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SCENARIO Please Use the Following to Answer the Next Question

question 117

Multiple Choice

SCENARIO Please use the following to answer the next question: Cheryl is the sole owner of Fitness Coach, Inc., a medium-sized company that helps individuals realize their physical fitness goals through classes, individual instruction, and access to an extensive indoor gym. She has owned the company for ten years and has always been concerned about protecting customers' privacy while maintaining the highest level of service. She is proud that she has built long-lasting customer relationships. Although Cheryl and her staff have tried to make privacy protection a priority, the company has no formal privacy policy. So Cheryl hired Janice, a privacy professional, to help her develop one. After an initial assessment, Janice created a first of a new policy. Cheryl read through the draft and was concerned about the many changes the policy would bring throughout the company. For example, the draft policy stipulates that a customer's personal information can only be held for one year after paying for a service such as a session with personal trainer. It also promises that customer information will not be shared with third parties without the written consent of the customer. The wording of these rules worries Cheryl since stored personal information often helps her company to serve her customers, even if there are long pauses between their visits. In addition, there are some third parties that provide crucial services, such as aerobics instructors who teach classes on a contract basis. Having access to customer files and understanding the fitness levels of their students helps instructors to organize their classes. Janice understood Cheryl's concerns and was already formulating some ideas for revision. She tried to put Cheryl at ease by pointing out that customer data can still be kept, but that it should be classified according to levels of sensitivity. However, Cheryl was skeptical. It seemed that classifying data and treating each type differently would cause undue difficulties in the company's day-to-day operations. Cheryl wants one simple data storage and access system that any employee can access if needed. Even though the privacy policy was only a draft, she was beginning to see that changes within her company were going to be necessary. She told Janice that she would be more comfortable with implementing the new policy gradually over a period of several months, one department at a time. She was also interested in a layered approach by creating documents listing applicable parts of the new policy for each department. What is the most likely risk of Fitness Coach, Inc. adopting Janice's first draft of the privacy policy?

Definitions:

Public Sector

The segment of the economy that encompasses both government-run services and businesses, which are owned and controlled by the state.

Domestic Output

The comprehensive total of all goods and services' value created inside a country's limits during a certain timeframe.

Average Tax Rate

The fraction of total income that is paid as taxes, calculated by dividing the total amount of taxes paid by the taxpayer's total income.

Marginal Tax Rate

The tax rate that applies to the next dollar of taxable income, indicating the percentage of any additional earnings that will be paid in taxes.