bestseller, The Little Book of GDPR, for Darren Wray, CEO of Fifth Step, who this week gave a market briefing for the International Underwriting Association (IUA) in London on what GDPR compliance entails.

Darren Wray, CEO, Fifth Step

Other parts of the world are also revamping their data protection rules; Australia, for example, introduced the Notifiable Data Breaches (NDB) scheme in February.

However, Wray suggested that GDPR could establish itself as the new template, meaning that the HR departments within U.S. companies would do well to become familiar with its requirements, if they haven’t already done so.

Facebook is evidently aware of the repercussions. The social networking giant is about to move 1.5 billion members in Africa, Asia, Australia and Latin America currently routed through its Ireland base to the U.S., to take advantage of the latter’s more lenient privacy laws.

While the advantage might prove temporary should consumer pressure mount for a U.S. equivalent of GDPR, Facebook’s caution is understandable.

The financial penalties imposed for breaching GDPR are the greater of 4 percent of the organization’s revenue or around $24.2 million (depending upon the exchange rate at the time of the fine).

The IUA briefing also referenced the massive data security breach suffered last fall by Equifax, which took the credit reference agency months to reveal and could eventually cost it $600 million or more.

However, Wray noted that “under GDPR, the company would no longer exist.” A mandatory post- breach period of 72 hours maximum will now apply to any company that becomes aware of any personal data breach.

More unexpected was the revelation that Equifax even derived some profit from last year’s episode by providing customers affected by the breach with a free three-month fraud protection service but then charging for it once that period had elapsed.

However, it may not yet be off the hook in the UK, where regulator the Financial Conduct Authority (FCA) is deciding whether the company violated the terms of its operating licence and if compensation to consumers is appropriate.

Dawn of the DPO

The lowdown for any business with European customers is that the GDPR isn’t optional. Companies will need to comply, regardless of their location.

It means obtaining the explicit consent, or opting-in, from any individual whose personal details they collect and process and ensuring that data is handled at all stages in a legally compliant way.

It also requires distinguishing between data protection — the risk of infringing an individual’s personal rights; and data security — the risk of it being lost, deleted or abused, while categorizing personal data as either sensitive or non-sensitive as the former requires higher protection and carries additional GDPR requirements.

The lowdown for any business with European customers is that the GDPR isn’t optional. Companies will need to comply, regardless of their location.

The new regulation also extends eight basic rights to each individual whose data is collected and processed by a company, such as the right to access a copy of the details being held on them.

They can also object to the company using their data; in some cases request erasure or ‘the right to be forgotten’ so that their data is deleted; and demand rectification where any of the personal data held is inaccurate or needs to be updated.

One that Wray foresees involving particular change is the right to data portability, enabling the individual to easily log on to the data being held about them, access a copy in standard format and use it, for example, when applying to a new insurer.

As a part of the organization that deals with large volumes of data — much of it sensitive — HR departments will be particularly susceptible to the tougher standards imposed by the GDPR. Their data lifecycles have an extended lifespan, ranging from when an individual is hired to their eventual transition to a retiree.

The new rules also promise bright career prospects for the data protection officer (DPO), whose role will be an essential one for any sizeable business. &

Graham Buck is a UK-based writer and has contributed to Risk & Insurance® since 1998. He can be reached at riskletters.com.

More from Risk & Insurance

More from Risk & Insurance

Cyber Resilience

No, Seriously. You Need a Comprehensive Cyber Incident Response Plan Before It’s Too Late.

Awareness of cyber risk is increasing, but some companies may be neglecting to prepare adequate response plans that could save them millions. 
By: | June 1, 2018 • 7 min read

To minimize the financial and reputational damage from a cyber attack, it is absolutely critical that businesses have a cyber incident response plan.

“Sadly, not all yet do,” said David Legassick, head of life sciences, tech and cyber, CNA Hardy.


In the event of a breach, a company must be able to quickly identify and contain the problem, assess the level of impact, communicate internally and externally, recover where possible any lost data or functionality needed to resume business operations and act quickly to manage potential reputational risk.

This can only be achieved with help from the right external experts and the design and practice of a well-honed internal response.

The first step a company must take, said Legassick, is to understand its cyber exposures through asset identification, classification, risk assessment and protection measures, both technological and human.

According to Raf Sanchez, international breach response manager, Beazley, cyber-response plans should be flexible and applicable to a wide range of incidents, “not just a list of consecutive steps.”

They also should bring together key stakeholders and specify end goals.

Jason J. Hogg, CEO, Aon Cyber Solutions

With bad actors becoming increasingly sophisticated and often acting in groups, attack vectors can hit companies from multiple angles simultaneously, meaning a holistic approach is essential, agreed Jason J. Hogg, CEO, Aon Cyber Solutions.

“Collaboration is key — you have to take silos down and work in a cross-functional manner.”

This means assembling a response team including individuals from IT, legal, operations, risk management, HR, finance and the board — each of whom must be well drilled in their responsibilities in the event of a breach.

“You can’t pick your players on the day of the game,” said Hogg. “Response times are critical, so speed and timing are of the essence. You should also have a very clear communication plan to keep the CEO and board of directors informed of recommended courses of action and timing expectations.”

People on the incident response team must have sufficient technical skills and access to critical third parties to be able to make decisions and move to contain incidents fast. Knowledge of the company’s data and network topology is also key, said Legassick.

“Perhaps most important of all,” he added, “is to capture in detail how, when, where and why an incident occurred so there is a feedback loop that ensures each threat makes the cyber defense stronger.”

Cyber insurance can play a key role by providing a range of experts such as forensic analysts to help manage a cyber breach quickly and effectively (as well as PR and legal help). However, the learning process should begin before a breach occurs.

Practice Makes Perfect

“Any incident response plan is only as strong as the practice that goes into it,” explained Mike Peters, vice president, IT, RIMS — who also conducts stress testing through his firm Sentinel Cyber Defense Advisors.


Unless companies have an ethical hacker or certified information security officer on board who can conduct sophisticated simulated attacks, Peters recommended they hire third-party experts to test their networks for weaknesses, remediate these issues and retest again for vulnerabilities that haven’t been patched or have newly appeared.

“You need to plan for every type of threat that’s out there,” he added.

Hogg agreed that bringing third parties in to conduct tests brings “fresh thinking, best practice and cross-pollination of learnings from testing plans across a multitude of industries and enterprises.”

“Collaboration is key — you have to take silos down and work in a cross-functional manner.” — Jason J. Hogg, CEO, Aon Cyber Solutions

Legassick added that companies should test their plans at least annually, updating procedures whenever there is a significant change in business activity, technology or location.

“As companies expand, cyber security is not always front of mind, but new operations and territories all expose a company to new risks.”

For smaller companies that might not have the resources or the expertise to develop an internal cyber response plan from whole cloth, some carriers offer their own cyber risk resources online.

Evan Fenaroli, an underwriting product manager with the Philadelphia Insurance Companies (PHLY), said his company hosts an eRiskHub, which gives PHLY clients a place to start looking for cyber event response answers.

That includes access to a pool of attorneys who can guide company executives in creating a plan.

“It’s something at the highest level that needs to be a priority,” Fenaroli said. For those just getting started, Fenaroli provided a checklist for consideration:

  • Purchase cyber insurance, read the policy and understand its notice requirements.
  • Work with an attorney to develop a cyber event response plan that you can customize to your business.
  • Identify stakeholders within the company who will own the plan and its execution.
  • Find outside forensics experts that the company can call in an emergency.
  • Identify a public relations expert who can be called in the case of an event that could be leaked to the press or otherwise become newsworthy.

“When all of these things fall into place, the outcome is far better in that there isn’t a panic,” said Fenaroli, who, like others, recommends the plan be tested at least annually.

Cyber’s Physical Threat

With the digital and physical worlds converging due to the rise of the Internet of Things, Hogg reminded companies: “You can’t just test in the virtual world — testing physical end-point security is critical too.”


How that testing is communicated to underwriters should also be a key focus, said Rich DePiero, head of cyber, North America, Swiss Re Corporate Solutions.

Don’t just report on what went well; it’s far more believable for an underwriter to hear what didn’t go well, he said.

“If I hear a client say it is perfect and then I look at some of the results of the responses to breaches last year, there is a disconnect. Help us understand what you learned and what you worked out. You want things to fail during these incident response tests, because that is how we learn,” he explained.

“Bringing in these outside firms, detailing what they learned and defining roles and responsibilities in the event of an incident is really the best practice, and we are seeing more and more companies do that.”

Support from the Board

Good cyber protection is built around a combination of process, technology, learning and people. While not every cyber incident needs to be reported to the boardroom, senior management has a key role in creating a culture of planning and risk awareness.

David Legassick, head of life sciences, tech and cyber, CNA Hardy

“Cyber is a boardroom risk. If it is not taken seriously at boardroom level, you are more than likely to suffer a network breach,” Legassick said.

However, getting board buy-in or buy-in from the C-suite is not always easy.

“C-suite executives often put off testing crisis plans as they get in the way of the day job. The irony here is obvious given how disruptive an incident can be,” said Sanchez.

“The C-suite must demonstrate its support for incident response planning and that it expects staff at all levels of the organization to play their part in recovering from serious incidents.”

“What these people need from the board is support,” said Jill Salmon, New York-based vice president, head of cyber/tech/MPL, Berkshire Hathaway Specialty Insurance.

“I don’t know that the information security folks are looking for direction from the board as much as they are looking for support from a resources standpoint and a visibility standpoint.

“They’ve got to be aware of what they need and they need to have the money to be able to build it up to that level,” she said.

Without that support, according to Legassick, failure to empower and encourage the IT team to manage cyber threats holistically through integration with the rest of the organization, particularly risk managers, becomes a common mistake.

He also warned that “blame culture” can prevent staff from escalating problems to management in a timely manner.

Collaboration and Communication

Given that cyber incident response truly is a team effort, it is therefore essential that a culture of collaboration, preparation and practice is embedded from the top down.


One of the biggest tripping points for companies — and an area that has done the most damage from a reputational perspective — is in how quickly and effectively the company communicates to the public in the aftermath of a cyber event.

Salmon said of all the cyber incident response plans she has seen, the companies that have impressed her most are those that have written mock press releases and rehearsed how they are going to respond to the media in the aftermath of an event.

“We have seen so many companies trip up in that regard,” she said. “There have been examples of companies taking too long and then not explaining why it took them so long. It’s like any other crisis — the way that you are communicating it to the public is really important.” &

Antony Ireland is a London-based financial journalist. He can be reached at [email protected] Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]