Management, compliance & auditing

Why data classification is important for security

Alex Morgan
June 15, 2021 by
Alex Morgan

Organizing unstructured data is the first step to making the most out of your data. Without a proper data classification system, it’s difficult to keep track of sensitive information, which is crucial when it comes to risk management, data protection and compliance.

Having a clear, and preferably written data classification policy, helps ensure data confidentiality, data integrity and makes data easier to access. This has multiple benefits, from improving your day-to-day operations to helping you ensure compliance and improve data security.

Different categories of data

In order to write a good data classification policy enabling you to properly secure your data, you first need to consider these common data categories:

  • Public information: includes marketing materials and pricing information available to everyone, which can freely be disclosed to the public
  • Personal information: includes sensitive personal data such as credit card information, Social Security numbers and medical information, which shouldn't be disclosed to the public and failing to protect it could result in legal and financial penalties
  • Confidential data: also needs to be kept from the public and includes sensitive employee information as well as information about business partners, such as vendor contracts, payroll information and employee reviews
  • Internal data: company data necessary for business operations, such as organizational charts and sales playbooks, which also shouldn't be disclosed to the public.

Staying compliant with data protection laws

There are many data protection and privacy laws that require companies to handle sensitive data in a certain way in order to keep it safe from public exposure. To stay compliant with these laws, it is necessary to properly classify your data.

A hot topic three years ago when it was first implemented, but still an equally relevant example is GDPR. It is the most well-known data regulation policy created to regulate the way businesses handle sensitive company data.

It consists of these seven guiding principles every company should follow:

  1. Obtaining data in a lawful and transparent way
  2. Being specific and clear about why you are collecting personal data
  3. Embracing a minimalist approach and collecting only the data you need
  4. Making sure that stored data is accurate
  5. Holding on to the necessary data only
  6. Ensuring data confidentiality and integrity
  7. Having clear written compliance policies

To be able to comply with these principles, you need to know exactly which data you collect and where it is stored. Data classification can make this significantly easier and help you manage your data in accordance with relevant laws and regulations.

Creating a data retention policy

Following the principles of GDPR, you should not only collect the minimum amount of data, but also make sure to dispose of it once you no longer need it or are no longer obliged to keep it.

In fact, not all data needs to be kept for a long period of time, and often, it’s best to destroy it as soon as possible. Creating a data classification policy will help you prioritize which data needs to be retained and for how long in order to diminish the risk of data exposure.

Different types of data require different retention policies so classifying your data into different categories will help you determine which type needs to be retained for how long. That way, you’ll make sure that the risk of data exposure is brought to a minimum and that you’re not holding on to your data for longer than necessary.

These retention periods can vary depending on the level of data sensitivity, but they can also differ from industry to industry. For example, when creating an email retention policy for industries that deal with large amounts of confidential data on a daily basis such as the healthcare industry, you should stick to the retention period of seven years, while this period can be shorter for industries that deal with less sensitive data such as telecommunication.

Knowing exactly when you can safely get rid of sensitive data without risking legal penalties will help you not only lower the risk of data breaches but also avoid high costs of data storage.

Protecting your data

Data protection is all about preventing unauthorized disclosure of sensitive information. In order to properly protect this data, you need to know exactly which data belongs to the most sensitive categories and requires the highest level of security.

That’s why it’s essential to classify your data into different categories of sensitivity and in order to implement proper security protocols for each category.

To make sure that your data collection practices are ethical and follow best practices that both meet your customer’s expectations and reflect your company’s standards, you need to know the following:

  • What sensitive data you collect
  • The location where this data is stored
  • Who has access to data, and who can alter or destroy it
  • What the consequences of improper handling of sensitive data are

With this in mind, you can work on creating a data protection strategy that includes estimating risk levels for each data category, prioritizing which category of data needs the highest level of protection as well as implementing proper threat detection and security measures.

Making your data more accessible

Data classification will not only help you stay away from legal issues and keep your sensitive data protected, but also make it much more accessible and useful. Nowadays, companies have enormous amounts of data at their disposal, and this data can help companies gain valuable insight into their own strengths and weaknesses.

Unfortunately, companies often leave their data unstructured, making it difficult to search and analyze.

Data classification and security depends on you

In order to properly protect your data, you need to keep in mind that data is dynamic and that you need to regularly update your data classification and data protection strategy. Your database is continuously changing as you move and delete files and add new information. 

It is crucial to adjudicate your data classification accordingly in order to keep it relevant and ensure that your data is properly secured.

Alex Morgan
Alex Morgan

Alex is a passionate tech blogger, internet nerd and data enthusiast. He is interested in topics that cover data regulation, compliance, eDiscovery, information governance and business communication.