How attention to data privacy will stabilize our financial markets – The European Sting – Critical News & Insights on European Politics, Economy, Foreign Affairs, Business & Technology

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This article is brought to you through The European Sting’s collaboration with the World Economic Forum.

Author: Dominique Shelton Leipzig, Partner, Cybersecurity and Data Privacy Practice, Mayer Brown

  • Recent stock market declines have been explained by the impact of COVID-19 and the war in Ukraine, but a key cause has been data privacy.
  • Data privacy has shown it has the power to shift markets, with many consumers unhappy with being tracked for digital advertising.
  • Leaders need to act on data privacy and security and realize that, like other global business issues, they can present risks and opportunities.

It is common knowledge that 2022 is off to a rocky start for the stock market – the S&P and NASDAQ are posting dizzying declines. Many experts have speculated: is it COVID-19? War in Ukraine? Inflation apprehension? Supply chain issues?

It’s all of that to some extent, but the single triggering factor that has sparked recent declines in tech stocks has been absent from the global conversation. The X factor is, in fact, data privacy.

Although not in the spotlight of traditional investors, data privacy has proven to have the power to move markets. After app users were given the power to decide whether they wanted to be tracked online for digital advertising, 85% said no.

This has made advertisements less effective, and continued consumer opt-outs, based on privacy trends, have taken billions of dollars in advertising revenue plummeting around the world. As companies miss their quarterly projections, markets have fallen.

Growing data privacy regulations

It’s not just about individual consumer actions. Increasingly over the past five years, legislators and regulators have erected safeguards around the collection of personal data and how that data is used.

While this area was largely unregulated prior to 2018, there are now 150 countries and regions with data protection laws, including the EU, MEA, 34 African countries, Brazil, China and Australia, as well than California and four other US states.

Regulators around the world have focused on digital advertising and data security in particular. US Federal Trade Commissioner Lina Kahn recently denounced the collection of personal information to create advertising profiles as “commercial surveillance”.

The U.S. Securities and Exchange Commission has enacted new proposed rules that would mandate privacy and cyber-transparency for executives and directors, and the EU is considering a new law (called DORA) that would impose criminal liability on boards of directors in the event of a data breach. Gartner predicts that by 2023, 75% of the world’s population will be covered by privacy laws.

The stakes will only increase. We currently generate globally 2.5 quintillion bytes of data per day (a quintillion is 1 followed by 18 zeros).

The security issues surrounding data are themselves important. Last year, data breaches were expected to cost our global economy $6.1 trillion. If data breaches were a country, it would be the third highest behind the United States and China.

Data privacy will not be limited to the technology sector

The pandemic has shown us that all companies are data companies and that the problems in the markets will not be limited to the technology sector. Some of the biggest sectors for digital advertising are consumer packaged goods, financial services, and healthcare.

On a positive note, just as data privacy can drive stock prices down, it can drive them up. The world’s most profitable companies have made data privacy a brand differentiator. Two tech companies that have made privacy and data security their brand differentiators have a market capitalization of $2.5 trillion and $2.055 trillion, respectively.

The CEO and chairman of two major tech companies were keynote speakers at this year’s International Association of Privacy Professionals summit, advocating for the positioning of privacy as a business imperative.

So far in 2022, the top 10 most profitable companies have officially committed to protecting consumer privacy and security. For example, a large multinational retailer promised responsible data management and published its statement “Digital Citizenship: Ethical Use of Data and Responsible Use of Technology” on its website.

China’s State Grid has announced the use of blockchain technology to secure its interdepartmental infrastructure. CVS, along with many other companies, is a member of the Data & Trust Alliance dedicated to adopting responsible data and artificial intelligence practices to prevent algorithmic bias.

Leaders must act on privacy and data security

These examples show that, while not easy, the fix is ​​simple; like everything, it’s a matter of leadership. In this context, leaders and directors need to do three things:

Data privacy and security require board-level attention, like other global corporate issues that present both business risks and opportunities, such as climate change and social responsibility. Global and national legal frameworks must evolve towards harmonization rather than fragmentation in order to promote the interests of businesses and consumers.

What is the World Economic Forum doing on data policy?

More data is being generated than ever before, but much of what is needed to address the world’s most pressing challenges is disconnected from public and private sources.

The World Economic Forum’s Platform for Shaping the Future of Technology Governance: Data Policy aims to fuel innovative approaches to accelerate the responsible use of data with a focus on privacy, fairness, interoperability and trust.

  • Together with the Finnish government, the Forum has developed a new approach to data management to improve the way sensitive data is used in Helsinki and securely provide residents with new personalized services.
  • The Center for the Fourth Industrial Revolution in Rwanda worked with the Ministry of Information, Communication Technology and Innovation to promote the adoption of new technologies in the country, stimulating policy innovation data and AI, especially in healthcare. The Forum has partnered with the Bahrain Economic Development Council and other experts to co-design a roadmap for cross-border data flows, identifying best practices for innovative policies in data-intensive technologies .

Contact us for more information on how to get involved.

Neither the private sector nor governments can solve this problem alone – data privacy and security require partnership and leadership like we have never seen before. We need a digital version of Davos that includes leaders from government, consumer groups and industry to develop global strategies on how to manage our fourth industrial revolution.

And finally, business leaders need to stay engaged in the data discussion because data is, in fact, their greatest asset – as evidenced by the volatility of the stock market, where it can sink stocks or raise them to record levels.