What is Data Classification?

In today’s data-driven world, managing and protecting information has become a critical challenge for modern organizations. The explosion of data, much of it unstructured and sprawling across diverse digital landscapes, has made traditional security measures increasingly inadequate. Data Classification is an essential process of data security, but many organizations struggle to do it effectively


This blog delves into the pivotal role of data classification, its inherent challenges, and the layers of sensitivity that dictate how data should be handled. Discover how to harness the power of data classification to protect, optimize, and leverage your organization’s most critical asset: its data.


Why data classification matters:


Data is the lifeblood of modern organizations. Data fuels every operation, decision, and strategic move. However, the sheer volume and variety of data organizations generate and collect present a formidable challenge in ensuring its security and appropriate usage. 


Data classification is an essential component of data management that enables effective security measures and streamlines access control and provisioning. By distinguishing between high and low-sensitivity data, organizations can tailor their security protocols to apply stringent controls where necessary, thus preventing the loss or leakage of critical proprietary data. This is essential for many regulatory standards and a vital defense against the threat of cyber-attacks.


Effective data classification is also essential for enabling efficient operations. While locking down and limiting access to all data would be incredibly secure, it would often slow down and limit productivity. Data classification allows businesses to prioritize accessibility when safe and necessary and creates the conditions for optimized risk-aware access management. 


The Challenge of Data Classification

Data classification presents a unique set of challenges, due to the large amount of data generated and used by most businesses, most of which is unstructured. 


The dynamic lifecycle of data complicates classification efforts. Vast amounts of data are created, modified, accessed, and shared across various organizational platforms and mediums. Whenever a file or other piece of data is modified, its sensitivity might change. Keeping track of these changes and ensuring that data classification remains accurate and up-to-date is daunting.


Unstructured data encompasses everything from source code to emails to multimedia content, constituting 80-90% of all organizational data. It is produced at a rate three to five times faster than structured data. Because of the lack of a database structure and because it is spread over many applications and devices, unstructured data is significantly more complex to organize, manage, and secure.


Compounding these challenges is the fact that critical data is a prime target for threat actors. Cybercriminals constantly seek valuable information to exploit for financial gain or to inflict damage. The threat landscape underscores the imperative of robust data classification as a fundamental element of an organization’s cybersecurity posture.


Different Levels of Data Sensitivity

A core component of data classification is that some data is more sensitive than others. Data sensitivity refers to the potential impact that the unauthorized disclosure, alteration, or destruction of data could have on an organization or individuals. While the leak of a newsletter sent to customers is likely not a massive issue, the loss of financial or customer data would be. 

Organizations can implement appropriate security measures and access controls to mitigate risks by categorizing data based on sensitivity. Different models suggest classifying data into 3-5 different tiers of sensitivity. In general, more granularity and specificity enable more effective data classification and management, making the overall process more complicated to implement.  

We typically advocate for starting with a four-tiered approach:


Public – Public data is information that is intended for public access. It can be disclosed without risk to the organization. This category includes marketing materials, press releases, and published financial reports. Since public data does not pose a security risk, it requires minimal protection, allowing for wide distribution inside and outside the organization.


Internal – Internal data is meant for use within the organization, and while not openly available to the public, its unauthorized disclosure would have minor consequences. This level includes internal memos, operational documents, and procedural information. Losing internal data would not lead to direct financial or reputational damage. However, it could affect operational efficiency and internal communications.


Confidential – Confidential data encompasses more sensitive information. If disclosed, it could lead to reputational, operational, or financial harm. This category typically includes customer information, employee records, and certain financial documents. Protecting confidential data is critical. Its exposure could undermine trust, violate privacy regulations, and expose the organization to legal liabilities.


Restricted – Restricted data represents the highest level of sensitivity. Unauthorized access or loss of restricted data would result in significant legal, financial, or reputational damage. Patient health records, classified government information, intellectual property, and trade secrets are all examples. Stringent security controls, including encryption, access controls, and regular audits, are necessary to safeguard restricted data from internal and external threats.


Organizations can more effectively allocate their security resources by categorizing data by sensitivity. This hierarchical approach to data classification enables organizations to balance information accessibility with the imperative of data security, laying the groundwork for robust data governance strategies that support operational efficiency and compliance with regulatory requirements.


Best Practices for Data Classification

Implementing an effective data classification strategy is essential for managing the risks associated with handling sensitive information. By adhering to best practices, organizations can ensure that data is accurately identified, classified, and protected throughout its lifecycle. Here are vital steps to classify data effectively:


  1. Identify Data Across All Locations: Conduct an inventory to locate data across all storage mediums within the organization. This includes on-prem servers and devices, cloud storage, SaaS applications, and remote devices employees use. Understanding where data resides is the first step in protecting it.
  2. Define Data Categories: Establish clear, consistent categories for data based on sensitivity levels. These categories should reflect the organization’s needs and regulatory requirements, enabling easy identification and classification of new and existing data.
  3. Establish Access and Use Policies: Develop comprehensive policies that dictate how different categories of data are handled, accessed, and protected. These policies should cover encryption, access controls, and data retention, ensuring each category is treated according to its sensitivity level.
  4. Prioritize Sensitive Data: Identify which data is most critical to the organization’s operations and reputation. Prioritizing this data helps allocate resources more effectively and reduces the risk of significant damage from data breaches.

By following these best practices, organizations can create a robust framework for data classification that enhances security, compliance, and operational efficiency. This proactive approach to data management safeguards sensitive information and supports informed decision-making and strategic planning.



Data classification is not just about securing data; it’s about empowering organizations to use their data effectively and safely. Companies can protect their most valuable assets by meticulously categorizing data based on sensitivity while ensuring operational agility and compliance with regulatory standards. 


Understanding the nuances of data sensitivity and applying strategic classification frameworks is essential in today’s fast-paced digital environment. Our advisors can help tailor a data classification strategy that aligns with your unique needs, ensuring your data is secure, compliant, and effectively leveraged. Speak with an advisor today—let us help you navigate the complexities of data classification and unlock your organization’s potential.


Talk to an Atlantic Data Security Advisor

Allow our experts to help you with your specific need.