- 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 move markets, with many consumers not happy with being tracked for digital advertising.
- Leaders need to act on data privacy and security and realise that, like other global enterprise issues, they can present risks and opportunities alike.
It is common knowledge that 2022 is off to a difficult start for the stock market – the S&P and NASDAQ are posting stomach-clenching declines. Many pundits have speculated: Is it COVID-19? The war in Ukraine? Inflation trepidation? Supply chain issues?
It’s all of these to some extent, but the single precipitating factor that triggered recent technology stock declines has been missing from the global conversation. The X factor is, in fact, data privacy.
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Although out of mainstream investors’ spotlight, data privacy has demonstrated it has the power to move markets. After app users were given the power to decide if they wanted to be tracked online for digital advertising, 85% said no.
This made ads less effective, and consumers’ continuing incremental refusals, grounded in privacy trends, decreased billions of dollars of advertising revenues worldwide. As companies miss their quarterly projections, markets have tumbled.
Surging regulations on data privacy
It’s not just consumers’ individual actions. Increasingly over the past five years, lawmakers and regulators have erected guardrails around personal data collection and how that data is used.
While this field was largely unregulated prior to 2018, there are now 150 countries and regions with data protection laws including the EU, MEA, 34 African nations, Brazil, China, and Australia – as well as California and four other US states.
Regulators around the globe have been fixated on digital advertising and data security in particular. US Federal Trade Commissioner Lina Kahn recently decried the collection of personal information to create ad profiles as “commercial surveillance”.
The US Securities and Exchange Commission has promulgated new proposed rules that would impose privacy and cyber transparency for officers and directors, and the EU is considering a new law (called DORA) that would impose criminal liability on boards for data breaches. Gartner projects that by 2023, 75% of the world’s population will be covered by privacy laws.
The stakes will only get higher. We are currently generating globally 2.5 quintillion bytes of data per day (a quintillion is 1 followed by 18 zeros).
The security issues surrounding data are themselves significant. Last year, data breaches were forecast to cost our global economy $6.1 trillion. If data breaches were a country, they would be the third-largest behind the US and China.
Data privacy won't be limited to tech sector
The pandemic has shown us that all companies are data companies and the issues playing out in the markets will not be limited to the tech sector. Some of the largest sectors for digital advertising are consumer packaged products, financial services, and healthcare.
On a positive note, just as data privacy can tank share prices, it can elevate them. The most profitable companies in the world have made data privacy a brand differentiator. Two tech companies that have made data privacy and security their brand differentiators have a market cap of $2.5 trillion dollars and $2.055 trillion, respectively.
The CEO and president of two large 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 profitable companies have gone on record with commitments to protect consumer privacy and security. For example, a leading multinational retailer has promised responsible data stewardship and has posted its 'Digital citizenship: ethical use of data & responsible use of technology' statement on its website.
China’s State Grid 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 the adoption of responsible data and artificial intelligence practices to prevent algorithmic bias.
Leaders need to act on data privacy and security
These examples show that, although not easy, the fix is straightforward; like everything, it’s about leadership. In this context, officers and directors need to realize three things:
Data privacy and security require board-level focus like other global enterprise issues that present risks and business opportunities alike, such as climate change and social responsibility. Global and national legal frameworks need to move toward harmonization rather than fragmentation to promote business and consumer interests.
What is the World Economic Forum doing on data policy?
More data is being generated than ever before, yet much of what is needed to tackle the world’s most pressing challenges lies disconnected in both 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 by focusing on privacy, equity, interoperability and trust.
- In collaboration with the Government of Finland, the Forum developed a new approach to data management to improve the way sensitive data is used in Helsinki and safely provide residents with new and personalized services.
- The Centre for the Fourth Industrial Revolution Rwanda worked with the Ministry of Information, Communication Technology and Innovation to promote the adoption of new technologies in the country, driving innovation on data policy and AI – particularly in healthcare. The Forum partnered with the Bahrain Economic Development Board and other experts to co-design a Roadmap for Cross-Border Data Flows, identifying best practices for innovative policies in data-intensive technologies.
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Neither the private sector nor governments can tackle this issue alone – data privacy and security require partnership, and leadership as 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 through our Fourth Industrial Revolution.
And finally, business leaders need to remain engaged in the data discussion because data is, in fact, their biggest asset – as evidenced by the volatile stock market, where it is able to sink shares or elevate them to record highs.