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Data Classification: What It Is and How to Implement It

What Is Data Classification?

Simply put, data classification is the process of categorizing files, databases and other content into logical
groupings according to their content. For example, a data classification process might distinguish
between public information and various types of sensitive data, as well as identify information that is
subject to regulatory mandates like the GDPR, HIPAA or the California Privacy Rights Act (CPRA).

Data classification is therefore vital to both data security and compliance, especially for organizations that
store large volumes of sensitive or protected data. Classifying data also improves user productivity and
decision-making, and reduces storage and maintenance costs by empowering you to eliminate unneeded
data.

In this article, you will learn more about the purpose and benefits of data classification, the steps in the
data protection process, best practices, and tips for getting a program approved. Finally, you’ll get a guide
to help you determine the best solution for your organization.

Request One-to-One Demo:

Data Classification Software from Netwrix

Types of Data Classification

At a high level, most organizations use a basic strategy to classify data: They manually organize data into
folders and subfolders based on their contents. For instance, mortgage applications might be sorted into
the Finance category, while offer letters may fall under Human Resources. Windows and other operating
systems even come with some basic categories, like Music, Videos and Documents.

However, this is not what the term “data classification” refers to in the world of data security. Rather, data
classification means to categorize data based on its sensitivity, which is indicated by who should be
permitted to access and use the data. For example, categories might include Top Secret and Confidential
for data that needs to be restricted to specific audiences, and Public for information that can be shared
freely.

Here are some examples of sensitivity-based classification schemas:

Example Commercial Classification

The data classification schemes used by private organizations typically have three or four levels, such as
this one:

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 Public: Data that can be freely disclosed, such as your company’s contact information and browser
cookie policy
Proprietary: Information that is private but has low sensitivity, such as organizational processes
Confidential: Data that has higher security requirements, like competitor research. vendor
contracts and employee reviews
Sensitive: Highly sensitive data whose disclosure could disrupt operations or put the organization
at financial or legal risk, such as intellectual property, bespoke applications or healthcare records.

Example Government Classification

Government agencies often use the following levels when classifying data:

Top Secret: Cryptologic and communications intelligence

Secret: Select military plans
Confidential: Data indicating the strength of ground forces
Sensitive unclassified (or “CUI”): Data tagged “For Official Use Only”
Unclassified: Data that may be publicly released with authorization

Data Classification Process

The data classification process comprises the following steps:

Step 1. Categorize the Data

The first step in the data classification process is to determine what type of information a piece of data
is. To automate this process, organizations can specify specific words and phrases to look for, as well as
define regular expressions to find data that follows a certain pattern, such as credit card numbers or
medical procedure codes.

Step 2. Label the Data

Once a piece of data has been categorized, It’s important to record that decision for future use. There are
several ways to do this:

Tagging — Another options is to place a digital tag on each file, such as the tags offered by
Microsoft Office. Users can search for content based on these tags, and they can be also used by
security tools such as data loss prevention (DLP) solutions.
Extended file metadata — Many modern collaboration platforms can add metadata to content
without changing the file itself. For instance, SharePoint, Box, Dropbox and Google Drive can add
metadata to a file to improve searchability and classification.

Step 3. Repeat

It’s important to remember that data classification is not a once-and-done process. Not only is new data
constantly being created and collected, but existing data can change classification due to new contractual
obligations and modifications to internal policies or legal mandates.

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Benefits of Data Classification
Understanding what types of data you’re storing and where brings many benefits, including improved
data security and regulatory compliance.

Data Security

Classifying your data improves data security by enabling you to:

Prioritize your security efforts and apply appropriate security controls based on data sensitivity.
More easily understand who can access, modify or delete certain types of data.
Improve risk management processes by providing insights like the potential business impact of a
breach or ransomware attack.

Regulatory Compliance

Data classification can identify data that is subject to various compliance regulations so you can protect it
as required and pass audits. Here’s how data classification can help you meet common compliance
standards:

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 GDPR: Data classification helps you uphold the rights of data subjects, including fulfilling data
subject access requests by quickly retrieving documents that contain a given individual’s data.
HIPAA: Accurately storing health records helps you implement security controls for proper data
protection.
ISO 27001: Classifying information according to value and sensitivity helps you meet requirements
for preventing unauthorized disclosure or modification.
NIST SP 800-53: Categorizing data helps federal agencies properly structure and manage their IT
systems.
PCI DSS: Sensitivity data classification helps you identify and secure payment card information.
CMMC: US government contactors can establish control over both personal sensitive data and
CUI.

Read Related Blogpost:

Data Classification for Compliance: Looking at the Nuances

Other Benefits

In addition, a solid data discovery and data classification system can:

Enable faster and more accurate legal discovery.

Improve user productivity and decision-making through more effective search.
Reduce data maintenance and storage costs by identifying duplicate and stale data.

Tips for Justifying a Data Classification Policy

In addition to outlining the data security, compliance and other benefits of data classification, here are
some tips to get support for implementing your program.

Demonstrate Current Risk

The most compelling way to secure funding for a data classification program is a demo. Pick one of your
data repositories, such as SharePoint, and scan it with a data classification tool. Most likely, it’ll pinpoint
loads of sensitive data that needs to be tagged and properly secured. Be sure to show how many
individuals have access to the data — and how many of them should not have that access.

Quantify Potential Damage

Try to quantify the damage that the organization could suffer if an adversary used a compromised
account to steal data that should have been out of reach or to deploy ransomware to encrypt it.

Also list any compliance regulations the current situation might be violating, and the penalties that could
be levied.

Show Additional Benefits

Classifying data can enhance the value of existing investments, like data loss prevention and user and
entity behavior analytics (UEBA) tools, by identifying the most critical files to protect.

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Data classification can also accelerate high-profile programs like cloud migration. Indeed, one of the
biggest hindrances to cloud adoption is the fear of losing control of sensitive data. But if your files are
classified, it is easy to ensure that critical content remains in secure locations.

Present a Comprehensive Data Classification Policy

Having a detailed data classification policy helps demonstrate that the project is not just worthwhile, but
clearly thought out and ready to implement. Effective classification policies should:

Use language and formatting that is clear and simple.

Explain the purpose and scope of the data classification process.
Detail an appropriate number of classification levels (often 3–5), with unambiguous criteria that are
generic enough to apply to different data sets.
Identify roles and responsibilities, including points of contact for clarification.
Include a history of revisions.

Download Free Guide:

Data Classification Policy Template

How to Select a Data Classification Solution

To find the best data classification solution for your organization, be sure to look for the following
capabilities:

Automation: It’s essential to choose a solution that automates the work of classifying data at the
time of creation — as well as classifying all the organization has already amassed, which can be
terabytes of data.
Compound term search: This feature improves the accuracy of determining whether a given file
falls into a particular category, minimizing both false positives and false negatives.
Index: It’s important to be able to identify sensitive terms without re-crawling the data.
Flexible taxonomy manager: Your organization can start with out-of-the-box taxonomies, but you
will soon want to add and modify terms and rules, so look for a solution that makes the task easy.
Workflows: It’s extremely helpful to have a solution that can take specific actions automatically
based on a document’s classification. For example, if sensitive data is discovered on a public
share, the solution could immediately move it to a secure quarantine area.
Breadth of coverage: Be sure the solution supports all your data sources, including structured and
unstructured data in the cloud and on premises.

Conclusion: Is Data Classification Worth the Effort?

Given that an estimated 33 billion data records will be stolen in 2023, organizations are eager to improve
data security. And with data privacy regulations packing steep penalties, they cannot afford to neglect
compliance.

But how can you even begin to protect your most sensitive data if you don’t know where it is? And how
can you get the most value from your current security tools if they can’t tell what’s inside your files?

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Data classification is a foundational technology that helps you strengthen both security and compliance.
Moreover, it can improve user productivity and effectiveness, speed initiatives like cloud migration, and
reduce data management and storage costs. By choosing the right data classification solution, you can
gain a wealth of benefits without disrupting your operations.

How Can Netwrix Help?

The Netwrix Data classification software will help you lock down critical data. But that’s not all. In addition,
it empowers you to:

Focus your security efforts on truly sensitive data.

Ensure high-accuracy classification results with our unique compound term processing and
statistical analysis technology.
Protect sensitive files by automatically moving them to a safe area and removing permissions from
global access groups.
Embed classification information right into the files to improve the accuracy of your DLP or IRM
products and streamline data management tasks.
Reduce the cost and effort associated with the flow of DSAR requests.

To experience all advantages of Netwrix Data classification software, please visit this page.

FAQ
What is the purpose of data classification?

Data classification sorts data into categories based on its value and sensitivity.

Why is data classification important, and what benefits does it offer?

Data classification helps you improve data security and regulatory compliance. You can prioritize your
protection efforts, improve user productivity and decision-making, and reduce costs by eliminating
unneeded data to free up storage.

What are common data classification levels?

Data is often classified as Public, Proprietary, Confidential or Sensitive.

What software should I use for data classification?

Look for data classification software that:

Uses compound word search to ensure accurate classification

Has an index to find sensitive terms without re-crawling your data stores
Includes a flexible taxonomy manager that empowers you to customize your classification
parameters
Provides workflows to automate processes such as moving sensitive data from public shares
Supports both on-premises and cloud content sources, including structured and unstructured data

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Who is responsible for data classification in an organization?

Organizations typically designate a security and risk manager, a data protection manager, a compliance
committee, or a similar entity.

Graham Simms
Graham Simms is the Product Manager for Netwrix Data Classification. His 25 years of experience in
data classification cover a broad range of subject material, from classifying news stories to identifying
documents of record to organizing ocean surveys based on underlying geology. At Netwrix, he brings his
extensive expertise to bear on the critical realms of data security and data governance, empowering
customers to locate and protect their sensitive data and reduce their attack surface by finding and
deleting data they no longer need. Early in his career, he worked on the world’s first commercial
implementation of a probabilistic search engine. Graham holds a degree in computer science from
Manchester University.

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