SaaS Compliance: What is the True Cost?

A Statista survey shows that 93% of global executives are concerned about SaaS data security. This is understandable given that in the US alone, 98% of companies reported at least one cloud data breach between 2020 and 2021. Since collecting, processing, and storing user data is a very important part of your business operations, there is significant responsibility to keep that cardholder data safe and secure.

You'll need to meet specific data regulations, compliance standards, and industry-specific regulations to assure your stakeholders that you are serious about cybersecurity and have taken the requisite steps to store customer data in a secure environment. This is especially important if you’re considering expanding your operations and target market across industries and geographies.

Compliance and data protection, however, is a highly complex field that requires extensive knowledge of regulations and continuous monitoring. Here, we unpack some of these complexities and explain the consequences of potentially getting it wrong.

What is SaaS compliance?

Global SaaS compliance regulations provide guidelines on how user data should be managed and secured as well as frameworks for financial reporting.

These regulations can be:

• country-specific
• region-specific
• industry-specific

Examples include the Health Insurance Portability and Accountability Act (HIPAA) in the US, the General Data Protection Regulation (GDPR) applicable in the EU, and the International Financial Reporting Standards (IFRS), which have a global reach. But more on these later.

Compliance standards are set by a third-party organization, which awards certification after demonstrating that your company has met all the relevant requirements.

6 Examples of Domestic and International SaaS Compliance Regulations

SaaS compliance requirements depend on where your company is based, the industry in which you operate, and where your customers are, so a large variety of domestic and international regulations may apply. The list of current compliance standards is considerable, but here are the most commonly used.

Costs of Managing Compliance Internally and the Consequences of Getting it Wrong

Business growth that skirts security and compliance requirements could land your company in hot water with hefty fines, legal repercussions, and, in some cases, a complete ban on your products or services.

Cost of Legal Repercussions

Non-compliance with specific standards can result in legal action that could hold your company responsible for significant financial penalties and even imprisonment in severe instances.

This is the case with HIPAA, where non-compliance is a criminal offense and could result in fines up to $250,000- and ten years of jail time.

Case Study

A proposed class action lawsuit against SuperCare Health was filed earlier this year in California for the alleged failure to secure sensitive health information. This resulted in a data breach that affected over 300,000 patients. SuperCare is accused of not following security guidelines and standards, including HIPAA.

Cost of Direct and Indirect Financial Loss

While some business leaders may have in the past factored in non-compliance with the price of doing business, the financial implications are now far too onerous to dismiss or take lightly. Data breaches in 2021, according to IBM, cost an average of $4.24 million, up 10% from the previous year.

Non-compliance with the GDPR, for instance, can cost a company as much as €20 million or 4% of its annual turnover.

Case Study

Clearview AI was recently issued a €20,000,000 fine in Greece following a complaint filed for unlawfully processing personal data. The regulatory authority also found that the company had not provided the individuals whose data they'd collected with access, violating one of the main components of the GDPR.

Misuse of Key Resources

Adhering to compliance regulations internally can put a lot of strain on your resources. It is a painstaking initiative that requires dedicated focus and ongoing monitoring by your team, who will have to become experts in every industry and region your growth trajectory takes you.

The SaaS compliance audit checklist is a long one. Because of that, outsourcing this part of your business to a trusted organization with extensive experience may be the safest option.

Cost of Reputational Damage

Contrary to the cliché, there is such a thing as bad publicity. The reputational damage suffered by SaaS companies guilty of not achieving regulatory compliance or not taking security incidents seriously can be disastrous. Over the year following a data breach, some companies have reported as much as a 25% drop in market value. And for startups with fewer resources to help them bounce back, this could be a death sentence.

Thankfully, proactively seeking regulatory compliance and following security practices can boost public relations and give your business a leg up on the competition. There might be bad publicity, but the general public seems to have a very short memory and is pretty forgiving regarding these transgressions.

Read on to learn 6 business areas linked to compliance regulations and how to achieve compliance on PayPro Global's Blog.