Behind the 10% revenue penalty: Data regulation has already reached the boardroom level

Ask AI · How does upward responsibility shift in the board reshape the data protection decision-making chain?

On March 10, 2026, South Korea revised the Personal Information Protection Act (PIPA) again.

This legislative update is not an isolated institutional adjustment but occurs within a very specific context—over the past few years, South Korea has experienced continuous large-scale data breach incidents involving finance, telecommunications, e-commerce, and other industries, with regulatory enforcement also intensifying. Under this real-world pressure, the existing system, which was primarily compliance-driven, has become increasingly inadequate to meet regulatory expectations.

Against this backdrop, a very noteworthy change emerges in this round of legislation: it does not simply strengthen regulation by “adding more obligations,” but begins to address a deeper issue—the way companies treat data risks.

On one hand, rules are moved forward. By introducing a mechanism requiring notification obligations once legal risk thresholds are met, compliance is no longer based on “an incident has already occurred,” but is shifted earlier to the risk identification stage; on the other hand, responsibilities are also moved upward. By strengthening the accountability of corporate leaders, introducing fines up to 10% of relevant turnover, and integrating the Data Protection Officer (DPO) into the board’s decision-making and reporting system, data protection is formally incorporated into corporate governance.

When these institutional changes are viewed alongside a series of recent typical enforcement cases, a shift more significant than just stricter regulation becomes apparent: the core focus of regulation is shifting from whether companies are “already compliant” to whether there are individuals within the organization making judgments about data risks and bearing the consequences.

Before and after the legislation, South Korea has seen multiple representative data breach incidents. Some financial institutions stored residents’ registration numbers in logs in plaintext, leading to millions of users’ information being leaked; some brands suffered attacks due to weak access control and authentication mechanisms, allowing attackers to directly access customer data; others, due to lack of basic security measures, experienced larger-scale data leaks.

On the surface, these incidents share a common label—“attacked.” But if we follow the regulatory review logic further, the problem is not with the attack itself.

The real issue lies in—companies’ fundamental lack of risk judgment capabilities at key points. Whether data requires higher protection levels, where structural vulnerabilities exist in the system, or whether abnormal behaviors can be detected in time—these are issues that should be continuously managed in daily operations but are often absent in many cases.

Therefore, what these cases reveal is not just isolated security accidents but systemic failures in risk identification, internal control, and response mechanisms within companies.

From a system design perspective, one of the most direct changes is the move of notification obligations forward.

In most jurisdictions, the basic logic of data compliance still revolves around post-incident response. Once a breach is confirmed, companies are required to notify regulators and users within a specified timeframe. This is a typical post-event response mechanism.

South Korea’s adjustment deliberately breaks this chronological order.

According to the revised Article 34, under certain conditions, even before confirming a breach, if there is already a risk reaching the legal standard, companies must initiate notification. This means companies can no longer delay decisions based on “it has not happened yet,” but must make judgments in uncertain states.

At the same time, notifications are no longer just about informing what happened. Companies must also clearly specify the legal actions users can take, including damages compensation, statutory remedies, and dispute resolution methods. This transforms notification from an information disclosure act into a compliance action with legal consequences.

However, viewing this merely as a shift of obligations is superficial. More importantly, this change is forcing companies to develop a capability—to make judgments when risks are not yet fully realized in real-time.

Compared to moving obligations forward, a more noteworthy change is in the responsibility structure.

This legislative update does not explicitly impose personal fines or criminal liabilities on company owners or representatives, but through a series of institutional arrangements, it clearly embeds data protection responsibilities into corporate governance. Business operators or representatives are no longer just abstractly responsible; they are required to bear substantive responsibility for the effectiveness of security measures through resource allocation and制度建设. Meanwhile, the appointment, change, and performance of the Data Protection Officer (DPO) must be continuously monitored at the governance level.

Under such an institutional framework, data compliance can no longer be understood as a task that a single department can complete or that should be handled solely by one team.

Data processing naturally spans product design, technical architecture, operational processes, business decisions, and external collaborations. Risks are not concentrated at a single point but are distributed in a chain-like, systemic manner throughout business operations. Therefore, data compliance from the outset should not be viewed as solely a legal, compliance, or technical function but as an integrated effort requiring resource investment, led by professionals, and involving cross-departmental collaboration.

The reason why, in many companies, it was previously treated as a single function is more about management’s insufficient understanding of its nature and importance rather than the task’s inherent suitability for compartmentalization. As a result, when notification obligations are moved forward, risk judgments need to be made under uncertainty, and resource investment begins to influence regulatory evaluation, these issues inevitably point to a higher organizational level—the management.

The 10% fine cap is undoubtedly the most impactful part of this legislative update. But focusing only on the increased severity risks missing its true function.

The revised rules link hefty fines to specific circumstances, such as repeated major violations, large-scale data breaches caused by intentional or gross negligence, or recurrence without rectification. Additionally, the system clarifies that if a company has invested sufficient resources (including personnel, budget, and technical measures) into personal data protection, penalties may be mitigated.

This effectively introduces a more targeted evaluation logic: regulators no longer only look at outcomes but also ask whether, before the outcome occurs, the company made reasonable judgments and allocated appropriate resources.

This also links penalties to the responsibility structure discussed earlier. Fines are no longer just punishments for results but serve as a push for a more specific issue—who made these decisions and whether they were based on sufficient grounds.

In other words, the focus of penalties is shifting from the result itself to the decision-making process.

When viewing these changes collectively, a deeper shift becomes apparent.

This legislative revision is not merely about raising compliance thresholds but about transforming how companies handle data issues. Data protection is no longer just a “compliance” requirement to be “met,” but increasingly a business issue requiring ongoing judgment and resource investment.

Companies now face not only the rules themselves but also how to make decisions when rules are not yet fully clarified and risks have not fully materialized. These decisions, in turn, are borne by those responsible. In this process, data risks are integrated into the daily operational logic of enterprises. They are no longer passive, post-hoc issues but variables that must be continuously assessed, weighed, and managed during business development.

Therefore, “who is responsible” is not an additional question but a natural consequence of moving decision-making upward—when risk judgment becomes part of daily operations, responsibility cannot stay at the execution level but must fall to management with resource allocation and decision-making authority.

This shift has very tangible implications for outbound companies.

Many companies—especially outbound enterprises—lack systematic internal mechanisms and stable resource input and professional support. Data compliance is often scattered across legal, technical, product, or security teams, working in silos, with reactive responses only after risks materialize. While this may have been sustainable in the past, under current regulatory logic, it is increasingly inadequate.

Because regulators are now continuously asking not only whether “the system exists” or “documents are complete,” but whether companies can promptly identify issues, form judgments, and facilitate cross-departmental collaboration to produce regulator-acceptable responses. For most outbound companies, this is not a capability that can be quickly developed through internal gradual exploration.

The core issue has shifted—it’s no longer just about subjective importance but about how to convert that importance into a sustainable mechanism. Which risks should be prioritized? Which issues should be escalated to management? How to foster effective collaboration among business, technical, and compliance teams? And how to maintain judgment consistency and explainability amid changing rules?

Practically, companies that can quickly establish these capabilities often do so not by internal trial-and-error but through mature experience frameworks, systematically restructuring existing processes, responsibilities, and boundaries—transforming dispersed duties, vague responsibilities, and delayed responses into a continuous governance system.

Thus, the real impact of this legislative change is not merely whether companies are compliant but whether they can quickly close this capability gap and embed relevant responsibilities into organizational structures.

A similar trend is also evident in China. The development of the Personal Information Protection Officer system similarly pushes responsibility toward resource-capable levels. Although different jurisdictions have variations in specific institutional design, the underlying logic is converging.

For companies, the core question posed by this change is very concrete:

In the face of data risks that have not yet materialized and rules that are not yet fully clear, is there someone within the organization capable of making judgments and bearing the consequences?

If this question cannot be answered affirmatively, then compliance itself no longer constitutes a true boundary of risk. The real determinant of an enterprise’s risk exposure is whether it has the capacity to make judgments amid uncertainty and whether those judgments are placed at the correct organizational level.