The Cost of Non-Compliance: Why Data Privacy Must Be a Tech Priority
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The Cost of Non-Compliance: Why Data Privacy Must Be a Tech Priority
In an era of rapid technological advancement, data privacy regulations are evolving just as swiftly. Tech companies, which collect and process vast amounts of personal data, are under increasing pressure to stay ahead of regulatory changes. Within important legislations like the EU’s General Data Protection Regulation (GDPR) and California's Consumer Privacy Act (CCPA), and new privacy frameworks continually emerging globally, adapting to these regulations is no longer optional—it's a strategic imperative.
Why Compliance is Critical
At the forefront, data compliance is important to help protect sensitive data and increase customer trust and satisfaction, but non-compliance with data privacy laws can also result in severe financial penalties, legal ramifications, and reputational damage. As data privacy regulations evolve, businesses will face increased scrutiny, leading to more severe consequences for data mishandling. Stronger enforcement and substantial fines will push companies to enhance their data protection practices.
GDPR violations: Forbes analyzed fines resulting from GDPR violations and found that authorities have issued over 2,000 violations, resulting in more than €4.5 billion in fines as of May 2024, with more violations issues each year. In 2023 alone, violations of the GDPR resulted in over €2 billion in fines, a figure that surpassed the totals from 2019, 2020, and 2021 combined. Major companies like Meta and TikTok have been fined billions for mishandling data under the GDPR. Beyond penalties, data breaches are becoming more costly. Meta Platforms Ireland, including Facebook and WhatsApp, has racked up over €2 billion in GDPR fines across six major penalties. The largest was a staggering €1.2 billion fine in 2023 for insufficient legal basis for data processing. Meta has been repeatedly penalized for non-compliance with data processing principles and lack of transparency.1
Increased cost for data breaches: According to IBM’s 2023 Cost of a Data Breach Report, the average breach costs companies $4.45 million globally, an all-time high.2 These costs include direct financial losses, reputational damage, and long-term operational disruptions. As regulatory environments grow more stringent and the complexity of cyber threats increases, non-compliance amplifies these financial burdens. A robust privacy strategy, including data protection measures and regulatory adherence, is crucial for companies to avoid these escalating costs and safeguard their long-term growth.
What to look out for
Cross-Border Data Transfers: As companies scale globally, navigating cross-border data transfers under laws like GDPR’s Schrems II ruling or the newly proposed Data Act becomes essential. Compliance requires investing in secure data transfer mechanisms and lawful processing agreements. Many countries beyond the EU have implemented similar regulations, such as Brazil’s General Law for Data Protection (LGPD), Canada’s Digital Charter Implementation Act, Egypt’s Law No. 151, and the California Consumer Privacy Act (CCPA). These laws further complicate international data flows, making robust compliance strategies indispensable.
Transparency and Consent: Increasing regulations demand that companies clearly communicate how data is collected, used, and shared. Prioritizing user consent management through transparent policies is critical to remaining compliant.
The Rise of Data Governance: Tech companies are implementing comprehensive data governance frameworks that ensure data integrity and regulatory alignment. This trend is moving beyond simply preventing breaches—it's about strategic data management that enhances trust and mitigates risk.
The Role of Technology in Compliance
Automation and AI-driven compliance tools are becoming indispensable for tech companies. These technologies can monitor real-time regulatory updates, identify compliance gaps, and generate audit trails. As AI usage increases, so do concerns about how it handles personal data. AI governance is now a critical aspect of compliance, especially with governments developing AI-specific regulations, such as the EU’s AI Act. These rules are aimed at addressing privacy risks related to the use of AI models trained on personal data. Italy’s temporary ban on ChatGPT in 2023 over privacy concerns illustrates the scrutiny AI applications face. Companies who are embracing the use of AI that interacts with regulated data will need to invest in AI-specific compliance tools to ensure they remain compliant with emerging laws.3
What Can Companies Do?
Staying ahead of regulatory changes doesn’t just mitigate risk—it can provide a strategic advantage. Tech companies that prioritize data privacy as a core aspect of their business operations will build greater trust with users, improve customer loyalty, and be better positioned to scale globally. Businesses can invest in AI-driven compliance tools, strengthen their data governance frameworks, and enhance their cross-border data transfer strategies.
Become Compliant: The easiest way to avoid the cost of non-compliance is to become compliant. Becoming GDPR compliant, for example, involves upfront costs that vary based on the size and complexity of a company. For small to mid-sized businesses, this can range from $5,000 to $50,000, covering legal fees, data audits, technology upgrades, and training. For larger enterprises, costs can rise significantly. Despite these initial expenses, they pale in comparison to the potential fines for non-compliance, which can reach up to €20 million or 4% of annual global turnover. Thus, investing in compliance is far more cost-effective in the long run.4
Our newest Portfolio Company, GRC International Group (GRCI), is a leading provider of governance, risk, and compliance services. They are at the forefront of helping businesses navigate this complex regulatory landscape. Partnering with experts like GRCI offers end-to-end support to stay compliant and grow with confidence. Their expertise spans GDPR, CCPA, ISO 27001, and other critical data privacy frameworks. With their end-to-end solutions, GRC International Group empowers tech companies to proactively adapt to evolving regulations while ensuring data protection and business continuity.
References
1 "Lessons To Take Away From €4.5 Billion In GDPR Fines." Forbes
2 Cost of a Data Breach Report 2024. IBM
3 "Five Data Privacy Trends To Watch In 2024." Forbes
4 “Compliance Q&A: How much does GDRP Compliance cost?” Sprinto
Bloom Equity Completes Take-Private of GRC International
Bloom Equity Partners is pleased to announce the successful take-private of GRC International (“GRCI”) from the London Stock Exchange’s AIM.
Founded in 2002, GRCI is a leading provider of governance, risk, and compliance (“GRC”) solutions. GRCI offers consulting services, training, tools, and software solutions to address a wide range of compliance needs, including both established frameworks, such as ISO27001 and GDPR, and emerging regulations such as DORA. GRCI is headquartered in the UK and serves customers in the UK, EU, and US.
To learn more, please visit the Bloom Equity Partners press release.
About Bloom Equity Partners
We’re big fans of mission-critical enterprise software, technology and tech-enabled business service companies with a competitive moat and a loyal, diversified, and growing customer base. Whether the business is bootstrapped, VC-backed, or a division of a larger organization, Bloom is completely agnostic to the structure. We are actively seeking investment opportunities that fall within the criteria below. We welcome the opportunity to discuss potential investments with founders, operating executives and intermediaries.
Our Investment Criteria
Industry: B2B Software and Technology-Enabled Companies
Geography: North America, Europe, Australia and New Zealand
Revenue: $5M - $50M
Growth: No requirement
Profitability: Negative - $10M EBITDA
Investment Type: Operational control required
If you or someone you know is considering selling or investing in their business, we would love to learn more! Check out our referral partner program, which compensates referrers for introductions that lead to affirmative outcomes.
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