GDPR is a broad framework for protecting personal data in the European Union. Organizations that fail to comply with the GDPR can face extremely damaging penalties. Here are some of the most common consequences of not adhering to the GDPR regulation.
What is GDPR Penalties?
Fines imposed by a DPA in every EU member state, who are given the power and authority to investigate a violation and impose sanctions, are the enforced penalties. The main purpose of these penalties is that they will serve as a deterrent but also ensure adherence to the laws of data protection.
8 GDPR Penalties and Their Consequences
Here are some of the common aftermaths of failing to comply with GDPR regulations.
1. Financial Penalties
The most direct and serious consequences of non-compliance will be financial penalties. GDPR does allow for fines up to €20 million or 4% of a company’s global annual turnover, whichever is higher. The GDPR categorizes these fines into two tiers, based on the severity of the violation:
- Level One Fines: Up to €10 million or 2% of global turnover for less serious violations, which may include failure to maintain proper records or inability to appoint a DPO.
- Level Two Fines: Up to €20 million or 4% of global turnover for more serious breaches; these include failure to get proper consent for processing or negligence in securing personal data.
These penalties are effective, proportionate, and dissuasive; this ensures that an organization takes compliance seriously.
2. Reputational Damage
There is a high possibility of reputational damage due to non-compliance with GDPR. In cases where organizations fail to protect personal data, there is a high possibility of erosion in customer trust and loyalty. Negative publicity stemming from data breaches or regulatory fines could mar the image of an organization, leading to a decline in customer engagement, with possible revenue loss.
Companies like Meta have even faced public backlash after heavy fines for misuse of data, which has extended even to their market value, let alone customer relationships. This is therefore a call for organizations to ensure compliance with the GDPR so that their reputation does not fall into such missteps.
3. Legal Costs and Litigation
If an organization fails to act within the confines of the GDPR, this might lead to litigation processes involving individuals whose information rights have been breached. There will be claims for damages arising from the lack of conformance, hence the process is quite expensive. Class-action lawsuits are growing with increasing individuals exercising their privileges under the GDPR, hence resources are becoming more strained and attention shifted from core business.
Apart from the legal fees involved in the defense against litigation, there are also costs related to settlements or damages awarded by the court. If an organization does not succeed in GDPR reporting data breach, it may suffer even worse legal consequences.
4. Operational Disruptions
Non-compliance may also lead to investigations and audits by Data Protection Authorities, which will disrupt regular business. While these investigations are going on, organizations will have to prove that their operations apply the requirements under GDPR-a process usually very painful and resource-consuming. If non-compliance is established, authorities may impose corrective measures such as temporary bans on data processing activities, further impacting operations.
For instance, failure of an organization in GDPR reporting data breach within the timeline might thereafter face increased scrutiny from regulators, whereas corrective actions will demand operational limitations.
5. Increased Scrutiny from Regulatory Authorities
Once a non-compliance issue has been tagged on an organization, it may be treated as a potential candidate for increased scrutiny by any regulatory authority in the future. Such heightened monitoring may translate into more frequent audits and inspections, thus increasing costs related to compliance and administrative headaches. An organization should be properly watchful to avoid falling under the radar again.
This can be quite draining and distracting from core business goals. It, therefore, always pays to have your organization make sure that you are GDPR compliant.
6. Suspension of Data Processing Activities
For extreme cases of default, DPAs may completely cease an organization’s data processing activities. Companies that heavily rely on data to operate experience the most detrimental effects. Apart from just halting the business processes, huge financial losses and disruptions in the continuation of services being provided to the customers are witnessed.
If, for example, a healthcare professional violates GDPR by not adequately protecting patient data, they may have to halt all data processing until they fully comply with the regulations.
7. Missed Business Opportunities
Organizations may also experience difficulty in securing partnerships or contracts with other companies that prioritize GDPR compliance. Many companies now conduct due diligence on potential partners’ compliance status before they enter into agreements with them. Potential clients or partners may avoid working with a company if they have a history of non-compliance, due to concerns about their handling of personal information.
This loss of business opportunities will have long-lasting effects on growth and market position. It is, therefore, very significant for organizations to make sure that you are GDPR compliant not only to avoid legal implications but also to retain competitive advantage.
8. Mandatory Compliance Measures
When non-compliance is found, DPAs can require organizations to complete mandatory compliance measures. This is often in-depth and includes policies and procedures that allow for internal changes within data handling practices. Organizations might have to expend significant resources toward retraining employees with new compliance protocols and implementing new technologies or processes devised for reinforcement in data protection.
While these measures aim at improving compliance in the long term, they can initially strain organizational resources and disrupt normal operations.
Wrap-up
In a nutshell, the impacts of GDPR non-compliance are wide-ranging and multi-faceted high financial fines, damage to reputation, operational disruption, and increased regulatory scrutiny. More so, compliance with GDPR should be a top priority in an organization’s operations. Only by being conscious of such potential pitfalls and accordingly implementing efficient data protection strategies, such as timely reporting of data breaches, will an organization be able to reduce the risks related to non-compliance and foster customer trust while protecting their interests in an increasingly regulated environment.
