How companies can ensure compliance with data protection standards

Rakesh Prabhakar

22nd Apr 2025

With Australia recording 527 data breaches in the first half of 2024 alone – the highest in over three years – the urgency for stronger security measures has never been greater. A single breach can lead to financial penalties, legal action and a loss of customer trust. Yet, compliance feels overwhelming. The good news? Protecting customer data and maintaining compliance doesn’t have to be complicated or costly.

Understanding legal compliance for SMEs

SMEs in Australia must adhere to the Privacy Act 1988 and the Australian Privacy Principles (APPs) if they collect, store, or process personal information. Even businesses not legally required to follow these regulations should still implement best practices to maintain trust and avoid reputational damage.

Many SMEs collect more customer data than they need – often storing it in unsecured spreadsheets, outdated systems, or even email threads. This not only increases security risks but also makes compliance more challenging.A better approach? Only collect essential personal data, obtain clear and informed customer consent, and secure information with encryption and restricted access. Regularly updating privacy policies to reflect current practices isn’t just about legal compliance – it’s about building a culture of data security that fosters long-term customer trust.

However, a worrying gap remains between awareness and action. Zoho research found that nearly 350,000 businesses don’t know what to do if they experience a data breach. Even more concerning, 19.7 per cent of SMEs didn’t realise they had a legal responsibility to communicate with customers about the data they collect. Without clear guidance, many SMEs risk non-compliance and financial penalties simply due to a lack of awareness.

Avoiding common data handling pitfalls

Many SMEs unknowingly expose themselves to security risks through outdated software, unsecured data storage, and poor access controls. Zoho research reveals that while 59.4 per cent of SMEs acknowledge their vulnerability to data breaches, many are not taking adequate action to strengthen their data security. Cybercriminals target businesses using outdated systems, making it critical to keep software and security tools updated.

Additionally, SMEs often rely on multiple apps – many of which may not be necessary – to store, process, and manage customer data. The more systems a business uses, the more challenging it becomes to track and protect customer data. This complexity, combined with limited resources, makes it harder to ensure data privacy and security, increasing the risk of non-compliance and breaches.

Another common oversight is granting unnecessary data access to employees. Implementing role-based permissions ensures only authorised personnel can view critical information. Regular security training is equally important – staff who can recognise phishing attempts and social engineering scams are the first line of defense against cyber threats.

Strengthening data protection through consent and security measures

Transparency in data collection isn’t just good practice – it’s a legal requirement. Policies should be clear, specific, and regularly updated to remain compliant. Additionally, customers must have easy opt-out options; failing to provide a clear way to withdraw consent creates compliance risks and trust issues. Free online privacy policy generators can help SMEs align with legal requirements, but consulting a legal expert offers added peace of mind.

Beyond consent, SMEs must prioritise security measures to protect collected data. Cyber threats are constantly evolving, and businesses need to stay ahead. Routine security audits help identify vulnerabilities before they lead to costly breaches. Multi-factor authentication protects sensitive accounts from unauthorised access, while encrypted backups provide a safety net against ransomware or accidental data loss. Monitoring access logs ensures businesses can track who interacts with customer data.

While data protection may seem complex, compliance is well within reach for SMEs that take a proactive approach. Strengthening security measures not only mitigates risks but also builds customer confidence and differentiates businesses in an increasingly data-conscious marketplace. As cyber threats grow, prioritising security isn’t just about avoiding penalties—it’s a strategic investment in long-term success.

This story was originally published on Inside Small Business.