Customer Relationship Management (CRM) systems have fundamentally transformed the way businesses interact with their customers or clients. Whereas just a few years ago, they relied on paper records, card indexes and notebooks, new digital systems certainly make business life easier and more efficient.
As with any digital system dealing with personal data, CRMs bring both benefits and risks from a legal and data protection perspective. In this blog post, we will delve into these aspects to help you understand how you can manage these issues while enjoying the myriad benefits that CRMs provide.
Benefits of Using a CRM
Centralised Customer Data
One of the most significant advantages of a CRM system is the centralised storage of customer data. All information related to a client, including contact details, interaction history, purchasing behaviour, and more, is housed in one location. This centralisation helps businesses ensure they meet their data protection obligations by keeping track of what personal data they hold and where it is stored, all essential under regulations such as the UK or EU General Data Protection Regulation (GDPR) or other data protection legislation depending on where your business is based.
Compliance Tools
Many CRM platforms now offer built-in compliance features to help businesses adhere to data protection laws. These tools include functionalities for consent management, data portability, and the right to access and rectification or deletion, among others. This not only aids in compliance but also demonstrates a business' commitment to data protection and fosters trust among clients.
Enhanced Security
CRM systems (particularly cloud-based ones) often have robust security measures in place to protect customer data. This includes encryption, firewalls, regular backups, and strong access control policies. Such measures can significantly enhance a business's cybersecurity posture and help meet legal requirements for data security.
Risks of Using a CRM
Despite the considerable advantages, there are potential risks involved in using CRM systems from a legal and data protection standpoint.
Data Breaches
Although CRM systems may have good security measures, data breaches can still occur due to various factors. It might be that the passwords you are using are too weak, or that they are shared with other members of staff, or there may be software vulnerabilities. Human error can also play a part in a data breach. Such incidents can lead to legal consequences and reputational damage. Moreover, under laws like the GDPR, and POPIA businesses may be obliged to report certain types of data breaches to the relevant authorities and possibly to the individuals affected.
Non-Compliance with Data Protection Laws
If not properly configured and managed, CRM systems can lead to breaches of data protection laws. For example, businesses could violate a customer's right to access their personal data or rectification/deletion of that data if they fail to respond to such requests within the right time period. Non-compliance may lead to sanctions, possible fines and damage to a company's reputation.
Third-Party Risks
Many businesses use ‘off the shelf' third-party CRM providers, which brings additional risks. Businesses remain responsible for their customers' personal data even when it is processed by these providers. If the CRM provider fails to adequately protect the data or violates data protection laws, the business could face legal consequences. So, it's crucial to assess a CRM provider's data protection policies and practices before engaging in their services (yes, that means clicking away). It is also important to assess where the personal data will be hosted, if it is in a ‘non-adequate’ country for UK GDPR purposes, additional safeguards may for instance need to be carried out, such as transfer risk assessments.
Navigating the Legal and Data Protection Landscape
To mitigate these risks, businesses should consider the following:
Implement Robust Data Security Measures: This includes encryption, strong passwords, two-factor authentication, regular security audits, and training employees on cybersecurity best practices.
Ensure CRM Systems are Configured Correctly: Ensure your CRM is configured to respect customers' rights under data protection law, such as the right to be forgotten or data portability.
Vet Third-Party Providers: Carefully review the data protection policies and security measures of any third-party CRM providers to ensure they meet legal requirements. Find out where data will be hosted so you can determine whether you need to carry out additional safeguards.
Keep Up to Date with Data Protection Laws: Regulations change frequently, so businesses should stay up to date. This can be time-consuming, so why not let Ethiqs Legal help you navigate the Data Protection maze? Get in touch here today for a free initial chat so we can help put you on the right path.