The Importance of Data Classification


The Importance of Data Classification

Data has been the buzzword in the business world lately. According to IBM, 2.7 zettabytes of data exist in the digital universe. Companies are collecting more customer data than ever, however, while knowledge is power, not every piece of data can count as knowledge.

To utilize the true power of data, you have to know how to use it correctly — and the first step is classifying your unstructured data. Your data needs to be properly organized into categories so you can easily store it, protect it, and retrieve it whenever you need it.

Without a well-organized data classification system, you won’t be able to find and retrieve sensitive information, which is essential when it comes to data protection and risk management, as well as compliance and e-discovery.

Every organization should have a clear, and preferably written, data classification policy. This policy should precisely define what criteria and categories your organization will use to classify data, and also determine specific roles and responsibilities of your employees when it comes to data management.

Common data classification categories

When writing your data classification policy, there are certain standard data classification categories you should consider:

  • Public information — This data can freely be disclosed to the public, for example, marketing materials, price lists, contact information, etc.
  • Internal data — Company data, such as organizational charts and sales playbooks, that’s not meant to be disclosed to the public.
  • Confidential information — Sensitive information about employees and business partners, such as contracts with vendors, employee reviews, etc. The exposure of this data could have a negative impact on operations.
  • Personal data — Information such as social security numbers, credit card information, and medical information, which is highly sensitive and, if compromised, could have legal and financial consequences.

Purpose of data classification

Having a clear data classification system can help your organization maintain data integrity, data confidentiality, ease of access to your data. Your data will be easier to locate, retrieve, manipulate, and track. Good classification practices can benefit your business on multiple levels, from easily accessing and using data to improve day-to-day operations, to ensuring that sensitive data is properly protected and that you’re staying compliant.

Let’s dive deeper into the reasons why data classification is so important.

Legal compliance

Classifying your data is a way to make sure that your company is compliant with relevant industry, local, and federal laws regarding data handling. These laws are usually put in place in order to maximize security and protect sensitive data from being exposed to the public.

For example, one of the most well-known data regulation laws, GDPR (The EU General Data Protection Regulation) is an international law created to regulate the way institutions and companies are handling sensitive data. To stay compliant with this law, companies must follow these seven guiding principles:

  • Obtain data lawfully and be transparent
  • Be specific about the purpose of the data collection
  • Collect only the minimum data they need
  • Store accurate data
  • Retain only the necessary data
  • Ensure data integrity and confidentiality
  • Have clear policies and prove compliance by recording them

Data retention

According to these principles, not all data needs to be kept, and in some cases, it’s even better if it’s destroyed as soon as possible. It is essential to prioritize which types of data need to be classified and retained in order to minimize the risk of data exposure.

Classifying your data into different categories will help you create retention policies for each type of data and ensure that you are not retaining the data for too long and unnecessarily exposing it to risk. Also, having a defined retention policy for each data category means you won’t delete your data too soon and get into legal trouble.

Retention periods vary not only according to the level of sensitivity but also by the industry. For example, the email retention period for industries that deal with highly confidential information such as the healthcare industry, is up to 7 years, while in the telecommunication industry, it’s only 2 years.

Once you know exactly when you can get rid of your data, you will not only lower the risk of sensitive data becoming vulnerable to breaches, but you will also avoid unnecessary data storage costs.

Data protection

If you experience an unauthorized disclosure of sensitive data that belongs within one of the protected categories of your company's data classification systems, you can face serious legal and financial repercussions.

In order to impose proper data security protocols, unstructured data first needs to be divided into different categories of sensitivity.

To ensure that the data is stored ethically and that your data privacy practices both reflect your company’s standards and meet the expectations of your customers, you must be able to answer the following questions:

  • What sensitive data do you have?
  • Where is this sensitive data stored?
  • Who has permission to access, alter, and destroy sensitive data?
  • What would be the consequences if sensitive data got leaked, deleted, or improperly modified?

Once you have answers to these questions, you can work on protecting your sensitive data by estimating risk levels, prioritizing which data needs the most robust protection and implementing appropriate threat detection and data protection measures.

Data accessibility

Besides helping you ensure compliance and protect your sensitive data, classifying your data will also make it more accessible.

One of the biggest advantages of having large amounts of data at your disposal is having insight into your company’s strengths and weaknesses. However, unstructured data is difficult to find, search, and analyze. Once you assess exactly which data you have and organize it into categories, it will be much easier to access it and use it to improve your operations.

Wrapping up

Don’t forget that data is dynamic and that you need to work on your data classification continuously. New information is added, files get moved and deleted, and your database changes over time. Make sure to regularly update your data classification policies accordingly, in order to keep your data classification system relevant and make the most out of your data.

Updated 08:20 PM UTC+8, 23 Dec 2020
Keith Coppersmith
Keith Coppersmith
Keith Coppersmith is a business and marketing expert who has experienced both the rise and fall of many businesses. As a regular contributor at BizzmarkBlog, he enjoys writing and providing insight of the marketing industry based on both practice and theory.

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