What Is Data Classification & Why Is It Important For Businesses?

Let’s begin with a hypothetical situation.

Imagine you hold a pretty decent designation at a certain office where thousands of employees are working under you. These thousands of employees send thousands of emails and share information with you on a daily basis. Some of the information that’s shared is highly confidential as well. And if any of that data is leaked or misused, you might end up hitting the headlines the next day and may have to pay a fine along.

To avoid situations like these, data classification now enters the picture.

What is Data Classification?

The process of categorizing data into relevant subgroups in order to make it easier to find, retrieve and use is termed data classification.

The data classification process entails labeling or labeling data with a classification label, such as “confidential” or “public”, while also cleaning your company’s storage of stale and duplicate data that has been hidden and unkempt or simply, cluttered for an unnecessarily prolonged time.

Data classification assists organizations in answering critical questions about their data, which informs how they mitigate risk and manage data governance policies. It can tell you where your most important data is stored or what types of sensitive data your users generate the most frequently. To comply with modern data privacy regulations, comprehensive data classification is required (but this isn’t entirely sufficient).

Therefore, to sum it up, data classification software enables organizations to identify information relevant to their interests.

Also, check out our latest postHow Does Data Mining Help In Business Intelligence?

What is the Importance of Data Classification?

A proper data classification enables your organization to apply appropriate controls based on the data in that predetermined category. Keep in mind that your controls frequently come at a cost. It is not necessary to have the same types of controls for all types of data.

Take, for example, an online marketing brochure. You want it to be visible to everyone. That would not necessitate a higher level of security. Instead, if the company collects the user information or login credentials required to download the marketing brochure- then it is valid to impose a higher level of security.

Classifying your data can save you time and money by allowing you to focus on what is important rather than wasting time putting on unnecessary controls.

Why Classify Data?

Data security and privacy suffer when organizations do not understand their data, including where it resides and how it must be safeguarded. To “know your data,” you must understand where all “sensitive” data is stored across an organization. According to Forrester, data privacy professionals, cannot effectively protect customer, employee and corporate information unless they are aware of the following

  • Where does data really reside?
  • What data does their company have?
  • Regulations governing data compliance
  • The risk and value it carries for the organization
  • Who is allowed to access and utilize the data?

This insight is provided by data classification, which is a consistent process that identifies and tags all sensitive information wherever it resides across an enterprise, such as in networks, sharing platforms, endpoints and cloud files. It works by allowing the creation of data attributes that specify how to handle and secure each group in accordance with corporate and regulatory requirements. Because the data is easily accessible, organizations can implement safeguards that reduce data exposure risks, reduce data footprints, eliminate data protection redundancies and focus security resources on the appropriate actions. As a result, classification streamlines and strengthens organizations’ data privacy and security programs.

Benefits of Data Classification

According to a cybersecurity study, four out of five businesses have no idea where their sensitive data is or how to protect it. This is a significant issue in the fight to keep sensitive data secure, private, and compliant. Organizations gain a wide range of benefits by launching comprehensive, well-planned data classification programs.

  • Enhance data security

By answering the following critical questions, data classification enables organizations to safeguard sensitive corporate and customer data

    • What sensitive information do we have?
    • Where is this sensitive information stored?
    • Who has access to, modifies it, and deletes it?
    • What impact will it have on our business if the data is leaked, destroyed, or incorrectly altered?
  • Help with regulatory compliance

Data classification assists in determining where regulated data is located across the enterprise, as well as ensuring that appropriate security controls are in place and that the data is traceable and searchable, as required by compliance regulations. This provides the following benefits

    • Ensures that sensitive data, such as medical, credit card, and personally identifiable information, is handled appropriately in accordance with various regulations (PII).
    • Aids in the ability to comply with all relevant rules, regulations and privacy laws on a daily basis.
    • Allows for the rapid retrieval of specific information within a specified timeframe, which aids in meeting newer compliance rules.
    • Demonstrates an organization’s expertise and support for data privacy compliance programs.
    • Increases the likelihood of passing compliance audits.
  • Increases the efficiency of business operations and reduces business risks

Data classification can assist organizations in ensuring that their data is effectively protected, stored, and managed from the time it is created until it is destroyed. This has the following advantages

    • Improves visibility and control over the data that organizations hold and share.
    • Allows for more efficient access and use of protected data throughout the organization.
    • Aids risk management by assisting organizations in determining the value of their data and the consequences of it being lost, stolen, misused or compromised.
    • Provides important capabilities for record retention and legal discovery.

Different Levels of Data Classification

The type of classification given to data determines the number of things, including who has access to that data and how long it should be retained, depending on its level of sensitivity or value to the organization. When it comes to categorizing data, there should typically be four base levels:

  • Public

Data/information that is freely used, reused, and redistributed with no access or usage restrictions. Press releases, brochures and published research are all examples.

  • Internal

Data that is only available to internal employees/personnel who have been granted access. Company memos, internal communications and marketing research are some examples.

  • Confidential

Data that requires granted access and/or authorization should be kept within the company or specifically permitted by third parties.

  • Restricted

Data that is highly sensitive and should only be accessed by those on a need-to-know basis. If a system is compromised or accessed without authorization, it may result in criminal charges, large legal fines, and irreparable company damage. Trade secrets, Personally Identifiable Information (PII), health information and data protected by federal regulations are all examples.

The Best Practices of Data Classification

Here are some best practices to consider when implementing and executing a data classification policy at a scale

  • Determine which compliance regulations or privacy laws apply to your organization and create a classification plan based on that information.
  • To process large amounts of data quickly, use automated tools.
  • When necessary, create custom classification rules, but don’t reinvent the wheel.
  • As needed, modify the classification rules/levels.
  • Validate your classification outcomes.
  • Determine the best way to apply your findings and apply classification to everything from data security to business intelligence.

The Bottom Line

Data classification is an important first step in ensuring the security of your information. Accurately defining your classifications and putting them in place can mean that everything is under control. Information on how to access that data and further keep it under wraps to avoid any potential security threats is thereafter taken care of. And once all of these factors are taken care of, provides an organized framework that facilitates more adequate data protection measures and encourages employee compliance with security policies.