Privacy and cybersecurity concerns are now among the top considerations for small- to mid-sized Philippine businesses that rely on outsourced teams, according to Cisco’s 2025 Data Privacy Benchmark Study.
The report found that 96% of organizations worldwide see privacy investments yielding returns greater than their cost, particularly in reducing data breaches, improving operational efficiency, and increasing customer trust.
Local data further underscores the urgency: 84% of Philippine organizations experienced at least one cybersecurity breach through their supply chain, with each reporting an average of three incidents, according to a separate study by BlueVoyant.
These risks are pushing more businesses to evaluate the cybersecurity practices of their outsourcing providers, including Employer of Record (EOR) services.
EORs Expected To Balance Global Security With Local Compliance
Cisco’s survey found that 90% of organizations believe locally stored data is more secure, but 91% also said global providers offer better privacy protections. This reflects the dilemma faced by many SMEs.
Companies want the reassurance of global standards but need to comply with local laws such as the Data Privacy Act of 2012. EORs like KMC Teams address this by offering both: ISO 27001-certified systems and localized compliance protocols.
A compliant EOR acts as the legal employer of outsourced workers and is responsible for processing sensitive information such as payroll data, government IDs, and employment records—data that, if compromised, can lead to financial and legal risks.
Turning Data Privacy Compliance Into a Competitive Business Advantage
Eighty-six percent of respondents in Cisco’s global study said privacy regulations improved business outcomes. This supports a trend in which compliance is not just a legal obligation but a factor that can accelerate growth.
For companies handling sensitive client or employee data, EORs that fully integrate privacy laws like the Philippines' DPA or the European Union’s GDPR into their processes help reduce liabilities while improving stakeholder confidence.
AI Adoption Raises New Concerns For SMEs
The report also noted that 63% of companies are familiar with generative AI tools. However, nearly half admitted to using these tools with sensitive data, often without clear governance policies in place.
This introduces new risks for SMEs, particularly those outsourcing tech and support functions that now rely on AI-driven tools. Without proper oversight, teams can inadvertently expose confidential data in public-facing systems or unregulated applications.
EORs that offer AI governance as part of their privacy infrastructure help address this risk. For example, KMC Teams applies access controls and usage policies to ensure sensitive data is not used improperly within AI systems.
Budgets Shift To AI, But Fundamentals Remain Essential
Cisco reports that 99% of companies plan to reallocate portions of their privacy budgets to AI initiatives. Still, experts warn against reducing investment in basic privacy measures.
For SMEs, the most efficient path is to work with outsourcing providers that offer both—advanced AI governance and established privacy protocols—without requiring separate systems or investments.
How Certified EORs Minimize Cybersecurity Risk Exposure
Outsourcing HR, payroll, and compliance functions to a certified EOR reduces internal handling of sensitive data. A local fintech company in Makati, for instance, was able to cut its exposure to data breaches by over 70% after switching to an EOR that handles encrypted employee records and compliance monitoring.
Instead of maintaining multiple tools and vendors for data security, the company now operates under a single system with end-to-end privacy controls built in.
Key Cybersecurity Features to Demand From Your EOR Partner
SMEs are advised to vet their outsourcing partners using the following criteria:
- ISO 27001 certification
- Compliance with the Philippine DPA and international standards like GDPR
- Encryption of data in transit and at rest
- AI usage and data governance policies
- Defined breach response procedures
- Role-based access control (RBAC) across HR and payroll systems
Why Choosing the Right EOR Is a Strategic Move for SME Growth
The cost of poor cybersecurity now outweighs the investment in privacy infrastructure. Cisco’s latest findings show that organizations that prioritize data protection benefit not just in risk reduction but also in business performance.
For SMEs, selecting the right outsourcing partner—particularly one that acts as an Employer of Record with cybersecurity protocols already in place is becoming a strategic necessity to survive today’s technologies.
A full-stack EOR like KMC Teams allows businesses to stay compliant, reduce breach risk, and focus on growth in an increasingly AI-driven environment.