How Companies Can Help Reduce Risk from Wearables

With the growth in wearable technology across all types of industries, companies that never before considered themselves in the technology business face new risks they need to be prepared for. Being aware of these threats and following strategies to help protect against them can help businesses focus on the growth opportunities that connected technologies make possible.

How Does Wearable Technology Work?

Wearable technology combines form and function, integrating the functionality of once-bulky devices into wearable gear in the form of watches, eyeglasses and more. These types of devices follow a common basic template for how they work. First, sensors capture impulses and translate them into actionable data. Then, microprocessors extract, transform and load data to a transmittable format. Finally, transmitters wirelessly send data to cloud storage for further processing and reporting.

With applications ranging from health and fitness monitoring to employee monitoring and safety, people can expect tremendous expansion driven by the health care industry, the corporate sector and consumer demand. According to PwC, over 80% of consumers said an important benefit of wearable tech is its potential to make healthcare more convenient, and 68% said they would wear employer-provided wearables streaming anonymous data to an information pool in exchange for lower health insurance costs.¹

What Are the Risks?

Wearable technology risks fall into three main categories:

1. Cyber risks. If data transmitted via wearables is not properly secured, companies can face class action lawsuits, costly fines and damage to their reputation.
2. Bodily injury risks. Malfunctioning devices can cause injuries, illnesses and even death of wearers or patients. Device manufacturers may face a product liability lawsuit.
3. Technology errors and omissions risks. Companies can be held liable for an economic loss from the failure of a device to work as intended.

Protect Against Cyber Risks

First and foremost, wearable devices should be engineered with data security in mind. Manufacturers have the burden of proof to show that data detected by their device was properly safeguarded. Consider the following strategies to help ensure proper data protection:

• Custom security level settings for the user;
• Remote erase feature;
• Bluetooth encryption;
• Encrypt critical data elements such as user ID, passwords and PIN;
• Secure data with multiple OSs in the cloud.

Protect Against Bodily Injury Risks

Wearables manufacturers need to understand and mitigate the risk of a product liability claim that may be filed as a result of their device failing. Consider these strategies to help protect against bodily injury risks:

• Conduct extensive testing;
• Conduct robust hazard analysis;
• Plan for mitigation;
• Evaluate awareness of and adherence to key standards;
• Build in cybersecurity;
• Develop clear safety and use instructions.

Protect Against Technology Errors & Omissions Risks

For certain economic losses caused by the failure of a device to work as intended, manufacturers may face technology errors and omissions liabilities. In addition to the strategies mentioned above for bodily injury risk (which may also help for this category), companies should evaluate the following customer contract provisions to manage this exposure:

• Limitation of liability;
• Damage caps;
• Disclaimer/Limitation of warranties;
• Integration;
• Contractual risk transfer and defense/indemnity provisions.

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Sources: 
¹ PricewaterhouseCoopers LLP. (2014). Consumer Intelligence Series: The Wearable Future. Retrieved from http://www.pwc.com/us/en/industry/entertainment-media/publications/consumer-intelligence-series/wearable-technology.jhtml.