Impact of the EU General Data Protection Regulation (GDPR)

23 June 2016 Consultancy.uk

It’s a major regulatory development and there are just two years to prepare for compliance. The time to understand the impacts and implications - and to get ready for implementation - is now, says Simon Stickley, a Principal Consultant in Capco's Edinburgh office.

The clock is ticking louder every day. The EU General Data Protection Regulation (GDPR) rules will become compulsory from 25 May 2018.  Organisations, businesses and institutions will need to take action to implement effective compliance measures. Key activities will include end-to-end process reviews, adjustment or amendment of relevant controls and re-alignment of risk profiles. Everyone concerned also needs to take into account the tough penalties that come with breach of this legislation. Who are the key actors? And what do they need to know?

Decision-makers and others in responsible roles must get involved. They need to understand quickly that the law is changing to the GDPR and that the time scales are tight. They need to appreciate the impact the new Regulation will have. Finally, they need to identify the areas within their business operation that could cause compliance problems. The tasks ahead are not trivial. Ensuring compliance could have significant resource implications, especially for larger and more complex organisations. All those concerned must keep at front of mind the urgency of the situation. We only have 24 months as a lead-in period for raising awareness and implementing required changes. Compliance will be challenging, even for organisations starting to prepare now. For those who delay until the last minute, time – and regulatory tolerance – will undoubtedly run out.

Penalties
The Regulation will enforce tough penalties; the proposed fines are up to 4% of annual global turnover or €20million, whichever is greater.

The EU General Data Protection Regulation

Key Changes
Below is a breakdown of the key changes proposed by the Regulation:

1. The definition of personal data will become broader, bringing more data into the regulated perimeter
Previously, personal data has been defined as data which relates to a living individual who can be identified (a) from those data, or (b) from those data and other information which is in the possession of, or is likely to come into the possession of, the data controller, and includes any expression of opinion about the individual and any indication of the intentions of the data controller or any other person in respect of the individual. The Regulation expands the definition of personal data such that data privacy will encompass other factors that could be used to identify an individual, such as their genetic, mental, economic, cultural or social identity.

The Regulation will require that personal data held must be documented and include where it came from and with whom it is shared. An information audit may be required, across the organisation, or within particular business areas to complete this documentation. Under the Regulation, if inaccurate personal data is held and has been shared with another organisation, the other organisation must be told about the inaccuracy so it can correct its own records. This will not be possible unless it is known exactly what personal data is held, where it came from and who it is shared with. Additionally, measures must be taken to reduce the amount of personally identifiable information stored and ensure that information is not stored for longer than necessary.

2. If a business is not in the EU, they will still have to comply with the Regulation
Non-EU controllers and processors who deal with EU subjects’ personal data must comply with the new Regulation.  Although enforcing regulation beyond EU borders will be a challenge, those providing products or services to EU customers, or processing their data, will face sanction under the Regulation if an incident is reported.

Organisations, businesses and institutions should have competent and well-tested controls along with complete and accurate back-ups to assimilate an audit trail.  Having a suitable controls framework in place will provide support if an incident is reported or when it comes to any form of data breach in supporting a case to minimise regulatory impact.

3. Children’s data
The Regulation will bring in special protection for children’s personal data. If information is collected about children (in the UK defined as anyone under 13 years old) then parental consent will be required in order to lawfully process their data.

4. Rules for obtaining valid consent will change
The consent document must be laid out in simple terms, and it is likely that the consent will be required to have an expiry date. Where the consent is for processing a child’s data the privacy notice and the consent must be written in language a child can understand. Silence or inactivity will not constitute or imply consent. Unless there is a positive consent, consent is deemed to be withheld.

5. Introduction of data breach notification regulations and changes in liability will have a profound impact on the supply chain
There is no obligation to notify authorities of data breaches under the current Directive, although there are some sector-specific requirements, such as those applicable to communications providers and ISPs under the E-Privacy Directive. The Regulation will bring in a breach notification duty across the board. This will be new to many organisations. Not all breaches will have to be notified to the regulator, only ones where the individual is likely to suffer some form of damage, such as through identity theft or a confidentiality breach and, where the breach puts individuals' data at risk, the data subjects must also be informed. Although the exact timelines for breach notification are still unclear, these changes place a greater emphasis on supply chain data security. Regular supply chain reviews and audits will be required to ensure they are fit for purpose under the new security regime. The Regulation clearly calls for more effective data breach investigation, categorisation, containment and response infrastructure.

Organisations must ensure they have the right procedures

Organisations, businesses and institutions must ensure they have the right procedures in place to detect, report and investigate a personal data breach. This could involve assessing the types of data held and documenting which ones would fall within the notification requirement if there was a breach. In some cases organisations, businesses and institutions will have to notify the individuals whose data has been subject to the breach directly, for example where the breach might leave them open to financial loss. Larger organisations will need to develop policies and procedures for managing data breaches – whether at a central or local level. Failure to report a breach, when required to do so, will result in a fine as well as the penalty for the breach itself.

6. Subject Access Requests and the “right to be forgotten”
The rules for dealing with subject access requests will change under the GDPR. In most cases organisations, businesses and institutions will not be able to charge for complying with a request and normally will have just a month to comply, rather than the current 40 days. There will be different grounds for refusing to comply with subject access request – manifestly unfounded or excessive requests can be charged for or refused. If any request is to be refused, policies and procedures will need to be in place to demonstrate why the request meets the refusal criteria.

Additional information will also need to be provided to people making requests, such as data retention periods and the right to have inaccurate data corrected. If a large number of access requests are being handled the impact of the changes will be considerable so the logistical implications of having to deal with requests more quickly and provide additional information will need to be addressed. The Regulation also requires that data subjects should have the “right to be forgotten”. This requirement will extend to search engines and tools. The extent to which data controllers should be burdened with the responsibility of deleting information is not yet clear however.

7. Introduction of mandatory privacy risk impact assessments
A privacy impact assessment (PIA) is a tool which can help identify the most effective way to comply with data protection obligations and meet individuals’ expectations of privacy. An effective PIA will allow organisations to identify and fix problems at an early stage, reducing the associated costs and damage to reputation which might otherwise occur.

The Regulation will contain conditions under which a PIA will always be required such as in high-risk situations, for example, where a new technology is being deployed or where a profiling operation is likely to significantly affect data subjects.

8. Privacy by design
The current EU Directive does not include any clauses related to privacy by design but under the new Regulation, data controllers will have to implement appropriate measures to ensure that processing protects the rights of the data subject, that only the minimum personal data will be processed, and that the data is not disclosed more widely than necessary. The essence of privacy by design is that privacy in a service or product is taken into account not only at the point of delivery, but from the inception of the product concept.

9. Future-proofing new contracts
Parties will need to document their data responsibilities even more clearly, and the increased risk levels will impact negotiations on security standards, risk allocation and pricing.

10. The international transfer of data
Since the Regulation will also be applicable to processors, organisations should be aware of the risk of transferring data to countries that are not part of the EU. Non-EU controllers will need to appoint representatives in the EU. The separate EU-U.S. Privacy Shield agreement also contains strict penalties for those in breach the privacy of European citizens and requires parallel consideration.

 Data Protection Officer

11. Data portability
The right to data portability is new in the Regulation. This is an enhanced form of subject access where organisations, businesses and institutions have to provide the requested data electronically and in a commonly used format. Many organisations will already provide the data in this way, but if paper print-outs are used, or an unusual electronic format, procedures will have to be revised and any necessary changes made.

12. Appointment of a Data Protection Officer (DPO)
Some organisations will need to appoint or (at minimum) designate a DPO to take responsibility for data protection compliance.

Next Steps
For all the demands that it will make on resources through the preparation and implementation periods, GDPR should be still be seen as a positive step for businesses. (Not least because it brings clarity, direction and protection for those organisations achieving and maintaining compliance.)

As an immediate next step, organisations must ascertain whether they have adequate resources and expertise in such key areas as finance, information technology, compliance, risk, legal and IT service management. If they do not, they need to source external counsel that is fully capable of supporting them through preparation for, and implementation of, the proposed changes.

Competent specialists will be able to perform an initial review and make recommendations which align with business requirements, objectives and risk appetite. Where required, they should also be capable of supporting the achievement of the highly desirable European Privacy Seal (“EuroPriSe”). (This endorsement certifies that an IT product or IT-based service facilitates the use of that product or service in a way compliant with European regulations on privacy and data protection, taking into account the legislation in the EU Member States.)

With a very tight 24-month preparation period, the point bears repeating: competent, focused and effective preparation must begin now. For those organisations lacking in some or all of the core analysis and implementation skills, the first task must be to build their competence – with external help if needed. That help should be sought and engaged as rapidly as possible. The time to act on GDPR is now.

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Four ways digitalisation is transforming car brands and dealers

16 April 2019 Consultancy.uk

From changing expectations from the customer to new stakeholders entering the industry, the digital transformation of global automotive industry means it is facing the wholesale transformation of its business model. In a new white paper, global consulting partnership Cordence Worldwide has highlighted four major digital trends that are transforming the relationships between car brands and dealers with consumers.

With digital transformation drives booming across the industrial spectrum, automotive groups are no different in having commenced large digital transformation programmes to improve productivity, efficiency, and ultimately profitability. Falling sales figures mean the automotive sector is facing an increasingly difficult road ahead, something which means companies in the market are even more hard pressed to find new ways to improve their bottom lines.

While it offers major opportunities, the industry’s move to digitalise is not without complications. It has triggered a series of major internal changes, which have presented automotive entities with the challenge of becoming a “customer-oriented” industry. A new report from Cordence Worldwide – a global management consulting partnership present in more than 20 countries – has explored how automotive companies are navigating the rapidly changing nature of digital business.

New business models

The level of change likely to be wrought on the automotive industry by digitalisation is hard to overstate. Automation could well lead to significant reductions in the number of accidents, higher vehicle utilisation and lower pollution levels, while leading to a $2.1 trillion change in traditional revenues, with up to $4.3 trillion in new revenue openings arising by 2030.

As a result of this colossal opportunity, it is easy to see why almost all automotive groups now have digital departments, with generally strong communication within the digital transformation and the customer approach. The changes to society which this may have are potentially distracting automotive firms from the change it is leading to in its own companies though, according to Cordence’s paper.

The automotive market is dead, long live the mobility market

Because of this, the sector’s business model is set to transform over the coming decades. With digitalisation speeding up the appearance of concepts such as car-sharing, a subscription package model will likely become more palatable. At the same time, car and ride-sharing models will cater to the sustainability criteria of millennials, who will rapidly become one of the automotive market’s leading consumer demographics in the coming years.

Antoine Glutron – a Managing Consultant with Cordence member Oresys, and the report’s author – said of the situation, “These ‘old school industries’ are now working on creating new opportunities, but in so-doing are facing challenges and threats: new jobs, new technologies, new ecosystem of partners, necessary reorganisation, different relationship with customers, and even new businesses. The customer approach topic is in fact a real challenge for car companies as it implies changing their business model and adjusting their mind-set to address the customer 4.0: from product-centric to customer-centric, from car manufacturer to service provider.”

Digital customer experience

In the hyper-competitive age of the internet, even top companies face an uphill challenge when it comes to holding onto customers through brand loyalty. Digital disruption has resulted in changes to consumer behaviour, which is forcing a range of marketing strategists to reconsider their old, possibly out-dated strategies. As modern customers wield an increasingly impressive array of digital tools and online databases, they and are now able to quickly and conveniently compare prices, check availability and read product reviews.

The automotive sector is no exception to this trend, according to the study. In order to adapt to the needs of the so-called ‘customer 4.0’, car companies will increasingly need to change their business model and move away from product-centric companies to customer-centric ones, from car manufacturers to service providers.

Glutron explained, “As an automotive company, you can no longer expect customer loyalty simply with good products; you must conquer and re-conquer a customer that “consumes” your service. The offer now has to be global, digital and personalised. Your offer has to be adapted to this customer’s needs at any given moment. A key issue related to data control is to build customer loyalty by creating a customer experience 'tailored' throughout the cycle of use of the 'car product': purchase, driving, maintenance and trade-in of the vehicle.”

One way in which the sector may be able to benefit from this desire for a tailored experience is via connectivity. Consumers are generally positive about new connective features for automobiles, and many are even willing to pay upfront for infotainment, emergency and maintenance services. Chinese consumers, where the connected car market is set to hit $216 billion, are already particularly interested in paying a little more for navigation and diagnostic features in their future new car. This can also enable automotive companies to exploit a rich vein of customer data, enabling them to rapidly tailor their offerings to consumer behaviour.

New automotive segments

Digital transformation has also brought with it the rise of completely new application areas. As mentioned earlier, the most well-known example is the autonomous or self-driving car, where the last steps forward were not taken by major automotive groups but by technology companies such as Tesla. While this may have given such firms the edge in the market briefly, a number of keystone automotive names will soon be set to take the plunge into the market themselves, leveraging their car manufacturing prowess and huge production capacities to their advantage.

Before companies rush to invest in this market, however, it is worth their while to remember that the readiness and uptake for such vehicles differs greatly geographically. For example, following a study published in 2018, 92% of Chinese would be ready to buy an autonomous car, compared with only around 35% of drivers in France, Germany and US. Meanwhile, the infrastructure of different nations will also be significantly less accommodating of the new technology.

Use digital for steering thr activity

Elsewhere, Cordence’s analysis has suggested that hooking the cars of tomorrow into the Internet of Things is also likely to see a rapid change in the business model for car maintenance, providing real-time diagnostics for problems. This presents chances for partnerships to improve the connectivity of cars, especially with tech companies; for example, PSA partnered with IBM for a global agreement on services in their vehicle. Meanwhile, data could also be sold to other parties with an interest in this data, such as the government, which could use it to manage traffic levels, or ensure that only adequately maintained vehicles take to the road.

Glutron added, “With the increase in the amount of client data and connected opportunities, the recommendation is to set up data-centric approaches. The value is now in the customer data. The general prerequisites are to rework the data model and the Enterprise Architecture and generally build up a data lake including data from all sources (internal and external, structured and unstructured).”

From automotive to mobility

Relating further to the idea of connectivity, the report claimed that automotive firms must now adjust their models in line with the provision of end-to-end mobility, rather than treating the sale of a car as an end point in their relationship with the customer. In order to realise this transformation, transformations are likely to become more and more important.

A network of partner companies means automotive firms can provide a global mobility experience. As the vehicle is increasingly connected to its environment, new partners can also be cities, governments, and other service providers within the global mobility services industry in which the car brands want to take part.

According to the study, the target is clear. Companies must look to a holistic transport service, offering to move customers from A to B in a unique and pleasant way – otherwise they might as well take public transport. At the same time, they should extend the services reachable “on-board” (especially the enhancement of the connectivity between the car and smartphones or other connected devices), and reach high standards in terms of user experience (online sales, online payment, customised experience during and after the use of the car).

Concluding the report, Glutron stated, “These mobility market transformations could be considered a threat for the car manufacturers. Quite the opposite: if they take up the challenge and review their business model so that they become the service provider – communicating no longer to a driver but to a ‘mobility customer’ – they can then take advantage of their expertise and their position as a historical player. The most convenient means of transport are cars, and building a car is highly-skilled work.”