#CyberFLASH: Consumer privacy needs to be a core business value

SomanA number of high-profile cases involving violations of online privacy have raised public alarm. Home Depot made headlines in 2014 when a massive theft of its consumer credit and debit card database affected more than 56 million customers. And Target was in the spotlight a few years ago for sending a teenage girl coupons for baby gear – before her parents even knew she was pregnant.

Fuelling the trend is the fact that, from a consumer perspective, the risks of sharing our information online have increased exponentially – but this is not widely recognized. To make a fully-informed decision about what information to should share online on any given occasion, a fully-rational consumer must go through three important decision-making steps.

First, she needs to employ the appropriate mental model to think about ‘information sharing’ as a risky prospect – similar to the risks of contracting disease on exposure to contaminated food, the risk of a side-effect after consuming medication or the risk of losing money when trading in risky assets.

Second, she needs to use available information to quantify the risk and identify the possible outcomes. There is usually limited information to enable this, but a lot of information in disclosures and privacy policies exists that would allow her to identify harmful outcomes.

Third, the consumer would need to integrate the ‘identified risk level’ with the ‘outcome information’ to arrive at a judgment as to whether the benefits of sharing her information exceed the potential harm. Unfortunately, decades of research show that most humans lack both the cognitive apparatus and the motivation to go through these steps, for three reasons.

1. We are limited processors of information.

2. We are highly susceptible to cognitive laziness.

3. We are increasingly displaying impulsive behaviour online.

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