Small business owners are often being pulled in many different directions and don’t have the resources to bring an attorney on board. What this means is that small businesses can be very susceptible to inadvertent legal problems. With a business moving and growing so quickly, details can often be overlooked that create the potential for future legal liability. In today’s business environment, the two biggest issues can be boiled down to hacking attacks and data privacy, and the growing regulatory environment. Technology sophistication has lead to a huge increase in the number of companies conducting business online, as well as the number of malicious internet users trying to exploit data security weaknesses. As the business environment adapts to the online marketplace, new regulations are consistently being created both to govern these new types of transactions and to update older regulations to function efficiently in the modern era.
Hacking Attacks & Data Privacy
Not only will a hacking attack damage your company’s reputation and customer perception, it will also expose you to numerous potential legal liabilities. Depending on the type of business you operate, one of the biggest issues will almost certainly be the release of confidential customer information. In recent years, the mindset of business owners surrounding hacking attacks has shifted from a question of whether an attack will occur to when and how bad an attack will be when it inevitably occurs. If a breach does occur within your company, the up-front costs will certainly include repairing any damaged hardware or software, providing notice to affected parties, and possibly paying the bill for credit monitoring services like many of the major corporate victims have been doing recently.
Data privacy goes hand-in-hand with the risk of hacking attacks. If the data controlled by your company is adequately protected, it will minimize the likelihood of a successful hacking attack. Depending on the type of customer information stored by a company, the legal duty of care can vary. Laws and regulations vary drastically based on subject and location, but businesses owners and managers are commonly held to a standard of using reasonable business judgment, acting in good faith, and acting in the best interests of the company. The legal standards vary and are somewhat subjective, so it is best to work with a trusted advisor or attorney to reduce data privacy risk. To get a general feeling on whether your company may run into data privacy issues, you can ask yourself a simple question: if a different company was storing your confidential personal information in the exact same way, would you be comfortable with it? To mitigate some of the risk companies like yours are now facing, cyber liability insurance continues to grow in popularity as an option to help protect your business in the event of a breach.
Growing Regulatory Environment
New and more complex regulations surrounding various business practices are being issued all the time. It is never safe to assume that just because your business was compliant with all laws and regulations in the past, that it is still complaint today. Regulations are very dynamic, and it is important to continually monitor the news and political bodies to understand what regulations are in the pipeline. Something as simple as setting up e-mail news alerts can help you stay on top of any regulatory developments. Membership and participation in industry organizations is another great way to hear about possible changes industry regulation. The more in tune you are to the legal environment of your industry, the more advanced notice you will have to consult with advisors on how to best respond to any proposed changes. If your business operates in a heavily regulated environment, it is even more important to have a solid understanding of how the regulatory schemes surrounding your business operate.
Large companies often employ in-house counsel to manage, monitor, and take action on these big-picture issues, but many small businesses do not have the resources to make that feasible. As your business continues to grow and these issues come to the forefront, obtaining appropriate legal advice is a must. Vlodaver Law Offices, LLC, an experienced business solutions and transactions law firm in the Twin Cities, and the sponsor of this article, provides an outside in-house counsel service to meet these very needs. If you would like a free legal consultation, contact us.