Go Beyond Compliance to Competitive Advantage

1. Privacy and Business: Go Beyond Compliance to Competitive Advantage Ann Cavoukian, Ph.D. Information & Privacy Commissioner/Ontario Rotman School of Management Executive MBA Program March 18, 2005

2. Growth of Privacy as a Global Issue. (EU Directive on Data Protection) Exponential growth of personal data collected, transmitted and exploited. Convergence of growth in bandwidth, sensors, data storage and computing power. Consumer Backlash; heightened consumer expectations Impetusfor Change

3. U.S. Patriot Act and series of anti-terrorism laws introduced. Served to expand powers of surveillance on the part of the state, and reduce judicial oversight. And then came 9/11

4. It’s business as usual: Clear distinction between public safety and business issues – make no mistake NO reduction in consumer expectations Increased value of trusted relationships The Aftermath

5. Business is not a beneficiary of the post-9/11 “Trust Mood” Increased trust in government has not been paralleled by increased trust in business handling of personal information Privacy On and Off the Internet: What Consumers Want Harris Interactive, November 2001 Dr. Alan Westin Consumer Attitudes

6. In the post-9/11 world: Consumers either as concerned or more concerned about online privacy Concerns focused on the business use of personal information, not new government surveillance powers If consumers have confidence in a company’s privacy practices, consumers are more likely to: Increase volume of business with company…….... 91% Increase frequency of business……………….…... 90% Stop doing business with company if PI misused…83% Harris/Westin Poll, Nov. 2001 & Feb. 2002 Importance of Consumer Trust

7. Information Privacy: Data Protection Freedom of choice; control; informational self-determination Personal control over the collection, use and disclosure of any recorded information about an identifiable individual Information Privacy Defined

8. Security  Privacy What Privacy is Not

9. Authentication Data Integrity Confidentiality Non-repudiation Privacy; Data Protection Fair Information Practices Security: Organizational control of information through information systems Privacy and Security: The Difference

10. OECD Guidelines on the Protection of Privacy and Transborder Flows of Personal Data EU Directive on Data Protection CSA Model Code for the Protection of Personal Information Canada Personal Information Protection and Electronic Documents Act (PIPEDA) Fair Information Practices: A Brief History

11. Accountability Identifying Purposes Consent Limiting Collection Limiting Use, Disclosure, Retention Accuracy Summary of Fair Information Practices • Safeguards • Openness • Individual Access • Challenging Compliance

12. 1. Accountability for personal information designate an individual(s) accountable for compliance 2. Identifying Purposes purpose of collection must be clear at or before time of collection 3. Consent individual has to give consent to collection, use, disclosure of personal information The Ten Commandments

13. 4. Limiting Collection collect only information required for the identified purpose; information shall be collected by fair and lawful means 5. Limiting Use, Disclosure, Retention consent of individual required for all other purposes 6. Accuracy keep information as accurate and up-to-date as necessary for identified purpose 7. Safeguards protection and security required, appropriate to the sensitivity of the information The Ten Commandments

14. 8. Openness policies and other information about the management of personal information should be readily available. 9. Individual Access upon request, an individual shall be informed of the existence, use and disclosure of his or her personal information and be given access to that information, be able to challenge its accuracy and completeness and have it amended as appropriate. 10. Challenging Compliance ability to challenge all practices in accord with the above principles to the accountable body in the organization. The Ten Commandments

15. Privacy Act (federal) Access to Information Act, (federal). Freedom of Information and Protection of Privacy Act (Ontario). Municipal Freedom of Information and Protection of Privacy Act, (Ontario). Public Sector Privacy Laws

16. As of January 1, 2004, the federal Personal Information Protection and Electronic Documents Act applies to:  all personal information collected, used or disclosed in the course of commercial activities by provincially regulated organizations  unless a substantially similar provincial privacy law is in force Private Sector: PIPEDA

17. Québec: Act respecting the protection of personal information in the private sector B.C.: Personal Information Protection Act Alberta:Personal Information Protection Act Ontario: Personal Health Information Protection Act Provincial Private-Sector Privacy Laws

18. Privacy should be viewed as a business issue, not a compliance issue The Bottom Line

19. Electronic Commerce projected to reach $220billion by 2001 WTO, 1998 Electronic Commerce projected to reach $133 billion by 2004 Wharton Forum on E-Commerce, 1999 The Promise Estimates revised downward to reflect lower expectations

20. United States: e-commerce sales were only 1.6% of total sales -- $54.9 billon in 2003. -U.S. Dept. of Commerce Census Bureau, November 2004 Canada: Online sales were only 0.8% of total revenues -- $18.6 billion in 2003 Statistics Canada, April 2004 Statistics Canada, April 2003 The Reality

21. “Consumer privacy apprehensions continue to plague the Web. These fears will hold back roughly $15 billion in e-commerce revenue.” Forrester Research, September 2001 “Privacy and security concerns could cost online sellers almost $25 billion by 2006.” Jupiter Research, May 2002 Lack of Privacy = Lack of Sales

22. “Our research shows that 80% of our customers would walk away if we mishandled their personal information.” CPO, Royal Bank of Canada, 2003 Nearly 90% of online consumers want the right to control how their personal information is used after it is collected. The Business Case

23. The Information Security Forum reported that a company’s privacy breaches can cause major damage to brand and reputation: 25% of companies surveyed experienced some adverse publicity due to privacy 1 in 10 had experienced civil litigation, lost business or broken contracts Robust privacy policies and staff training were viewed as keys to avoiding privacy problems The Information Security Forum, July 7, 2004 ISF Highlights Damage Done by Privacy Breaches

24. How the Public Divides on Privacy The “Privacy Dynamic” - Battle for the minds of the pragmatists — Dr. Alan Westin

25. “Trust is more important than ever online … Price does not rule the Web … Trust does.” Frederick F. Reichheld, Loyalty Rules: How Today’s Leaders Build Lasting Relationships It’s All About Trust

26. “When customers DO trust an online vendor, they are much more likely to share personal information. This information then enables the company to form a more intimate relationship with its customers.” Frederick F. Reichheld, Loyalty Rules: How Today’s Leaders Build Lasting Relationships The High Road

27. “In 70% of instances where Internet users were asked to provide information in order to access an online informational resource, those users did not pursue the resource because they thought their privacy would be compromised.” Narrowline Study, 1997 Lack of Trust on the Web

28. Fully 50% of online users said they would leave a Web site if they were unhappy with a company’s privacy policy. Customer Respect Group, February 2004 survey Trust and Privacy Policies

29. “42.1% have falsified information at one time or another when asked to register at a Web site.” 10th WWW User Survey, October 1998 Falsifying Information on the Web

30. Hot Topics

31. West Virginia scrap yard operator reported that since 2001, his telephone system has been deluged with confidential CIBC customer data (e.g. SIN, account information, client signature). Bank acknowledges reports of the misdirected faxes dating back to February 2002. Scrap yard operator filed a lawsuit against CIBC claiming his business was ruined. CIBC filed a court action accusing him of deliberately leaking customer data. CIBC

32. The fastest growing form of consumer fraud in North America. Identity theft is the most frequently cited complaint received by the F.T.C. — 10 million new victims, and $50 billion in losses every year. According to PhoneBusters, fraud has now become one of the most pervasive forms of white-collar crime, costing Canadians $40 million since 1995. November 2004 — ChoicePoint: Identity theft involving 145,000 persons. December 2004 — Bank of America: 1.2 million records misplaced. January 2005 — T-Mobile: Illegal access to 16.3 million records. January 2005 — HSBC: 180,000 MasterCard records stolen. March 2005 — LexisNexis: Identity theft involving 32,000 records. March 2005 — DSW Inc: Hacker theft of 103 credit card numbers. March 2005 — Boston College: Hacker theft of 120,000 alumni donor records Identity Theft

33. A data aggregation and clearinghouse company that maintains databases of background information on virtually every U.S. citizen. 19 billion public records in its database: motor vehicle registrations, license and deed transfers, military records, names, addresses and Social Security numbers. ChoicePoint routinely sells dossiers to police, lawyers, reporters and private investigators. ChoicePoint

34. In a plot twist taken from a Hollywood movie, criminals were creating false identities to establish accounts with ChoicePoint and then using those accounts to commit identity theft. In response, ChoicePoint: Notified 35,000 Californians as required by California law, SB1386. Will notify an additional 145,000 persons that “unauthorized third parties” had obtained their personal information. Los Angeles police believe that the actual number of persons affected could be 500,000 or more. ChoicePoint:Gateway for Identity Thieves

35. ChoicePoint will re-screen and re-credential 17,000 customers to verify that they are legitimate businesses. Since early February, ChoicePoint’s stock value has dropped by more than 23%. February 2005, Lawsuit filed by identity theft victim. March 2005, suspension of sales to small businesses — loss of 5% of annual revenue or $900 million. March 2005, class action lawsuit filed by shareholders. ChoicePoint:Fallout and Cost

36. An effective privacy program needs to be integrated into the corporate culture It is essential that privacy protection become a corporate priority throughout all levels of the organization Senior Management and Board of Directors’ commitment is critical Make Privacy a Corporate Priority

37. “Privacy and Boards of Directors: What You Don’t Know Can Hurt You” Guidance to corporate directors faced with increasing responsibilities and expectation of openness and transparency Privacy among the key issues that Boards of Directors must address Potential risks if Directors ignore privacy Great benefits to be reaped if privacy included in a company’s business plan Good Governance and Privacy

38. Simple, plain-language tool (paper and e-versions) Free & self-administered CSA model code to examine an organization’s privacy management practices www.ipc.on.ca/PDT Privacy Diagnostic Tool

39. Final Thought “Anyone today who thinks the privacy issue has peaked is greatly mistaken…we are in the early stages of a sweeping change in attitudes that will fuel political battles and put once-routine business practices under the microscope.” Forrester Research, March 5, 2001

40. How to Contact Us Commissioner Ann Cavoukian Information & Privacy Commissioner/Ontario 2 Bloor Street East, Suite 1400 Toronto, Ontario M4W 1A8 Phone: (416) 326-3333 Web: www.ipc.on.ca E-mail: commissioner@ipc.on.ca