FTC Safeguards Rule Checklist: Using a Risk-Based Approach to Build Your Information Security Program

The FTC Safeguards Rule requires financial institutions and certain businesses handling consumer data to develop, implement, and maintain a comprehensive Information Security Program (ISP). But compliance isn’t just about checking a box—it’s about actively managing risk and safeguarding customer information to protect customer data.

A risk-based approach ensures your security measures are aligned with actual threats rather than applying a one-size-fits-all model. This means assessing your unique risks, evaluating safeguards, and continuously adapting to new cybersecurity challenges.

In this article, we’ll break down what the risk-based approach means, how to integrate it into your ISP, and why it’s essential for FTC Safeguards Rule compliance.

What Is the FTC Safeguards Rule?

The FTC Safeguards Rule (16 CFR Part 314) was established under the Gramm-Leach-Bliley Act (GLBA) to protect consumers’ personal financial information. It applies to businesses handling sensitive consumer data, including:

✅ Mortgage brokers & lenders
✅ Auto dealerships
✅ Financial advisors & accountants
✅ Credit unions & collection agencies
✅ Tax preparation firms
✅ Other financial advisors
✅ Any business handling customer financial data

The core requirement? Establish a Written Information Security Program (WISP) that includes specific administrative, technical, and physical safeguards to protect consumer information from unauthorized access, misuse, or theft.

Why a Risk-Based Approach?

A risk-based approach ensures your security measures aren’t just a checkbox exercise—they are targeted, scalable, and effective. Instead of applying generic security controls, a risk-based approach requires organizations to:

✔️ Identify risks to customer data, including personally identifiable financial information.

✔️ Assess risks using a structured process to ensure repeatable and measurable results.

✔️ Treat risks using an appropriate strategy (avoid, mitigate, transfer, or accept).

✔️ Apply controls that align with both risk assessment findings and risk appetite.

This ensures that security efforts focus on the most critical vulnerabilities while remaining flexible to evolving cyber threats like AI-driven attacks, insider threats, and new regulatory changes.

The Risk Assessment Process

A structured risk assessment process helps identify, assess, and treat risks in a consistent, repeatable manner. This ensures that your ISP adapts to real-world threats rather than being a static compliance document. Additionally, understanding what constitutes a security event, such as unauthorized access to sensitive customer information, is crucial for compliance with regulatory proposals requiring financial institutions to report these events to the Federal Trade Commission (FTC).

Step 1: Identifying Risks

Begin by mapping out potential risks to customer data and your organization’s information systems. This includes:

🔹 Data Inventory – What customer data do you collect, process, and store?

🔹 Unencrypted Customer Information – Are there any instances of unencrypted customer information? Unauthorized acquisition of such data, especially affecting at least 500 consumers, requires reporting to the FTC and can incur significant compliance costs.

🔹 Access Control – Who has access to this data? Are permissions properly restricted?

🔹 Storage & Transmission – Where is data stored, and how is it transmitted?

🔹 Threat Landscape – What cyber threats (phishing, ransomware, insider threats) could compromise security?

A formal risk identification process ensures nothing is overlooked.

Step 2: Assessing Risks

Each identified risk should be evaluated based on:

• Likelihood – How probable is it that the risk will occur?

• Impact – If the risk occurs, what is the severity of its consequences, including the potential for certain data breaches?

• Effectiveness of Existing Controls – Are current safeguards reducing risk sufficiently?

Using a structured risk assessment framework, such as NIST SP 800-30 or ISO 27005, helps create consistent, data-driven decisions rather than subjective judgments.

📌 Best Practice: Conduct risk assessments annually and whenever major changes occur in your IT environment or business operations.

Step 3: Treating Risks

Once risks are identified and assessed, they must be treated appropriately. There are four main risk treatment strategies:

1️⃣ Avoid the Risk – Eliminating activities that expose data to risk (e.g., discontinuing an insecure process).

2️⃣ Mitigate (Reduce) the Risk – Implementing security controls to reduce the risk (e.g., encrypting sensitive data, applying MFA). This includes adhering to the standards for safeguarding customer information as set forth by the Federal Trade Commission (FTC), which necessitates developing and maintaining a comprehensive information security program to protect customer data.

3️⃣ Transfer the Risk – Using cyber insurance or third-party security services to shift responsibility.

4️⃣ Accept the Risk – Acknowledging and formally accepting the risk when the impact is low or mitigation costs outweigh the benefit.

The choice should align with your organization’s risk appetite—ensuring consistency across all departments.

Key Components of an FTC Safeguards Rule Compliant Information Security Program

An information security program is a cornerstone of the Safeguards Rule, ensuring the security, confidentiality, and integrity of personally identifiable financial information. To build a robust program, financial institutions must include several critical elements:

1. Designation of a Qualified Individual: Appoint a qualified individual to oversee the information security program. This person should possess the necessary expertise and authority to implement and supervise the program effectively.

2. Risk Assessment: Conduct a thorough risk assessment to identify potential risks to customer information. This assessment must be documented and include criteria for evaluating risks and threats.

3. Implementation of Safeguards: Implement safeguards to control the risks identified through the risk assessment. These measures should be designed to protect customer information from unauthorized access, use, or disclosure.

4. Monitoring and Testing: Regularly monitor and test the effectiveness of the safeguards to ensure they are functioning as intended.

5. Training: Train staff on the information security program and their roles and responsibilities in maintaining and implementing the program.

6. Incident Response Plan: Develop an incident response plan to address security events, including data breaches, ensuring a swift and effective response.

7. Service Provider Oversight: Monitor and assess service providers to ensure they are implementing adequate safeguards to protect customer information.

By incorporating these key components, financial institutions can build a comprehensive information security program that aligns with the FTC Safeguards Rule and effectively protects customer information. Be sure to check our all the FTC Safeguards Rule Checklist for Compliance series articles to review all the requirements.

Aligning Security Controls to Risk Appetite

Risk appetite defines how much risk your organization is willing to accept in pursuit of its business objectives. A well-structured ISP ensures that:

🔹 Security controls directly map to identified risks (not arbitrary implementations).
🔹 Risk treatment decisions remain consistent across the organization (avoiding inconsistencies between departments).
🔹 Resources are allocated effectively—focusing on high-impact risks first rather than spreading efforts too thin.

By matching security investments to risk priorities, businesses can achieve both compliance and operational resilience.

Monitoring and Updating Risk Assessments

Cyber threats evolve—your ISP should too. Risk assessments must be ongoing, not a one-time process. It is also crucial to adhere to the standards for safeguarding customer information set forth by the Federal Trade Commission (FTC).

📌 Update risk assessments when:

• New technology is introduced.

• Security incidents occur.

• Regulatory changes impact your business.

📌 Implement continuous monitoring to detect anomalies, unauthorized access, and new attack patterns.

Staying Up-to-Date with Regulatory Changes

The Safeguards Rule is subject to change, and financial institutions must stay current with regulatory updates to ensure ongoing compliance. Here are some steps to stay informed:

1. Monitor FTC Guidance: Regularly check FTC guidance and updates on the Safeguards Rule to stay informed about any changes.

2. Attend Industry Events: Participate in industry events and conferences to gain insights into regulatory changes and best practices.

3. Subscribe to Industry Publications: Subscribe to industry publications (and the Input Output blog) that provide updates on regulatory changes and compliance requirements.

4. Consult with Compliance Experts: Engage with compliance experts to ensure that your policies and procedures are aligned with the latest regulatory changes.

By following these steps, financial institutions can ensure they remain compliant with the Safeguards Rule and continue to protect customer information from unauthorized access, use, or disclosure.

Conclusion: A Risk-Based Approach is Smart Security

A risk-based approach isn’t just about FTC compliance—it’s about real security.

By focusing on actual risks rather than blindly applying generic controls, businesses can:

✅ Reduce the likelihood of data breaches.
✅ Strengthen regulatory compliance and reduce liability.
✅ Improve operational efficiency and resource allocation.
✅ Build customer trust and protect business reputation.

The FTC isn’t just looking for a checklist—they expect a living, evolving security program that adapts to real-world threats. Implementing a structured, risk-based approach ensures your business is both compliant and truly secure.

Next Steps: Secure Your Business with a Risk-Based ISP

FTC compliance isn’t just about avoiding fines—it’s about building a security-first organization that protects customer trust.

🔹 Need help implementing a Risk-Based ISP?
🔹 Want to ensure your business meets FTC Safeguards Rule requirements?

📩 Contact us today to get started with a tailored, compliance-ready security strategy!