What is sensitive information & how do I protect it?

Have you ever heard the term "sensitive information" used? I use it all the time, and sometimes I forget that most people don't know what in the world this refers to.  Last week, I posted a quick tip about NDAs (non-disclosure agreements) on my social feeds. And the very first comment I got was "what is sensitive information?" Well, that was a big oopsie from me. It's my mission to make legal simple for you, the business-minded entrepreneurs. Instead, I used a legal term without explaining it, and that makes me very, very upset with myself. So now, I need to correct the error.

WHAT IS SENSITIVE INFORMATION?

So what type of information is considered "sensitive"? The answer is just about any kind of information. It can be financial (how much you made, or what your production costs are), it might be a client list or supplier list (who you do business with), it could be your distribution plans (where you will sell your product or service and when), what innovations you are working on, or many other things.

Sensitive information is any information about your business that you do not want to become public. You don't want it public because it would harm your business if others know it. This might be damage to your reputation, missing out on potential sales, losing the opportunity to be the first to bring a new product on the market, or something else.  It doesn't matter if it's information you don't want your competitors to know or if it's information you don't want the general public to know.  Simply, it's your business's information and no one else's, and you want to keep it that way.

A question I was asked recently is if a diagram can be sensitive information. The answer is yes! What form the information is stored in does not matter. You could have hand drawn figures, audio files, digital images, a database, computer files in any format, and so on.  Even something you only said to someone (verbal information) can be sensitive information.  A word of caution though: if there is no written record of what information was shared and when it was shared, it is very, very difficult to protect.

PROTECTING YOUR BUSINESS WHEN SHARING SENSITIVE INFORMATION

The best way to protect your sensitive information is to keep it to yourself, of course. A famous saying is that "the only way two people can keep a secret is if one of them is dead." Personally, I think that's a bit harsh, but aside from that, it's very unrealistic.  You can't do everything yourself, so obviously, you will need to share some of that information with other people, and possibly other companies.

The next best way to protect your information is to build a trust relationship.  Did you think I was going to say a legal contract? Sorry, no. Legal contracts are important, and I will talk about below, but no legal contract can protect you fully. The best thing is to trust your judgment and only share the information with people you trust. Your employees or subcontractors will need you to share information with them in order to do their jobs. Be careful who you hire.  If you work with other companies, for example, you make kitchen sinks, you probably have a manufacturer, a distributor, and some other companies you work with. You will need to share information with them too.  Furthermore, don't share more information than is necessary with each of those people/companies.  The more limited their knowledge is, the less they can harm your business if it gets out (intentionally or unintentionally - hacking & data theft is always a risk).  The lesson of the day: manage information skillfully.  A colleague taught me this in my very first corporate job, and I will never forget it.

So that brings us to legal contracts. The NDA (non-disclosure agreement) also known as a CDA (confidential disclosure agreement) is one of the most common business contracts used. It is used to protect the exchange of information - only information, not money.  I wrote a blog post about this recently called I only need a contract when we exchange money…right?. The NDA is the best legal protection when you share sensitive information, but be warned, the only way a contract really protects you is if you are willing to take legal action (i.e. a lawsuit), which is time consuming, emotionally exhausting and possibly expensive too. There is certainly business value to a contract as well. The psychological effect of having signed a contract will deter many people from intentionally breaching an agreement, but this is not a guarantee. Just understand that an NDA is about as useful as a pair of handcuffs. Handcuffs work pretty well, but a truly motivated individual can find ways to escape them - whether they run away with the handcuffs still on, or find a way to get them off.

Still, an NDA is better than no NDA. And best of all, it's very, very cheap. So cheap, in fact, that you can get one for free. Yes, yes, I know I often say not to take free contract templates off the internet because you never know what you get (here is my blog post about it: Free contract templates from the internet: DON'T DO IT!). 

However, I can vouch for this one.  I use it in my businesses, and it's not for lack of options (I have written plenty of NDAs myself).  So, check out onenda.org. Some amazing colleagues of mine started this initiative to make a legally sound NDA available to everyone. Many large corporations and major law firms across the world have already signed up to the club, promising to only use this NDA (names like Coca Cola, American Express, pwc & Airbus … and some law firms you've never heard of and don't care about). This means that they ALL use this exact NDA, no (major) negotiations, no bickering over legal language. If they all agree it's good enough for them, you can bet it will protect you too! (And did I mention it's available for FREE).