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The Non-compliance effect: How businesses lose reputation without cookie consent

Updated: May 8, 2023

Cookies. Consent. Customers.

These three have taken the central stage since major data breaches gripped the world in the last decade and the awakening of the data privacy order.

Anyone who has been using the internet for a while knows that cookies help businesses, particularly marketers and advertisers, to understand user behavior through behavior profiling that allows the company to create personalized products and services, ultimately resulting in profits. Additionally, cookies benefit customers by providing them with tailored content, products, and services, enhancing their overall user experience.

But sadly, a lot of companies still don’t comply with cookie consent for using these trackers on their user’s devices.

But before that, one crucial question needs our attention: Is it safe to enable cookies? Also, read our blog post on Cookie consent: A marketer’s guide to thrive in 2023, which discusses cookie consent in-depth.

Cookie Genesis: What they are and how they've evolved

The usage of cookies can be traced back to the origins of the world wide web (www). A computer programmer, Lou Montulli, then an employee at Netscape Communications, created a solution that helped users remember their shopping cart items. Since then, they've been used for all sorts of purposes, like, security, session recording, profiling, user info, and much more. But still, most people need help understanding cookie's implications and the risk they pose to information security and privacy.

What are cookies?

Cookies are small text files placed by the domain or an URL in the web address on the user's devices when they browse a website/mobile app. These cookies are significant for businesses, especially marketers and advertisers, as they store information regarding user engagement, session recording, login credentials, and much more. Cookies, in and of themselves, are not harmful and are functional to provide an excellent user experience.

It is simple to describe how a cookie functions. So, when a user visits the website, their browser sends in a request to you, the website/mobile app owner. A cookie is stored on the user's device when your website/mobile app responds with the requested information. You might store at least 1000 different cookies on your browser right now.

Types of cookies

Basic types of cookies and their specific purposes:

Session cookies

These cookies are temporary. They are valid only during a specific session, and when the user exits the browser, these cease to exist or disappear. Session cookies are the most common type of cookies.

Also called temporary cookies, it helps to track real-time changes in the user's activity, such as what items have been stored while shopping on your e-commerce website. That's why most websites have session cookies by default, as it helps with user navigation and makes the holistic website browsing experience smooth and easy.

Permanent cookies

Unlike session cookies, permanent cookies are stored over multiple sessions for a more extended timeframe. These cookies are not deleted automatically and are stored in your hard drive and thus are called persistent cookies. These cookies have two essential functions to perform: Authentication and Tracking.

Authentication: When users opt for "remember me" or "keep me signed in," they use permanent cookies for authentication purposes.

Tracking: These are automatically activated most of the time. Unless you alert the user or give the option to deactivate nonessential cookies, these cookies can still function without the user's knowledge.

First party and third-party cookies: Some cookies are created by the website, and third-party vendors create some. Most session cookies, for example, are first-party cookies. They take in your direct, first-hand info like name, address, phone number, etc. But some cookies are created by another website that the user is not even visiting; these are also called marketing or advertising cookies as they are generally used to track and gather more and more information about the user to provide "personalized adverts. "These cookies track user queries, behavior, geographic location, and more.

So, what's this fuss about security and privacy if these cookies are so good? Well, there is.

It's not the session, temporary cookie, or persistence cookie that causes problems. It wouldn't be a big issue even if these cookies ceased to exist. But third-party cookies pose a significant threat, not only to the user's data but to the organization's credibility too. Various types of fraud and cyber-attack based on exploiting third-party cookies and other vulnerable trackers lead to severe security complications.

Reputational Risk: The biggest nightmare of a business

When businesses fail to comply with data privacy laws, it becomes a consequence subject of enforcement agencies, six-figure lawsuits, unruly media attention, fines, and penalties. But these might look small compared to a loss of public trust, business credit score, and other intangible consequences that a business suffers.

When people discover how companies have misused their data, there is an 80% chance that they will never again do business with them. On top of that, media attention only magnifies the inherent reputational risk that each corporation carries with themselves. World-famous companies such as Bank of America, LexisNexis, and ChoicePoint have each felt the heat from media attention when potential breaches of private information surfaced.

Forbes published an article about how a business's online reputation affects its customer relations and profits. More than 90% research about the company online before engaging in business, as per the Forbes article. So, maintaining a good brand reputation is a must for any business if they want hack success in 2023 and beyond.

According to Harris Interactive Study in 2004, more than 50% of people would prefer to buy frequently and highly in volumes from a business that has sound data privacy practices in its organization.

This showcases two critical things that businesses must understand and work on:

  1. Noncompliance results in financial risk and reputational loss

  2. Compliance results in greater economic opportunity and data privacy commitments

So now it is for businesses to decide how they want to proceed further with the Data privacy system within their organization. But as Warren Buffet famously said, "it takes 20 years to build a reputation and five minutes to ruin it" you don't want this to happen to you.

Cookie risks: Virus for Data privacy world?

Don't worry. You won't get any viruses from cookies as they don't contain any executable; they are simple, plain text. Yet they might pose a severe security threat. Why?

Well, tough cookies, in general, aren't harmful; but they can indeed be hijacked. This leads to hackers altering the purpose of cookies, which can be used for malicious intent.

If they succeed, the hijacker can surely impersonate a user and illegally gain personal data access.

We'll look at how hijackers manipulate cookies and take undue advantage of the user's data.

Capturing cookies over insecure channels: Any authentication cookie must always be securely transmitted, no matter what. But often, this is different. Cookies without a security flag are one example. Only secure SSL/TLS channels can access those specific cookies when a cookie is set with a security flag. Suppose the cookie does not have a particular flag. In that case, a cookie can be transmitted in cleartext, which means that attackers can eavesdrop on the network traffic, capture the cookie, and use it for unauthorized purposes if a user visits an HTTP URL within the cookie's scope.

  • Session Fixation: The session ID is maintained by the specific web application. But they have some limitations, and attackers love to exploit them. For example, when an application allows a session token in the query parameter, the attacker sends the user URL in the argument with a specific session ID. The attacker hijacks the session if the user authenticates it using the URL.

  • Cross-site Scripting: The attacker uses this method to steal cookies by exploiting websites that allow unfiltered HTML and JavaScript content posted by the user. For example, when a user clicks on a malicious link posted by an attacker, it executes a JavaScript code. This will cause the victim's web browser to send the victim's cookies to a website the attacker controls.

  • Cross-site request forgery (CSRF): When unauthorized commands are transmitted from a user that the web application trusts and the website executes, the attacker exploits the website. The attacker uses an innocent victim by making them submit a maliciously crafted web request unknowingly to a website to which the victim has privileged access. As the victim is already logged in, the request will be deemed trustworthy and can be executed. The attacker must identify a reproducible web request that executes a required action for the CSRF attack to work. For example, by changing a password on the target page when such a request is identified, the attacker can create a link that generates this malicious request and can be embedded on a page within the attacker's control. And the worst part, the victim might not even need to click the link. It will be automatically loaded. For example, if the attacker embeds the link within an HTML image tag on an email sent to the victim, it will load automatically when the user or the victim opens their email.

  • Cookie tossing: When an attacker wants to dupe the user with a malicious cookie that looks like it came from a targeted site's subdomain, it is known as a cookie tossing attack. It becomes problematic when the website allows untrustworthy people to host their subdomains under its domain. And when the user visits the main domain or the target site, all valid cookies and those appearing from subdomains are sent to the attacker. The attacker can only write the information and not read anything under a cookie-tossing attack, so the ability to take over a session is quite limited. But the attacker can set arbitrary cookie values used for a CSRF attack or an XSS injection.

Cookies also severely threaten privacy as they track users, and their ability has evolved significantly throughout the years. They used to do simple operations such as knowing the contents of the shopping cart and counting Ad Impressions used and clicks. Still, marketers now use cookies to perform user profiling and cross-contextual behavior advertising.

Some of the largest companies in the world use large-scale third-party cookies for ad serving with third-party networks such as Google's AdSense / AdWords. This became a huge issue with online privacy groups to the point where specific regulations had to be developed to prevent privacy abuse.

Creating compliance strategy: What businesses must do

Businesses must use a comprehensive framework to identify and mitigate the data privacy risk proactively. Compliance is not mainly a response to regulation but is a long-term commitment to responsible leadership and inducing a culture of compliance in all facets of the organization. Therefore, there is a six steps framework to identify and mitigate privacy risks and introduce compliance into the organization's culture.

1. Identification and evaluation of risk

2. Setting compliance policy

3. Embed compliance policy

4. Monitoring

5. Investigating

6. Reporting

Identification and evaluation of compliance risk: Before beginning anything, you must gain a clear and specific understanding of your organization or business's privacy risks. Now there are two types of risk:

(a) external environment

(b) internal environment

The external environment is the environment in which the company operates. Most multinationals have a tremendously complex environment. Data privacy regulations are ever-changing, so the organization's obligation will differ immensely depending on where the company does its business. And, of course, the regulatory component is only part of the environment.

Companies are trying as hard as possible to stay ahead of the regulatory curve, as noncompliance comes with immense reputational risk. Some of them are going a step beyond the compliance that is currently needed. That's why they prioritize uniformity in their privacy practices that are otherwise not required by the myriad local rules familiar multinationals face.

The second driver is the internal environment. A company must understand how data travels through and outside the organization. This is the most hectic task.

It is recommended that a sound person should look at the organization's data process to lead the company to better compliance. This requires working together to include all the departments of the organization. Gain a detailed understanding of the internal environment to protect data privacy.

Protected data must be identified along with how every data moves within the layers of the organization. Usually, the protected data includes names, addresses, social security numbers, driver's licenses, family details, lifestyle, ethnicity, physical and mental health conditions, etc.

No matter how, where, and what kind of data is captured, it will generally fall into three basic categories: client, employee, or vendor. Flowcharts and other schematics can be used to understand the protected data repositories and processes from system to system.

Set Policies: To cover the data collection handling as it moves through systems, data storage and dissemination of third parties in the organization should develop specific policies.

(a) Data collection: Businesses must communicate the end users' terms addressing data protection issues. This includes limiting the collection of sensitive data critical to the client and disclosing how it will be utilized.

(b) Storage: Organisations have many options to protect data stored either in electronic or physical form. For example, electronic data can be secured from unauthorized access from internal and external firewalls, viruses, and other spyware protection programs. This can also be done through off-site storage for backup, data retention schedules, SSL (secure socket layer), PKI (public key infrastructure), and user authentication through id and passwords. Corporates can also provide card Access for restricted areas and ensure security in physical locations.

(c) Dissemination: To transmit data to a third party, the corporation should be considered establishing specific terms and conditions to perform that. They must also provide an "opt-out" option for the user about sharing data with third parties wherever applicable.

(d) Escalations: Employees must be motivated to use the right channel, such as the company's hotline or "ombudsman "program, for reporting infractions whenever they arise. Adding to it, the company must have a policy that would include response procedures.

(e) Breach: If a data breach happens at your organization, you must lay out all the details of the specific action you must take. These actions will depend on what kind of data has been compromised, but they must include concepts such as notice to impacted individuals and remediation activities.

Embedded Policies: There is nothing more important than to walk the talk. Companies need to internalize data policy within their business. As a responsible and executive leader of the industry, you must foster a culture of data privacy that recognizes the importance of its customers.

This can be done through communication, education, establishing and maintaining accountability, and incorporating data privacy solutions in your company's technological system.

Within the organization, you can launch training systems like having a company-wide program educating about data privacy compliance with different industries. Combined with clearly other escalation procedures, issues, concerns, frequently asked questions, handbooks, in much more.

Monitor: Monitoring includes both a long-term approach and a short-term approach. The long-term approach includes periodic monitoring of the overall compliance program within the company, for example, data audits every three months. Short term approach is more of day-to-day monitoring of the compliance environment—for example, cookie consent status.

There must be a specific metric that should be developed in the organization by experts in handling data. The business process and system controls should be administered and tested to ensure that the company's compliance program is functioning smoothly.

However, it can sometimes be necessary to use a third party to review data systems and processes to ensure data compliance and get an independent review.

Investigate Infractions: Sometimes, when an issue needs further identification and scrutiny, a continuous cyclical process called investigate infractions is used. Everything within the data compliance system should have a particular process. All infractions and other related investigations should be well documented, and policies should have a straightforward escalation process.

It is equally important to be vigilant of data breaches within your competitors. This will give you great insights and the shortcomings of your own organization's data compliance system. It is better to strategize and work on your vulnerabilities before they become infractions.

Reporting: Reporting helps stakeholders to get an overview of a company's data privacy compliance and its success. It also evaluates the room for improvement in data compliance. An organization must solve significant issues that pose a potential risk to the user's data and a company's reputation. Reporting should include metrics such as identifying data flow between the systems on various levels of the organization, the security of those systems, and identifying new initiatives for robust data governance.

Adzapier's CMP: Turning the Framework into Reality

Adzapier's Consent Management Platform brings All-in-one data privacy solutions to you.

Let me share with you the core features of our Consent Management Platform:

Collection of consent: Asking for consent from your user without violating the privacy law is what Adzapier is excellent at. We are compliant and updated with the most rigid Data Privacy Laws, such as GDPR, CPRA, and many more. We help you get legally compliant consent and provide insights and suggestions as to how you increase your consent opt-in rates.

Banner Customization: The way you ask for consent is equally vital in a world overcrowded with useless voices. We make sure you stand out by providing more than 10+ personalized cookie banners, including the layout, colors, content, behavior, and advanced CSS options that best reflect your brand and make users want to give their consent freely.

Auto-Cookie Blocking: Not every CMP in the market has this feature, which is also mandatory by GDPR, the most stringent data privacy law. Until the user gives consent, the Auto-cookie blocker blocks all nonessential cookies such as Google Analytics, Facebook pixels, and Hotjar cookies, keeping unnecessary fines and penalties away from you.

Consent Recording: What will happen after you comply with every data privacy provision, and somebody asks for proof of consent? Don't worry. Adzapier has a unique feature, Session Recording, that helps you to record the user's consent lawfully so that you can provide proof of compliance; anytime, anywhere.

Consent management is an opportunity to comply with regulations and communicate with your users that you respect their data and privacy. Put consent management to practice with a best-in-class Adzapier CMP.

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