This article originally appeared in FA Magazine Online on August 24, 2018. 

The amount of data in the world has been rising exponentially for many years, and in the years to come people will rely more on it, interact with it more often and give more of it to the companies that provide us with products and services. Data collection will be more frequent, more pervasive and more likely to happen without the participation or even the awareness of the subject. And while this growing universe of data will enable new and useful services to improve our lives, the opportunities to use data for purposes we neither intend nor want will grow as well.

In particular, many people fear the loss of privacy as data analytics allow more accurate portraits of individuals’ lives and personal characteristics. While this kind of profiling can lead to improved services, it could also enable discrimination, undue political influence or deliberate efforts at social control and manipulation. Data-driven innovation will reach its full potential only if consumers trust companies with their personal data.

Investors should be concerned about two kinds of uncertainty as they consider the future of data privacy: first, how much privacy will consumers demand? And second, how much will government regulation impact the collection of data?

For many years, the tech industry has enjoyed greater public trust than other industries. But trust in tech companies is declining. In the wake of the Facebook/Cambridge Analytica scandal, many of the social media giant’s data-sharing practices have come under greater scrutiny. Most people now say that they do not trust social media sites to guard the privacy of their data.

To date there has been little consumers can do to prevent the collection of their data, at least in the United States. This isn’t because consumers are happy to share personal data: Polls show that consumers feel resentful yet powerless to prevent the unwanted digital intrusion. As data collection becomes more pervasive, either consumer ambivalence may evolve into outright opposition, or consumers may simply accept the lack of privacy as a fact of modern life.

The second uncertainty concerns the regulation of data. The European Union has enacted its General Data Privacy Regulation (GDPR), which requires companies that do business with European Union citizens to only collect data with the specific consent of users. The regulation, if fully implemented as intended, could hinder many forms of data collection, especially fast-growing passive data collection, which takes place without specific user participation (e.g. location data on your smartphone). While many countries (and the state of California) are adopting similar legislation, the U.S. government continues to take a narrower approach to data regulation that restricts data gathering only when there is evidence of specific harms. The future of data may be decided in part on which regulatory regime prevails globally.

How uncertainties regarding consumer demand for privacy and regulatory restrictions play out may be very significant for investors, since data-driven industries are increasingly important to portfolios. The most well-known tech names, Facebook, Amazon, Netflix and Alphabet (formerly Google)—The “FANG” stocks—by themselves make up 15 percent of the S&P 500. While data is central to these companies’ business models, companies in many other industries are also expecting improvements in data quality and quantity to improve their ability to compete—for example, the retail, telecommunications and financial services industries.

Which companies will thrive depends on the direction of data privacy demand and regulatory evolution. Heightened restrictions on data gathering could affect the ability of data-driven companies to execute on their long-term business plans. On the other hand, companies with less exposure to data and data-driven innovation may be relatively more competitive in a data-restricted environment. And If data flows more freely because privacy protection never becomes a priority, data competency could become a significant competitive advantage for companies in a variety of sectors.

Investors should be concerned that the governance of the companies in their portfolio is sufficiently prepared to manage the uncertain future of data privacy. Investors should ask about a company’s exposure to data privacy concerns, the level of stakeholder trust and how adaptable its governance structures to different future scenarios:

1. Exposure: What kind of data does the firm collect? How important is it to business strategy? Does the company share data with external business partners?

2. Trust: Do consumers have confidence that their data will be protected? Are employees engaged and satisfied with their work? Is trust stable or rising over time or is it declining?

3. Governance: Is data privacy part of strategic planning? Do boards have competency in this area? Are there proper incentives for balancing data privacy with growth objectives? Are companies monitoring stakeholder trust?