In today’s data-driven world, information is one of the most valuable assets a business can have. The data generated and collected by companies provides key insights that drive important business decisions. However, just as physical assets can be damaged or lost, digital data is also vulnerable. Hardware failure, software issues, human error, cyber attacks, and natural disasters can all lead to accidental or malicious data loss. When important business data is deleted or corrupted, it can have significant consequences for a company. Loss of data may disrupt operations, lead to financial losses, damage the company’s reputation, and put them in legal jeopardy. While no law explicitly mandates data backup, there are effectively legal requirements for companies to have a data backup plan in place.
Are there laws requiring data backup?
There is no federal or state law that specifically obligates businesses to back up their data. The Federal Rules of Civil Procedure require companies to preserve relevant data when litigation is reasonably anticipated, but there is no general law requiring routine backups. While not legally mandated, having a comprehensive data backup plan is considered a standard business practice and failure to implement one can have legal repercussions. Companies that suffer data loss due to negligence may be liable for breach of contract claims, violations of industry regulations, or charges of spoliation if they cannot produce the lost information. Proper data backup is essential for meeting obligations around privacy, financial reporting, healthcare records, tax documents, and other sectors. In effect, the various compliance rules and liability risks make having a backup system an implicit necessity for companies even if it is not an explicit legal mandate.
How can data loss create legal risks?
While the law does not dictate specific data backup practices, there are a variety of laws and regulations that essentially require companies to preserve important information. Failure to have reliable backup systems can expose an organization to significant compliance, contractual, and litigation risks. Some examples include:
– Loss of financial records that must be retained for tax purposes under IRS regulations.
– Deletion of past email communications relevant for e-discovery in litigation.
– Damage to sensitive customer data in violation of privacy laws like GDPR or HIPAA.
– Missing product information needed to meet consumer protection regulations.
– Inability to provide billing records required under contracts.
– Removal of personnel files necessary to defend against employment discrimination suits.
– Lack of old website content needed to defend against libel or copyright infringement claims.
In situations like these, lack of backup can hinder a company’s ability to meet its legal obligations or defend itself in court. Plaintiffs can argue spoliation, which is the intentional or negligent destruction of relevant evidence. Judges may then impose sanctions or give the jury instructions that assume the lost information was damaging. Failing to preserve data through backup can have catastrophic consequences in legal proceedings.
What industry standards suggest data backup is necessary?
While specific regulations may not directly mandate data backup for all businesses, various industry standards essentially require companies to have systematic backup programs in place:
Payment Card Industry Data Security Standards (PCI DSS) – Companies that process credit card payments must comply with PCI DSS requirements around protecting cardholder data. It specifies the need for routine backup of that information.
Sarbanes-Oxley Act (SOX) – This law sets standards for public company financial reporting and internal controls. It does not specifically require data backup, but backup is necessary to comply with SOX’s records retention and accuracy rules.
ISO 27001 – This international standard for information security management calls for systematic backup procedures and redundancy to enable data restoration. It is increasingly required by business contracts.
SOC 2 – Service companies that undergo SOC 2 audits for data security trust must have backup plans to satisfy availability criteria.
State Privacy Laws – Laws like the California Consumer Privacy Act have mandatory data protection standards that imply the need for reliable backup systems.
Healthcare Regulations – HIPAA and other health IT standards require covered entities to have backup systems to preserve protected health information.
While individual laws and regulations may not all explicitly require it, implementing systematic data backup is the only way for businesses to comply with current industry norms, certification standards, and legal or contractual obligations in many sectors.
What are the consequences of lacking a backup system?
Businesses that fail to implement adequate data backup procedures are taking a tremendous risk and leaving themselves vulnerable to a variety of negative consequences, including:
– Prolonged downtime – Without good backups, restoring business systems and data could take weeks or longer if servers crash or data is deleted.
– Loss of revenue – Downtime and lost data can disrupt business operations, resulting in lost sales, orders, and profits.
– Reputational harm – Customers lose trust when companies cannot recover quickly from data loss events. Public perception may suffer.
– Contract violations – Missing data can cause a company to be in breach of service level agreements or regulatory compliance terms.
– Sanctions for spoliation – Courts may impose a range of sanctions for spoliation when relevant data cannot be produced for lawsuits or investigations. Adverse inference jury instructions can seriously harm litigation outcomes.
– Fines for non-compliance – Regulators may levy fines or penalties for failure to provide required information due to lack of backups. Private lawsuits over privacy breaches or contract issues based on missing data can also result in monetary damages.
– Loss of customers – People today expect their information to be preserved and protected by companies they do business with. Failure to meet those expectations after data loss can mean permanent loss of accounts.
With so much on the line, it is clear why having a tested and reliable backup program is considered a mandatory best practice for companies even if it is not legally required.
What should a backup plan include?
To mitigate the risks of data loss, businesses should implement a backup plan designed to comprehensively protect critical systems and data. Key elements include:
– Regular full backups – At least weekly full backups are essential to capture new or changed files.
– Differential or incremental backups – Doing more frequent partial backups of new/revised data between full backups saves time and storage.
– Offsite backups – Keeping some backups offsite or in the cloud provides protection if onsite storage is damaged.
– Multiple media types – Storing backups on tape, external drives, SAN or multiple clouds avoids a single point of failure.
– Strict access controls – Backup systems must have data access limited to authorized personnel and strong cybersecurity protections to prevent unauthorized access, ransomware attacks or other threats.
– Testing restores – Regular tests help confirm backups are usable for restores and meet recovery time/point objectives.
– Backup monitoring – Ongoing monitoring provides visibility into completion status and backup health.
– Backup reporting – Reports help identify problems needing attention and demonstrate diligence.
– Backup verification – Backup contents should be verified to make sure they are capturing all required data and can be restored if needed.
A backup plan that incorporates these key principles provides redundancy across different media types, secure onsite and offsite data copies, and means to validate backups so data can be confidently recovered in the event of an outage, ransomware attack or other disruption.
Are cloud backups required?
While local onsite backups on tapes or drives are essential, most experts caution that cloud-based backup is now a mandatory part of a comprehensive plan. Purely local backups leave the business vulnerable if something destroys oraccess the onsite backup repositories, as seen in natural disasters like fires or hurricanes. Cloud backup provides key advantages:
– Geographic redundancy – Data replicated to the cloud is not all stored in the same physical location vulnerable to localized disasters.
– Secure offsite access – Cloud backups provide offsite copies without having to physically remove and store tapes or drives offsite.
– Potential cost savings – Cloud storage can reduce or eliminate expense associated with tapes and local backup infrastructure.
– Automation – Cloud services make it easier to schedule and manage backups automatically.
– Scalability – Cloud storage readily scales to accommodate data growth.
– Encryption – Data is encrypted both at rest and in transit for security.
– Data availability – Cloud data is accessible from anywhere with an internet connection.
– Faster recovery – Cloud data can typically be quickly downloaded to restore onsite systems.
While cloud has some risks like reliance on internet access, top cybersecurity experts overwhelmingly recommend using cloud backup services to augment local options. Hybrid blends of local and cloud backup are ideal for performance, security and data availability.
Should businesses hire a backup service provider?
Given the specialized expertise required to architect, secure and manage backup environments, many companies opt to hire managed service providers (MSPs) that focus exclusively on data protection services. Top reasons to consider using a backup MSP include:
– Cost savings – MSPs achieve economies of scale that allow them to offer backup services at a lower cost than in-house solutions.
– Reduced burden – Maintaining backup systems in-house requires deep technical expertise that is expensive and difficult to recruit.
– Enhanced security – MSPs implement advanced security like blockchain-based immutability and dark web monitoring that goes beyond most in-house capabilities.
– Better recovery compliance – MSP services are designed to ensure backups facilitate faster and more reliable recovery.
– Accountability – Outsourcing backup shifts liability to the provider if recovery fails due to backup system compromise.
– Predictable costs – MSP services allow backup costs to be planned as an operating expense rather than budgeting large capital expenditures for backup hardware/software.
– Increased uptime – MSP expertise results in fewer failed backups and less downtime when restoration is needed.
– Improved reporting – MSPs provide monitoring, alerts, detailed reports and historical views of backup activity.
– Flexibility – MSP services scale easily to accommodate business growth and any future demand spikes.
For most small and mid-size businesses, the benefits of using a specialist MSP for backup far outweigh the option of trying to build and manage systems in-house. The predictability, security, cost savings, and peace of mind are why MSP data protection services are a popular choice to handle backup needs for many companies.
Conclusion
In summary, while no laws specifically obligate companies to have backup systems, the multitude of compliance rules, contractual requirements, liability risks and basic best practices essentially make comprehensive data backup a mandatory practice for any business. Robust backup is the only way to protect critical digital assets and avoid the considerable financial, legal, and reputational consequences of catastrophic data loss. Given the complexities involved, using a dedicated backup MSP emerges as the most prudent choice for most organizations seeking reliable protection suitable for the modern regulatory and litigation environment. In the data-dependent business world today, backup is effectively required to meet standards of due care.