What is a potential risk of privacy violations for financial institutions?

Litigation risk is a significant concern for financial institutions regarding privacy violations. Financial entities handle vast amounts of sensitive personal and financial information about their customers. If these institutions fail to protect this data or violate privacy laws, they can face lawsuits from affected individuals or regulatory bodies.

Litigation can lead to hefty fines, legal costs, and a loss of trust from customers, which can further impact a financial institution's reputation and business operations. Regulatory frameworks, such as the General Data Protection Regulation (GDPR) and various state-level privacy laws, impose strict requirements on how financial data is managed, and non-compliance can result in legal repercussions. Therefore, the risk of litigation is a serious issue for financial institutions when it comes to privacy and data protection practices.