Retailers under pressure to tighten security

Privacy concerns and proposed laws governing the use of sensitive personal information are making it more important for retailers to be able to demonstrate due diligence when it comes to information security practices, according to IT managers at the Retail Data Security Forum this week. An inability to do so could expose companies to serious damage to their reputations, financial losses and customer churn, they said.

"The brand can suffer real consequences" from a security breach, said Brian Kilcourse, chief strategist at the Retail Systems Alert Group, the Newton, Mass.-based organizer of this week's forum. "In the eyes of the customer, if their data is compromised, the retailer is legally and ethically bound to report that breach."

The issue is particularly urgent given that a survey by the Retail Systems Alert Group shows that retailers are amassing a growing amount of information on their customers, Kilcourse said. Increasingly, retailers are associating demographic information and transaction-level details to customer profiles -- even though they don't appear to be using the data to deliver specialized services for customers, he said.

While many retailers have worked to ensure the security and integrity of the data, queries to it in many cases are not well controlled, and the data itself is not encrypted, he said. Similarly, forensic data related to the creation and retrieval of customer information is not captured, Kilcourse said.

Information security executives understand what needs to be done to fix such issues, said the IT security director at a major Midwestern franchise chain, who requested anonymity.

"The problem is the executive sponsorship" for the investments needed to bolster security, he said. While high-profile data compromises such as those involving ChoicePoint Inc. and BJs Wholesale Club last year have raised awareness of the stakes involved, there still is an unwillingness to invest in security "without a clear demonstrable ROI," he said.