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Managing data risk

February 25, 2014

Data security is a big issue for business today. The risks of non-compliance are substantial, both in terms of regulatory exposure and reputational damage. This has resulted in data-related topics being among the most important and the most contentious in contract negotiations.

In this context, the findings of a recent survey published by In-house Counsel magazine are interesting. The study reveals that IT professionals do not understand how to handle data compliance and therefore prefer to outsource to Managed Service Providers. Of course, in some cases it may be less an issue of understanding and more a desire to get out of the line of fire if something goes wrong.

It is entirely logical to hire a specialist to do something when underlying complexity demands specialist skills or knowledge. It seems that the uncertainties of today’s data protection rules, plus the innate risks associated with systems vulnerability, have moved data security into this category.  Obviously a buyer of such services will place heavy pressure on its supplier to validate their capabilities. Part of this pressure is in the form of onerous liabilities for failure.

Contention is perhaps inevitable in such a sensitive area. But it seems to me that buyers also increase the risk of failure when they demand highly customized terms. The more variations that a supplier must manage, the greater the risk that something will go wrong. Smart buyers are those who allow their supplier (being chosen for their expertise) to guide them on the optimum terms and conditions. Or to put it another way, if your potential supplier shows a readiness to be highly flexible on data protection services, that should be seen as an indication of riskiness.

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