Navigating Regulatory Compliance in the Tech Industry with a Focus on Security

Meeting the evolving regulatory mandates promulgated by lawmakers and agencies has become something of a Herculean task. The fast-changing and exponential growth of the technology landscape cracks the door for threat actors to breach systems, exposing valuable and confidential data. The tech industry may be more at risk than ever before, and the need to focus on cybersecurity has never been greater.

In his 1999 book, The Age of Spiritual Machines, Ray Kurzweil contends that “we won’t experience 100 years of progress in the 21st century — it will be more like 20,000 years of progress (at today’s rate).” He argues there is “exponential growth in the rate of exponential growth” occurring right now.

States are now crafting their own unique data privacy laws that often exceed the regulations established by the federal government. Technology operations must also be keenly aware that international cybersecurity measures apply across the oceans. This patchwork of rules makes regulatory compliance exceedingly tricky. Compounding the problem, the U.S. Securities and Exchange Commission (SEC) can bring civil fines up to “$1,098,190 or triple the monetary gain” for violating its Privacy of Consumer Financial Information and Safeguarding Personal Information regulation. Exploding IT could become increasingly challenging to protect year-over-year unless exceptional vigilance is practiced.

What is Regulatory Compliance?

Regulatory compliance in the tech industry involves meeting or exceeding the data protection standards set by lawmakers and agencies. The U.S. Congress, state legislatures, and regulatory bodies such as the SEC, Food and Drug Administration, Federal Trade Commission (FTC), Financial Industry Regulatory Authority, North American Electric Reliability Corporation, as well as overseas organizations, craft data privacy and protection policies that companies around the world must follow.

It’s also important to note that organizations such as the National Institute of Standards and Technology (NIST) develop cybersecurity measures in an advisory capacity that are routinely adopted by the federal government. Failing to meet these regulations can result in hefty fines, license suspensions, and being sidelined from doing business in a specific sector.

As an enterprise expands across state and international lines, its regulatory compliance responsibilities overlap with those set by a variety of jurisdictions. That means implementing new cybersecurity policies and processes in order to grow. Strict adherence to data protection regulations in an age when technology moves at light speed often requires an entire department of specialists or outsourcing to a third party managed IT firm with cybersecurity expertise.

Fundamental Components of IT Compliance Regulations

The primary elements of IT compliance regulations are designed to protect data from a variety of trajectory points. Standards focus on cybersecurity, privacy, and the structural integrity of information systems. Depending on the type of digital information, lawmakers and regulatory bodies craft rules regarding suitable protective methods. These are among the fundamental goals of IT compliance regulations.

• Data Security: Regulations task companies with implementing technology, devices, and professionals to ensure sensitive data is not compromised.
• Protect Privacy: Customers, clients, and patients have an expectation of privacy when they share information with an organization. Data protection mandates are in place to serve that purpose.
• Risk Management: Data security regulations typically require companies to conduct a risk assessment. This process highlights cybersecurity strengths and vulnerabilities. Usually performed by a third party managed IT firm with cybersecurity expertise, the fresh set of eyes identifies issues in-house technicians grow accustomed to seeing and sometimes overlook.
• Incident Response: Regulatory compliance addresses an outfit’s ability to promptly respond to imminent threats. An organization must usually possess the ability to identify, confine, and expel risks to digital information quickly.
• Managing Vendors: No company operates in a vacuum. Interactions with businesses in the same orbit can crack the door for hackers. Data protection regulations generally address the way digital information is shared, stored, and transmitted.
• Cybersecurity Awareness Training: One of the issues that too often crops up during a risk assessment is the lack of cybersecurity knowledge employees possess. Data privacy regulations can mandate that everyone who accesses, stores, or transmits digital information undergoes cybersecurity awareness training.

By implementing appropriate mandates for tech industry operations, unauthorized users are confronted by robust security measures. Businesses that do not meet security expectations are little more than low-hanging fruit waiting to be harvested by even garden variety hackers.

Cost of Failing to Maintain Regulatory Compliance

Failing to maintain regulatory compliance is usually exposed following a cybersecurity incident. Needless to say, hackers in foreign lands have consistently increased the number of attacks and methods used to evade detection. In recent years, IoT devices and technology have presented bad actors with new playthings and tools to burglarize business data.

According to Statista, 75 percent of chief information security officers (CISO) in the U.S. indicated their companies were at material risk of a cyberattack in 2023. The number of attacks on businesses rose to 480,000 in 2022, and losses are expected to exceed $452 billion in 2024. These are other types of losses corporations suffer as a result of non-compliance.

• Protracted Litigation: When companies fail to fully protect sensitive data, regulatory bodies bring civil actions that often result in a negotiated fine. Impacted customers and peripheral enterprises may also file suit in court. People who have their personal information exposed seek significant monetary court judgments that require expensive lawyers to defend against.
• Business Disruption: Downtime doesn’t just affect a company’s immediate bottom line. Clients forced to go elsewhere for goods and services may not return, causing future losses.

These and other stinging losses do not necessarily include regulatory agency fines and the long-term damage to a tarnished reputation. 

The Costly Dangers of Non-Compliance

Last year’s major cybersecurity breach of MGM Resorts International in Las Vegas resulted in quantifiable losses tallying more than $100 million. One of the world’s largest gambling and leisure operations, MGM was literally forced to use clipboards and paper receipts after a group of Gen Z hackers ravaged its network. The FBI launched a probe designed to identify the cybercriminals and bring them to justice. The FTC — by contrast — pursued its own investigation to determine whether MGM failed to meet regulatory standards. After the FTC requested approximately 100 categories of information, MGM recently became embroiled in a civil lawsuit to block the federal agency. These are other corporations with deep pockets that were hit with high fines on top of their initial losses.

• JP Morgan Chase: The company negotiated a $125 SEC fine and a $75 million Commodity Futures Trading Commission payout over employees using WhatsApp and other platforms to end run federal record-keeping regulations.  
• Marriott: The hospitality giant paid upwards of $124 million for violating the EU’s General Data Protection Regulation (GDPR). More than 339 million guest records were reportedly exposed.
• British Airways: After more than a half-million customers’ data was compromised, the organization faced $230 million in regulatory fines.

Equifax reportedly wrote a check to the tune of $575 million in 2017 and Uber has been fined $150 for failing to protect confidential information in accordance with regulatory standards. Failing to meet data protection mandates opens a veritable Pandora’s Box of financial losses, reputational damage, and civil litigation. That’s why business leaders in the technology industry and others must go to great pains to achieve and maintain compliance with all applicable regulations. Some large multinational corporations spend millions annually on internal cybersecurity to adhere to changing mandates.

Cost of Operating an In-House Security Operations Center (SOC)

An SOC ranks among the best ways to protect valuable and confidential information 24 hours a day, 7 days a week. Corporations onboard talented managed IT and cybersecurity experts to fill administrative and monitoring positions. The essential positions typically include the following.

• Triager: This entry-level position involves analyzing alerts and prioritizing them. A triager may also provide support to co-workers dealing with glitches and forgotten passwords.  
• Cybersecurity Investigator: Experienced professionals usually field credible threats and dig deeper into the network to identify anomalies and other telltale signs of a potential data breach. Many take prompt measures to mitigate risks and expel threats.
• Advanced Security Analyst: Highly skilled cybersecurity experts handle SOC maintenance and search for inherent system vulnerabilities. It’s not uncommon for an advanced security analyst to conduct operations known as “threat hunting.”
• Chief Information Security Officer (CISO): The SOC team leader provides oversight and technology supervision. This individual serves as a conduit for corporate leadership and maps out critical next steps to mitigate risk.

The total cost of ongoing SOC vigilance can run several million dollars annually. Hidden costs, such as ongoing cybersecurity education and training, tend to balloon the price of internal SOCs. Attrition also plays a role as the global shortage of certified cybersecurity professionals neared 4 million in 2023.

For organizations that can afford the high price of an in-house SOC, it makes sense when weighed against potential financial losses, reputational damage, civil litigation, and the massive fines levied for regulatory non-compliance. Businesses that cannot reasonably justify this expenditure usually take advantage of scalable vSOC services. Outsourcing 24/7 cybersecurity has proven cost-effective and business leaders can build in the practices necessary to exceed regulatory compliance.

Benefits of an SOC or vSOC to Meet Data Protection Standards

The importance of constant data security vigilance for tech industry operations cannot be understated. One slip-up, one data breach, and the fallout could prove disastrous for the entire organization. When clients and partners in the sector lose confidence that an outfit can keep its data secure, decision-makers may start to rethink that relationship. Fortunately, an SOC or vSOC delivers proactive benefits that allow businesses to exceed state, federal, and international regulations.

• Vigilant Monitoring: A well-conceived SOC or vSOC has the capacity to provide ongoing monitoring. When a hacker sitting in a café in another time zone attempts a breach in the middle of the night, someone is ready to respond in real time.
• Enhanced Visibility: Bringing all of the cybersecurity elements into one room or virtual security operations center creates a laser focus. False threats are weeded out and credible ones are promptly dealt with by cybersecurity professionals. An SOC or vSOC improves visibility and reduces reaction times.
• Central Hub: By centralizing regulatory security efforts, wide-reaching departments streamline intel directly to the cybersecurity experts. This eliminates any guesswork that would cause a delayed response to a credible threat, such as a targeted phishing attack.

Transitioning to a virtual or in-house SOC provides an opportunity to rethink the way sensitive and valuable data is being defended. The approach also allows CISOs to incorporate all the practices outlined in applicable state, federal, and international data privacy regulations.

Regulatory Measures Businesses Need to Address

To say the list of data protection regulations is long would be something of an understatement. States such as California, Virginia, Connecticut, Colorado, Utah, Iowa, Indiana, Tennessee, Oregon, Montana, Texas, Delaware, Florida, New Jersey, and New Hampshire all have extensive digital privacy laws in place. That list is only expected to grow in the coming years and companies that conduct business across these and other state lines must meet the requirements.

General Data Protection Regulation (GDPR)

Considered by many to be the touchstone by which data consumer information protection regulations are measured, the GDPR impacts organizations that collect the personal information of EU residents. Companies that collect information for purposes such as processing credit card purchases must notify EU citizens why the data was collected and for what purpose. Companies must demonstrate they adhere to the strict data privacy protections outlined in the GDPR.

California Consumer Privacy Act (CCPA)

California continues to advance strict data privacy laws and other states have followed suit. The CCPA affords California residents specific rights in terms of how their personal information is collected, stored, transferred, and utilized. The measure tasks outfits with certain obligations, such as issuing transparency notices. Even if a company collects information in another state, California exercises the CCPA.

Health Insurance Portability and Accountability Act (HIPAA)

The healthcare industry ranks among the most targeted sectors by hackers. That’s primarily because organizations collect, store, and transmit a treasure trove of valuable and confidential information. Credit cards, bank accounts, names, addresses, birth dates, and even Social Security numbers are housed in healthcare systems. Maintaining HIPAA compliance is one of the most demanding regulatory standards to achieve.

Gramm-Leach-Bliley Act (GLBA)

The GLBA focuses on financial institutions, setting standards for safeguarding digital information. It places clear limits on what lenders can do with personal information and requires companies to provide privacy notices. It’s not unusual for financial institutions to wrestle with GLBA regulatory compliance and outsource data protection to a managed IT firm with cybersecurity expertise.

Payment Card Industry Data Security Standard (PCI DSS)

Credit and debit cards are high-value targets for hackers looking to make a quick buck selling information on the Dark Web. The PCI DSS mandate sets guidelines for how companies process, store, and transmit cardholder information. Its ultimate goal is to prevent theft and misuse by ensuring companies meet the standards necessary to maintain a secure network.

There are emerging ideas about the best ways to protect valuable and confidential data that are finding their way into discussions about advancing new regulations and updating existing ones. For example, the Iowa Consumer Data Protection Act is scheduled to take effect on Jan. 1, 2025. Montana’s Consumer Data Privacy Act comes online in October. Modeled after a Connecticut law that hit the books last year, it gives residents the right to opt out of lists that might otherwise be lawfully sold.

The Oregon Consumer Privacy Act takes effect in July, and it addresses issues regarding biometric data. Passed in 2023, Oregon was the sixth state to pass such legislation and other states will likely adopt a similar measure. With AI and machine learning playing more prominent roles in the digital age, companies can anticipate a tectonic shift in the way lawmakers and agencies craft regulatory compliance measures.

What Tech Industry Companies Can Do to Achieve Regulatory Compliance

The tech industry is not immune to the attempts of garden variety hackers and advanced persistent threats trying to pilfer off sensitive data. To achieve regulatory compliance, the initial step usually involves having a thorough risk assessment performed. Understanding systemic vulnerabilities and the lack of cybersecurity awareness knowledge staff members possess is a jumping-off point.

Once industry leaders know their operational ills, they can be cured. Solutions such as a vSOC, cybersecurity overhaul, and ongoing awareness training are vital to defending a business’s attack surface. A digitally secure tech operation deters threat actors, maintains its reputation, and avoids regulatory fines and civil litigation.