A woman stands in a bakery with the front counter at her back. She looks down at the smartphone in her hand with a smile and uses one finger to tap on the screen. The woman has gray-streaked curly hair pulled up on top of her head, and she is wearing a light green checkered apron over a white button-up shirt. The bakery counter is rustic, with a weathered wooden front. On top of the counter, directly behind the woman is a glass case filled with buns and pastries.
Data safety should be a priority at all levels of your business. Train your employees in data awareness and safety so they know how to protect your organization's information. — Getty Images/JLco - Julia Amaral

In an era where data is pivotal to business operations, the threat of fake or unverified data looms large, especially for small businesses.

“The Association of Certified Fraud Examiners reports that U.S. businesses will lose an average of 5% of their gross revenues to fraud,” said Cindy Vestergaard, Vice President, Special Projects and External Relations at DataTrails. “When losses do occur, only 49% of businesses have been able to recover funds lost, while almost two-thirds of businesses recover 25% or less and only one-fourth recover more than 75%.”

Understanding and combating fake data is crucial to maintaining your business’s integrity, profitability, and reputation. Here’s what you need to know about fake data and how to protect your business against its detrimental effects.

[Read more: How to Protect Company and Customer Data as a Small Business]

Understanding the threat of fake data

Fake data poses a significant threat to the financial health of an organization. According to PNC Bank, 65% of organizations were targets of payment fraud in 2022. Vestergaard also noted that small businesses are particularly susceptible to vendor fraud schemes.

“Twenty-nine percent of small businesses [reported] an attempt to scam their accounts payable into paying a vendor or multiple vendors — whether fake or real — for false claims,” Vestergaard said.

Fake or unverified data can also lead to poor decision-making, impacting everything from inventory management to marketing strategies. Potentially equally damaging is the loss of client trust, which can ultimately lead to long-term reputational damage.

“If customers discover businesses have been using fake data, trust is eroded with clients, who may question the company’s commitment to safeguarding their information,” emphasized Vestergaard.

Ensuring data authenticity isn’t just a business necessity; it’s a legal imperative. Using unverified or falsified can lead to compliance violations, which can result in hefty legal and financial penalties.

[Read more: How to Communicate a Data Breach to Customers]

Implementing access controls and the principle of least privilege ensures sensitive data can only be accessed by authorized individuals.

Strategies for combating fake data and protecting authentic data

Follow these key strategies to fight against fake data and protect your business’s authentic data.

Lay the groundwork for data authenticity

The first step in combating fake data is to understand where your data is stored and who has access to it.

“This helps in understanding the flow of data and identifying critical points where provenance should be tracked,” Vestergaard explained.

She also recommends creating clear data governance policies defining how data should be handled, who is responsible for it, and how to most effectively manage it. Implementing access controls and the principle of least privilege ensures sensitive data can only be accessed by authorized individuals.

“By maintaining a trail of where documents come from and who has handled them, businesses can more easily verify their authenticity and respond to potential security incidents,” Vestergaard said.

Keep only the data you need

The Federal Trade Commission (FTC) advises only collecting sensitive information when there’s a legitimate business need, and keeping that information only as long as absolutely necessary.

If your company accepts credit cards, don’t store account numbers and expiration dates in your system unless the information is pivotal to your business operations. And if your company has a mobile app, ensure it only accesses and collects the data it needs to function.

Utilize technology and metadata

Employing metadata can help businesses in the fight against fake data. Attaching details like the creation date, author, and changes made over time can assist in version control across a document’s lifecycle, making data easier to verify.

Consider investing in technology that automatically tracks and logs data interactions, such as document management systems or databases with built-in audit capabilities. Blockchain technology can be particularly effective, creating immutable records that are nearly impossible to fake.

Bolster login security

Many hackers take advantage of gaps in security, such as weak authentication and password protocols, to breach data. Using multi-factor authentication (MFA) requires multiple touchpoints, such as entering a security code from another device, to determine a user’s identity.

Investing in a password manager for your company can also increase login security. With just a single master password, password managers can automatically create strong passwords, safely share passwords among employees, and limit the repetition of unsecured passwords.

Foster a culture of data awareness

Finally, educate and train your staff on the importance of data provenance and the correct handling of data. Employees should be able to recognize potential issues with data authenticity and understand how to prevent and address those issues. Developing a comprehensive plan to respond to breaches or exposure of fake data — and ensuring your team is equipped to implement that plan — prepares your business to act quickly and effectively should an incident arise.

[Read more: How to Keep Customer Data Secure]

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