Introduced in May 2018, GDPR set new standards for data protection and privacy, affecting how businesses handle personal data. For finance teams, the regulation has brought both challenges and opportunities, reshaping their operations and compliance strategies.
On May 25, the European Union’s General Data Protection Regulation (GDPR) will mark its sixth anniversary. The sweeping data-privacy law has reshaped how companies handle personal data, ushering in an era of heightened consumer rights and stringent regulatory oversight. Yet for chief financial officers (CFOs) and their finance teams, GDPR’s impact has been a costly exercise in compliance.
The price of playing by the rules has been exorbitant. Some deep-pocketed firms have forked out over €10m annually to upgrade IT systems and protocols to meet GDPR’s requirements around data access, correction, deletion and portability. Smaller outfits have been forced to divert resources away from growth initiatives.
On average, companies targeting EU markets have seen profits shrink by 8% and sales dip by 2% as GDPR’s compliance burden weighs on performance.
But the costs of non-compliance are even steeper.
In just its first year, nearly 150,000 complaints flooded regulators’ inboxes, revealing that a data-rights-aware public was keeping watchful eyes on corporate practice. For transgressors, a new era of open-wallet enforcement dawned: in 2021 Amazon was slapped with a record €746m fine for GDPR shortcomings. The e-commerce behemoth is appealing—but for CFOs, such headline-grabbing penalties underscore the financial jeopardy of cutting corners.
Not that adhering to the law’s spirit is easy.
New systems and processes have been bolted onto legacy IT architectures. Compliant data handling now requires meticulous documentation, from obtaining consent for analytics to monitoring intra-company transfers. Vast troves of personal data must be traceable, redactable and portable on request.
Despite GDPR’s teething troubles, though, its positive impact is increasingly evident. Companies have upgraded data-protection practices, from secure document archiving to enhanced privacy controls for customers. Buttressed by board-level data-protection officers, a new culture of data ethics is taking root.
For CFOs, managing GDPR’s monetary and operational impacts has been a delicate balancing act.
Beyond devoting capital to compliance costs, they must factor regulatory risk into decision-making, work closely with legal and IT counterparts, and develop metrics for measuring GDPR’s bottom-line effects.
As data-privacy lapses can inflict severe reputational and financial damage, ensuring robust compliance is both a risk-mitigation strategy and a crucial investment in customer trust.
Implementing GDPR-mandated systems and processes is a major undertaking requiring substantial capital outlays. CFOs must judiciously allocate funds for compliance priorities like overhauling data architectures, automating consent management, training personnel and hiring data-protection officers. Carefully balancing compliance spending against other corporate needs is essential.
GDPR compliance is an enterprise-wide effort transcending the finance function. CFOs must work closely with IT teams to build out data infrastructures, implement security controls and enable consumer privacy rights. Coordinating with legal experts is vital for interpreting GDPR’s nuanced provisions and monitoring regulatory changes. Interdepartmental governance bodies can help harmonise data-handling policies and practices.
What gets measured gets managed. To quantify GDPR’s financial toll, CFOs need robust metrics capturing compliance expenditure, operational disruptions, revenue impacts from constrained data usage, and costs incurred from fines or lawsuits. Translating such data into standardised reporting frameworks allows corporate boards to assess GDPR’s return on investment and benchmark performance against industry peers.
Beyond financials, GDPR’s less quantifiable impacts—like bolstered consumer confidence and brand equity—should be tracked through instruments like customer surveys and social-media sentiment analysis. These insights can inform better risk calculations when investing in enhanced privacy safeguards.
As the law’s first comprehensive review nears in 2025, some hope for a reprieve from GDPR’s most nettlesome requirements. But a rollback looks unlikely. If anything, European data-privacy rules may be tightened further as techlash sentiments persist.
Policymakers may tighten rules around areas like artificial intelligence (AI), which GDPR’s framers could scarcely have foreseen. Automated decision-making systems that lack human oversight could face stricter guardrails. Tougher restrictions on digital advertising practices like micro-targeting may also materialise as public discomfort with surveillance capitalism grows.