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Senior Editor, Network World

Does your business need a “Data Protection Officer?”

Aug 08, 20144 mins

Anticipated new EU regulation may mean you do, notes consultancy PricewaterhouseCoopers.

New data-privacy regulation for the European Union expected to gain approval as early as October of this year would break new ground by requiring businesses selling goods and services to European citizens to appoint a so-called “Data Protection Officer” to be in compliance with the new law.               

If passed and implemented as expected in the EU, there would be uniform data-privacy regulation for EU countries with a probable timeframe of 2016 to take effect in full, points out Carolyn Holcomb, partner and leader in the risk assurance data protection and privacy practice at PricewaterhouseCoopers (PwC).

One of the notable aspects of the drafted regulation is that it calls for businesses, regardless of whether they are EU-based or not, to appoint a so-called “Data Protection Officer” (DPO) if they sell goods and services or regularly monitor Europeans, or process data on them at certain levels.

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The EU-envisioned DPO is supposed to be an expert in data-privacy law and must be given a highly independent position in the business reporting to the top level of management. Under the draft of the law, the DPO is envisioned as a four-year appointment (see graphic, below) who cannot be easily dismissed. There will be a lot of challenges for companies around this DPO question, says Holcomb, if only because there are likely not enough qualified DPOs available to meet what may be an upcoming surge in demand for them.

“If you have European operations or customers, you are really thinking about it,” she notes. Under the current drafted regulation, if a business processes data related to about 5,000 or more “data-subject” individuals in some way—it’s emphasized this number could change over the course of the next few months—the business is supposed to appoint a DPO to assure compliance with the new law.

“This is the first time we’ve seen a mandate related to the concept of the DPO,” says Jay Cline, principal in PwC’s data protection and privacy practice. Countries such as Germany have sought to encourage the DPO idea through some granted regulatory advantages, but now there’s the prospect that the DPO will be a requirement in terms of the anticipated new EU regulation, which is expected to supersede individual country data-privacy laws in place now.

Experts in data-privacy regulations are not in great supply though there is rising demand. According to PwC’s estimate, slightly more than half of the Fortune 100 companies today appear to have a so-called “Chief Privacy Officer.”

One of the most important professional credentials the CPO might have is known as the “Certified Information Privacy Professional” designation granted by the International Association of Privacy Professionals which offers global types of data-privacy accreditations. The CPO function, most often found in the largest companies, might be roughly analogues to what would be expected of an EU-styled DPO in assuring the business complies with relevant data-protection practices and data-breach laws.

But in the U.S., the CPO role varies considerably, given to the IT or legal department, Holcomb points out. The EU-styled DPO, on the other hand, is supposed to be much like an independent watchdog, reporting to the highest level of management, who basically cannot be dismissed for the four-year appointment term at the company. Holcomb said companies will be assessing whether their CPO can become the designated DPO, or whether there needs to be a separate DPO for European business operations if they don’t already have one.

The penalties for failure to comply with the anticipated regulations will be high. As currently written, the draft regulation carries the prospect of hefty fines against the business, a possible “5% of worldwide annual turnover or 100 million Euros, whichever is greater,” according to a recent PwC report on the topic.