As we step into 2025, data privacy has become more than a buzzword—it is a legal requirement with serious financial and reputational implications. The Digital Personal Data Protection Act (DPDPA), which will come mid of 2025 into effect in India, sets a high bar for organizations that handle personal data. For businesses to stay compliant and avoid hefty penalties, it's essential for CFOs to prioritize and allocate budget to data privacy initiatives in the 2025-2026 fiscal year. The stakes are higher than ever, with fines ranging from Rs. 250 crores to Rs. 500 crores per non-compliant incident.
In this article, we’ll explore the key factors and considerations CFOs must keep in mind when budgeting for DPDPA compliance.
1. Understanding the DPDPA Framework and Its Implications The DPDPA introduces a comprehensive set of rules around the collection, processing, storage, and transfer of personal data. Under the Act, any organization handling personal data must implement a series of technical, organizational, and legal safeguards to ensure data privacy. Non-compliance can result in severe penalties, with fines as high as Rs. 500 crores for a single violation.
Key provisions of the Act include:
Consent: Organizations must ensure that consent is obtained in a transparent and accessible manner.
Rights of Individuals: Data subjects have the right to access, correct, erase, or restrict the processing of their data.
Data Breach Notifications: Organizations must notify data breaches within a specific time frame.
Cross-border Data Transfers: There are strict regulations on transferring data outside of India.
Given these significant requirements, CFOs need to be proactive in budgeting for the resources necessary to stay compliant.
2. Budgeting for Data Privacy Officers (DPOs) and Privacy Programs
A central pillar of DPDPA compliance is the appointment of a Data Protection Officer (DPO). The DPO is responsible for overseeing the implementation of data privacy policies and ensuring that the organization adheres to legal requirements. In many organizations, this role will likely require a full-time, dedicated individual or team.
When budgeting for the DPO, CFOs should consider:
Salaries and Recruitment: A qualified DPO may command a high salary, but this role is critical to ensure ongoing compliance. Costs may include recruitment, training, and retention.
Training and Certification: Investing in continuous education for the DPO and other key stakeholders within the organization ensures that the team remains updated with evolving privacy regulations and practices.
Beyond the DPO, the organization must set aside funds for the broader privacy program—a coordinated effort that involves policy formulation, training, audits, and reporting. This will require the allocation of both time and money.
3. Setting Up a Data Privacy Office
Creating a Data Privacy Office (DP Office) is one of the most strategic steps for large organizations to embed data privacy at the core of their operations. The DP Office will be responsible for:
Developing Privacy Policies: Clear, accessible policies that govern how data is handled.
Ongoing Monitoring and Auditing: Regular audits to ensure compliance with privacy laws and company policies.
Managing Data Subject Requests: Handling requests from individuals seeking access to their data or exercising their rights under the DPDPA.
This office requires resources—both in terms of staffing and technology—and these should be carefully considered when budgeting.
4. Investing in Data Privacy Tools and Technology
Technology plays a critical role in ensuring compliance with data privacy laws. Privacy tools can help manage consent, track data subject requests, identify and mitigate risks, and conduct internal audits.
Some of the key tools and technologies to invest in include:
Data Loss Prevention (DLP) Tools: These help prevent data breaches by monitoring and controlling data transfers across the organization.
Encryption and Masking Technologies: Protect personal data both at rest and in transit.
Consent Management Platforms: These help streamline the process of obtaining and managing user consent.
Privacy Impact Assessments (PIA) Tools: These tools help in assessing the risks associated with processing personal data.
CFOs should ensure that the budget includes both the purchase of these tools and their ongoing maintenance.
5. Training and Awareness Programs
For any data privacy program to be effective, it’s crucial that every employee understands their role in protecting personal data. This includes training on the organization’s data privacy policies, recognizing data breaches, and handling personal data securely.
The cost of training programs, workshops, and certifications for employees should be factored into the budget. It's also important to allocate funds for the development of ongoing training content, as laws and best practices evolve.
6. Third-Party Vendor Compliance
Organizations often rely on third-party vendors for various services, and these vendors may have access to personal data. Under the DPDPA, businesses are responsible for ensuring that their third-party vendors are also compliant with the data protection laws. This means conducting due diligence, negotiating contracts that include data protection clauses, and regularly auditing these vendors’ compliance.
The budget must include the costs of:
Third-Party Audits: Engaging with external consultants to assess vendor practices.
Contract Negotiations: Updating contracts with data protection provisions.
7. Legal and Consultancy Costs
Compliance with the DPDPA often requires expert legal advice, especially as the law is still evolving. CFOs should plan for the cost of engaging legal counsel, privacy consultants, and external auditors to ensure that their data privacy policies and practices are in line with current regulations.
8. Cost of Handling Data Breaches and Incidents
Despite best efforts, data breaches can still happen. Organizations should have a budget set aside for breach management, including:
Incident Response Teams: Costs related to managing and mitigating the impact of a breach.
Notification and Reporting: Complying with breach notification requirements under the DPDPA.
Remediation and Recovery: Fixing the vulnerabilities that allowed the breach to occur and recovering any compromised data.
Conclusion: Why CFOs Must Act Now
The financial consequences of non-compliance with the DPDPA are severe, with potential fines of Rs. 250 to 500 crores for each data breach. However, the costs of proactive compliance—hiring a DPO, setting up a privacy office, investing in technology, and ongoing training—are far less than the financial and reputational damage caused by a data privacy failure.
CFOs must take the lead in allocating adequate resources for data privacy compliance in 2025-2026. Failure to do so could expose the company to massive financial penalties and irreparable damage to its brand reputation. As the importance of data privacy continues to grow, it’s time for organizations to make data protection a priority and ensure that their budgeting reflects the urgency of the DPDPA compliance journey.
For more information, please reach out to Nagaraja Bangalore Subbarao.
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