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Are you basing your assertions on a discussion with an attorney, or better yet, a written legal opinion, or is this your interpretation as a lay person?

To date, I have yet to see a software contract that absorbs any legal culpability. Not even high 3-comma annual renewals. The way culpability is usually handled is a clause demanding information security and/or data privacy insurance in client-vendor Master Services Agreements. If your experience with reading business contracts is different, and you've seen actual absorption of legal risk, then please tell some war stories of the contexts, as I'm always up for learning how others do business.

I am not a lawyer and this is not level advice.

I am referring to after you have been breached, your data has been lost and your CEO and CFO are standing before the judge. The judge will make some punitive decisions based on what effort you can show you made to protect your customers.

If your devs are grabbing every shiny gidget widget from Joe Random and you did not make attempts, as a company, to protect your investors and uphold your fiduciary responsibilities, then the hammer will come down much harder.

> ...your CEO and CFO are standing before the judge.

This doesn't happen often, and you more commonly see lower-level line staff or managers standing in court because the high-level executives simply point to the written company policies their legal team advised b put in place that forbid such wanton behavior. Now indictment not to speak of prosecution has to clear the far higher bar to show that such high-level executives deliberately, consciously structured incentives such that meeting such policies was outright impossible.

Issuing a policy that demands any such conflicts be raised immediately to management neatly short-circuits such prosecution strategies. Unless the executives are particularly careless or brazen, it is worth more to the prosecution to go after lower-level staff.

I believe that it helps if legal precedent can be set such that management is held more accountable for behavioral structuring through incentives and selective policy enforcement.

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