Financial Implications on Businesses from the CPRA

If you have never heard of the CPRA before, it stands for the California Privacy Rights Act, and it is a must-follow for any business that sells products or services to Californian residents or handles the data of even one person from this state. 

There are a number of repercussions you can expect if you fail to adhere to the CPRA. Not only will you suffer the extensive reputational damage of failing to protect your customers but you will also be subject to fines as well. 

To help you get a better understanding, read on to get familiar with the CPRA fines, monetary implications, and penalties in more detail. 

What is the CPRA?

Before we look at the financial implications associated with the CPRA, it is first important to explain what it actually is. 

The California Privacy Rights Act is the next iteration of California law that protects the privacy of consumers and strengthens privacy regulations. It supports the 2018 California Consumer Privacy Act.

There are a number of different requirements that you need to meet under the CPRA. for example, you are required to provide consumer notices with regard to your use of data. 

This includes notices of financial incentives, with a description of the incentive, how to withdraw, how to opt-in, material terms, and why the incentive is allowed under the CCPA. You also have to provide notices of the right to opt-out of sales information and notices at the time of personal data collection.

Another important part of the CPRA is verification. Before you can give up any sort of personal information, you need to verify that the person requesting the information is who they say they are. If you don’t, you could find yourself in the middle of a whole host of legal and privacy issues. 

These are just a handful of the requirements that are placed on you in accordance with the California Privacy Rights Act. These requirements are not optional; they are mandatory. Therefore, you cannot afford to cut corners or ignore your obligations.

What are the financial implications of the California Privacy Rights Act?

Now that you have a basic understanding of what the CPRA is, it is important to look at the financial implications of failing to adhere to these regulations. 

Fines and penalties imposed by the California Privacy Rights Act

There are two sides to the coin when it comes to the financial implications of the CPRA. Not only do you have the fines imposed but you also have the costs associated with a data breach itself. Let’s deal with the CPRA fines and penalties first.

The possible administrative fines in place are the same as they were under the CCPA, i.e. up to $2,500 per violation. If the violation was deemed intentional, this figure can reach as much as $7,500. 

There is a significant difference between the CPRA and the CCPA, though. There has been an increase in the potential fines that you could receive for violations that involve customers under the age of 16-years-old. 

The law itself reads as follows for the liability of an administrative fine: 

“Not more than two thousand five hundred dollars ($2,500) for each violation or seven thousand five hundred dollars ($7,500) for each intentional violation or violations involving the personal information of consumers whom the business, service provider, contractor, or other person has actual knowledge are under 16 years of age.”

The law also indicates that there are joint and several liability in terms of fines where more than one person is responsible for a violation. 

The costs associated with a data breach

Not only do you need to think about the fines imposed on you if you are found to be in breach of CPRA but there are other costs associated with data breaches as well. 

You need to get to the bottom of the breach itself, which costs money

Firstly, you need to consider the fact that you will need to spend time getting to the bottom of the data breach. This will involve doing a deep assessment of your network so that you can get to the source of the issue. You need to figure out how the violation happened and where the cybercriminal gained entry to your business.

Once you have determined what happened, you will then need to spend thousands of dollars on repairing the issue. You need to be confident that the vulnerability has been fully patched up. It could be that more than one problem has been discovered during your audit. This is probable if you have not been taking cybersecurity seriously. 

You will need to reimburse customers and set up a team for communicating with them about the breach

Next, you also need to spend money on reimbursing your customers for any losses and communicating with them throughout the breach. You need to make sure that they are fully informed of what has happened and whether or not their account could have been impacted.

Most businesses set up a dedicated customer services team to handle all queries and concerns relating to what happened. Of course, this costs money but it is a necessity. So, this is another cost you will need to factor in if you are found to not be in compliance with CPRA. 

The lost sales while your system has been down

You certainly cannot continue business as normal while you know that your systems have been compromised. You will need to take your service offline until you have gotten to the bottom of the issue and you are sure that your customers are safe. 

Of course, all businesses are going to miss out on sales if they are offline. The greater the amount of downtime, the more money that is lost. 

The cost of repairing the trust that has been broken

This is one of the biggest expenses associated with data breaches. If you have mishandled consumer data, this is going to result in the trust being broken. Why would someone want to do business with a company that allows consumer data to get into the wrong hands?

In the current day and age, consumers are rightly skeptical. They are cautious when spending their money because they want to feel assured that the company in question is legitimate and that they will handle their personal data safely and accordingly. 

If a data breach has happened, the immediate impression is that you have not safeguarded your customers’ data properly. This will cause them to look at your business in a different way, and you can be sure that you will lose a huge chunk of your customers as a consequence. 

To get this trust back, it is going to take a massive marketing drive on your behalf. This will mean a lot of time and money spent on crafting marketing campaigns to help you move forward. 

This is why we have seen a lot of businesses closing their doors after data infringements. We do not want this to happen to you, which is why it is imperative to put data security and the CPRA regulations first when protecting your business.

The cost of a data breach in the United States

To put all of this into perspective, the United States actually has the highest data breach expenses around the world, coming in at $8.64 million on average. If that was not bad enough, the statistics show that the cost of a data breach is increasing all of the time. 

Furthermore, it is estimated that every six in 10 small businesses have to shut their doors permanently within six months of experiencing a cyber attack or a data breach. The reputational damage and financial expenses are simply too much for them to come back from.

If you are unsure as to whether your business is compliant with CPRA and doing everything to avoid a data breach, why not consult with an expert who can give you a non-biased view and help you to understand your security and data requirements?

Don’t suffer the financial implications of failing to adhere to CPRA

We hope that this guide has given you a better understanding of the financial implications that are in place if you do not adhere to the CPRA guidelines. 

This is why it is imperative to make sure that all businesses take these guidelines seriously and put measures in place to make sure they do not fall foul of them. 

If you are struggling with this, there are companies out there that can help you. They will be able to carry out an audit of your current data measures and advise you on the steps you need to take next.

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