Key points

• Data classification enables organisations to identify, manage, and protect sensitive information stored in SaaS applications more effectively
• Compliance with regulations such as GDPR, HIPAA, PCI DSS, and CCPA is essential to avoid hefty fines and legal penalties.
• Consistent and ongoing data classification efforts help reduce risks, particularly those related to data breaches and unauthorised access.‍
• Metomic streamlines data classification through automated discovery and protection, making compliance and data security simpler to manage.‍‍
• Request a demo today to see how Metomic can keep your organisation maintain compliance and your SaaS data secure.

Effective data classification is crucial for compliance with data protection regulations like GDPR and HIPAA—and beyond—amid rising concerns over data breaches and privacy.

With a new data breach in the news seemingly daily, organisations are under more pressure than ever to safeguard sensitive information.

IT and security teams play a crucial role—not just in protecting data, but also in ensuring compliance with increasingly complex regulations like GDPR, HIPAA, and PCI DSS 4.0.

A big part of this challenge is knowing exactly what data you hold, where it's stored, and how it's being processed. Without this clear picture, the risk of non-compliance and potential data breaches rises dramatically.

This guide is designed to help make that easier by breaking down how effective data classification can help your organisation stay compliant, reduce risks, and maintain strong data security practices.

A brief explanation of data classification

Data classification is all about organising your data into categories, making it easier to manage and protect. Think of it like sorting books into different genres on a shelf. By understanding what types of data you have and how sensitive they are, you can apply the right security measures to keep everything safe.

It answers essential questions:

• What data do we have?
• Where is it stored?
• How is it being used?

With data breaches making headlines and privacy concerns on everyone’s mind, knowing your sensitive information is crucial.

The data classification market is projected to reach approximately $9.5 billion by 2031, reflecting how organisations are stepping up their game to comply with regulations like GDPR and HIPAA. Proper classification not only ensures compliance but also strengthens overall data governance and reduces risks.

If you want to dive deeper into data classification, check out our handy comprehensive guide to data classification.

Why do businesses need to classify data according to different compliance regulations?

Classifying data is essential for staying compliant with various regulations like GDPR, HIPAA, PCI DSS, and CCPA. Each regulation requires businesses to manage and protect data according to specific guidelines, making classification critical for understanding data sensitivity and access controls.

Failing to comply can lead to serious consequences. In fact, the average cost for organisations facing non-compliance issues is nearly three times higher than that of compliance, reaching $14.82 million. This cost encompasses not just fines, but also reputational damage and legal challenges.

By effectively classifying data, businesses not only meet regulatory requirements but also establish a strong data governance framework. This proactive approach mitigates risks and builds a culture of accountability, making data classification a priority for any organisation.

Understanding the key requirements of key compliance regulations

Navigating the maze of compliance regulations can feel daunting, but it's crucial for businesses, especially those in finance and healthcare.

Here’s a breakdown of the key requirements for some of the major regulations, including GDPR, HIPAA, PCI DSS, and CCPA. Understanding these can help organisations safeguard sensitive data and avoid hefty fines.

GDPR (General Data Protection Regulation) and Data Classification

GDPR is fundamentally about safeguarding personal data, and its core tenets include:

• Consent: Businesses must secure explicit, informed, and unambiguous consent before processing any personal data.
• Rights of Data Subjects: Individuals possess various rights, including the right to access, rectify, and erase their personal data (the "right to be forgotten").
• Breach Notifications: Organisations are obligated to report data breaches to authorities and affected individuals within 72 hours of discovery.

The severity of GDPR non-compliance is underscored by substantial fines, as evidenced by Meta's €1.2 billion penalty for improperly transferring European users' personal data to the U.S. without adequate safeguards.

Data Classification Levels and GDPR

Data classification is a vital component of GDPR compliance. It involves categorising data based on its sensitivity and impact if compromised. Commonly, organisations use classifications like:

• Public: Information freely available to anyone.
• Internal Use: Data intended for internal organizational use.
• Restricted: Data with limited access, often containing sensitive information.
• Confidential: The most sensitive data, requiring strict access controls. This category often includes Personally Identifiable Information (PII), such as social security numbers, financial data, and medical records.

Why Data Classification Matters for GDPR

• Compliance: GDPR mandates that organisations implement "appropriate technical and organisational measures" to protect personal data. Data classification helps define these measures by identifying which data requires the highest level of protection.
• Risk Management: By classifying data, organizations can prioritise security efforts, focusing on protecting the most sensitive information from unauthorised access, breaches, and misuse.
• Data Reduction: Classifying data enables organisations to identify and eliminate unnecessary data, reducing the scope of GDPR compliance and minimising potential risks.
• Improved Security Posture: Accurate classification enables the implementation of security controls that are proportional to the risk involved. For example, confidential data will require strong encryption, strict access controls, and detailed audit logs.

Risks of Non-Compliance

Failure to comply with GDPR can result in severe consequences:

• Significant Fines: As seen with Meta, fines can reach up to €20 million or 4% of global annual turnover, whichever is higher.
• Reputational Damage: Data breaches and non-compliance erode customer trust and damage an organisation's reputation.
• Legal Action: Affected individuals can pursue legal action for damages.
• Operational Disruption: Investigations and penalties can disrupt business operations.

How Data Classification Aids GDPR Compliance

• Identifying PII: Classifying data helps pinpoint PII, which requires the highest level of protection under GDPR.
• Implementing Appropriate Security Measures: Classification allows organisations to implement tailored security controls, such as encryption, access controls, and data loss prevention (DLP) measures, based on the sensitivity of the data.
• Demonstrating Accountability: Accurate data classification demonstrates an organization's commitment to data protection, a key requirement of GDPR.
• Facilitating Data Subject Rights: Classification enables organisations to efficiently respond to data subject requests, such as access requests and erasure requests, by locating and managing data effectively.
• Breach Response: If a breach occurs, classified data allows for quicker identification of what data was impacted, and therefore helps the organisation to comply with the 72 hour breach notification rule.
• Data Minimisation: Classifing data helps to identify redundant or unecessary data that can be removed.

Download our guide to see how Metomic helps organisations monitor, detect, and protect sensitive data within SaaS applications, ensuring compliance with GDPR regulations.

HIPAA (Health Insurance Portability and Accountability Act)

HIPAA protects sensitive health information in the U.S. Here’s what organisations need to know about data classification and HIPAA:

• Protection of Health Information: Healthcare providers must safeguard patient information against breaches.
• Access Controls: Only authorised personnel should have access to sensitive data.
• Audit Requirements: Regular audits must be conducted to ensure compliance.

Anthem experienced the largest HIPAA breach in 2018, leading to a record $16 million settlement for mishandling patient information.

• To find out how Metomic can help you stay HIPAA compliant, download our one-pager today.

PCI DSS (Payment Card Industry Data Security Standard)

For businesses handling credit card transactions, compliance with PCI DSS 4.0 is essential. Key requirements include:

• Protection of Cardholder Data: Strong measures must be in place to protect cardholder information.
• Secure Storage and Processing: Data must be stored securely, with strong encryption methods used during processing.

Equifax serves as a stark reminder of what can happen when these standards aren’t followed. The company was fined $425 million after a breach affected around 45% of the U.S. population, compromising credit card details and other sensitive information.

• Download our guide to see how Metomic can help businesses achieve PCI DSS 4.0 compliance by providing visibility, access controls, data location identification, and employee training on handling sensitive data in SaaS applications.

CCPA (California Consumer Privacy Act)

The CCPA focuses on consumer rights regarding personal data. Key requirements include:

• Consumer Rights: Customers have the right to know what personal information is collected and how it’s used.
• Data Access and Deletion: Consumers can request access to their data and demand its deletion if desired.

Sephora was penalised with a $1.2 million fine for selling customer data without proper consent under CCPA regulations.

Understanding these regulations not only helps in compliance but also builds trust with customers, showing them that their data is treated with the utmost care and respect.

Best practices for data classification

Getting data classification right can make all the difference when it comes to protecting your sensitive information and staying compliant. Here are some straightforward, best practices that can help keep your data secure:

• Use scanning tools: Automating the way you identify sensitive data is a game changer. Relying on manual processes leaves room for mistakes, and the numbers show it. 86% of companies using mostly manual methods experience data breaches, compared to only 55% of companies using mostly or fully automated methods. Automating data discovery helps you stay ahead of the game and reduces your risk.
• Keep your data inventory accurate: Knowing exactly what data you have, where it’s stored, and how it’s classified is essential. Regularly updating your documentation ensures that nothing slips through the cracks. Plus, it makes compliance audits much smoother when you can easily show what’s being protected and how.
• Review and update regularly: The landscape is always changing—whether it’s new types of data or evolving regulations—so it’s important to revisit your classification process from time to time. Organisations that embrace automation are three times as likely to avoid a data breach, so keeping your methods up-to-date pays off.
• Apply security based on sensitivity: Not all data needs the same level of protection. Make sure your security measures match the classification of the data. This way, you’re focusing your efforts where they matter most. It’s worth noting that data breaches can cost up to $4.88 million on average, so prioritising the most sensitive information can save a lot of trouble.

🔒See Metomic's Data Classification Tool in Action: Request a Demo

Metomic offers robust tools for managing and updating data labels at scale. If data is misclassified or if its sensitivity level changes, Metomic allows you to quickly add, remove, or modify labels across your entire data environment.

This ensures that your data classification strategy remains accurate and up-to-date, helping to protect your organisation against emerging risks and maintaining compliance with evolving regulations.

Request a demo with our security experts. They’ll guide you through how Metomic’s solutions can be tailored to fit your organisation's specific data classification and compliance needs.