How to Balance GDPR Legal Risks and Business Rewards

Working in marketing, sales, or product development? Are you stymied by your legal team every time GDPR comes into the conversation? This post is your guide to understanding, quantifying, and effectively communicating the real risks and rewards involved in data processing under GDPR.

Note: This article focuses on managing the legal risks associated with GDPR compliance, which is distinct from evaluating the privacy risks that data processing poses to individual data subjects.

The Importance of Articulating Risk

The Vagueness Issue

The challenge with the term "legal risk" is that it's often thrown around in discussions without much clarity or specificity, leaving those on the receiving end puzzled about what to do next. It's somewhat akin to a weather forecast saying "it might rain someday." While technically correct, this level of vagueness is far from actionable. In the context of GDPR compliance, a vague warning about "legal risk" from the legal department becomes a bottleneck for those in commercial roles. Marketers, product owners, and sales teams find themselves in a state of paralysis, unsure how to proceed with their initiatives without tangible guidelines. This vague warning guidance fails to offer a concrete roadmap for navigating the complexities of data privacy regulations. Therefore, the utility of such generalized risk assessments becomes highly questionable, slowing down projects and inhibiting innovation.

The Power of Specificity

To counter the pitfalls of vagueness, there's immense value in articulating risk in a specific and quantifiable manner. Imagine if, instead of simply cautioning that a new marketing tactic has a legal risk, the legal team could classify the risk based on a predifined risk scoring model. This predifined risk level can for example be defined as "High likelihood of resulting in GDPR-related penalties, with an estimated financial impact of $50,000." This level of specificity not only illuminates the nature of the risk but also provides a numerical framework for assessing its magnitude. It enables those in commercial roles—be it marketers, product owners, or sales teams—to weigh this calculated risk against the prospective benefits of their initiatives, such as increased customer engagement or revenue growth. By employing precise language and metrics, legal advisories become actionable pieces of information. They transform from stumbling blocks into valuable inputs for informed decision-making. With this kind of clarity, cross-departmental teams can engage in more nuanced discussions about the trade-offs involved and collaboratively chart a course that balances both legal compliance and business objectives.

The Art of Scoring and Rating Risk

Scoring and rating risk is essential for GDPR compliance. Rather than just labeling activities as "risky," organizations should quantify them on a scale, such as 1-5. This provides a common language for both legal and commercial teams and allows for a balanced approach to risk management. By doing so, you can weigh the potential legal repercussions against the business benefits, making informed decisions that align with both compliance requirements and organizational objectives.

A 1-5 Scoring System

Here is a simple example of a scoring system to classify the GDPR legal risk of related to your business activities.

1. Minimal Risk (Score 1):
   Activities in this category are likely to receive only advice or recommendations from data protection authorities for modification or improvement. The focus here is on guidance rather than punitive measures.

2. Low Risk (Score 2):
   These activities could attract a reprimand from data protection authorities. While financial penalties are generally not applied at this level, a reprimand may serve as a precursor to more severe actions if not addressed.

3. Moderate Risk (Score 3):
   Activities in this tier may result in an instruction from data protection authorities to modify or cease a specific data-processing action. This category ranges from instructions only to instructions accompanied by small fines, calculated as a minor percentage of the company's gross revenue.

4. High Risk (Score 4):
   Activities at this level could lead to moderate fines, calculated as a moderate percentage of the company's gross revenue. This category also entails reputational risks and is likely to attract public scrutiny.

5. Severe Risk (Score 5):
   Activities in this category are in clear violation of GDPR guidelines and are highly likely to result in substantial fines, calculated as a significant percentage of the company's gross revenue, along with severe reputational damage.

Rating Methodology

You can modify the risk score above to fit your needs. When assessing the risk score we recommend considereing these three factors:

1. Likelihood of Violation
2. Severity of Consequences
3. Frequency of the Data Processing Activity

Conclusion

Don't view GDPR as a chokehold on your business creativity. Any processing of personal data involves a legal risk, but its the magnitude of the risk that matters. By applying a structured risk assessment method, you can engage in a more fruitful dialogue with your legal team. This leads to a better balance of legal compliance and business development.