What risks do IT freelancers face and how do they protect themselves?

What risks arise from professional negligence on the part of IT freelancers?

Even the slightest oversight can have significant consequences for an IT project. If customers suffer losses as a result, they may hold the relevant IT freelancer liable.

Programming errors and misconfigurations

Even minor errors in code or configuration can cause applications to malfunction or fail. This results in lost revenue and reputational damage for clients.

In practice, it is often simple oversights rather than complex errors that cause significant damage. Mixed-Up Numbers: IT Expert Causes Damage Amounting to 14.000 Euros.

Data loss due to missing or faulty backups

Data loss can cause projects to fail, resulting in significant additional costs. One reason for this is the absence of backups, or backups that are not fit for purpose, which lead to the loss of important information. This is particularly problematic when backup systems are in place but are not regularly checked, meaning they fail to work when needed. Read on to find out how Professional Indemnity can help in such cases. A Real-Life exali Damage Event - Loss of Data on Your own Hard Drive.

Mishandling of confidential information

IT freelancers are granted access to sensitive company data as part of projects. If this information is disclosed unintentionally, it can cause significant damage. Furthermore, this often constitutes a breach of confidentiality. Consequences can include a claim for compensation, a written warning, a contractual penalty or termination of the project contract without notice.

Property damage in a project context

Damage to property in the immediate working environment also poses a risk, for example to hardware, infrastructure or rented premises. This can be covered if appropriate business or General Liability Insurance is included in the Professional Indemnity Insurance policy. For instance, imagine that you are granted access to a client’s office and lose the provided key. A similar mishap befell an IT service provider insured through exali: Lost Customer Key: IT Service Provider Causes 1.400 Euros in Damage.

How significant is the threat of cyberattacks to IT freelancers?

They face a twofold challenge: not only must they protect their own infrastructure, but they are also responsible for their clients’ systems as part of their contractual duties.

Security vulnerabilities in customer systems

The situation becomes particularly critical when an IT freelancer's work results in security vulnerabilities in their clients' systems. For example, if servers are configured incorrectly, updates are not installed, or access rights are too broad, criminals can exploit these vulnerabilities.

Attacks on IT infrastructure

IT freelancers are also potential targets for cyberattacks. If attackers gain access to their systems, the consequences can be severe. Data may be lost, or a business may grind to a halt. Projects may not be completed on time, and sensitive information may fall into the wrong hands. Such losses are generally only covered if a specific add-on module has been agreed. 

Social engineering: an underestimated risk

Many cyberattacks do not primarily rely on technology, but on people. In a process known as social engineering, attackers attempt to access confidential information by using deceptive tactics, such as sending fake emails or making fake phone calls.

Lack of security awareness and processes

As well as technical vulnerabilities, a business' organisational structure plays a crucial role. A lack of clear responsibilities, unclear processes, and insufficient risk awareness can significantly increase the risk of successful cyber-attacks. IT freelancers help to shape these structures and can share responsibility for security frameworks as part of their work.

Read our article to find out exactly which cyber threats you should be preparing for: Cyber Risks: What Threatens You and How You Can Protect Yourself.

What legal risks do IT freelancers face?

In addition to technical risks, legal requirements play a key role in the day-to-day work of IT freelancers. The requirements are particularly stringent and difficult to keep track of in the digital environment.

Copyright infringements in IT projects

Programming code, images, text and software components are generally protected by copyright. Using third-party content without the necessary rights or complying with licence terms may result in written warnings and claims for compensation.

Data protection breaches (GDPR)

The handling of sensitive and personal data is subject to strict legal requirements. Even minor errors in processing, storing or transmitting data can constitute a breach of the GDPR. Such breaches can result in claims for compensation and fines.

Competition law and online presence

Your public image can also carry legal risks.

• missing or incomplete legal notices
• an incorrect privacy policy
• misleading information about services or prices
• inadequate labelling of advertising

Trademark and personality rights

The role of trademark and personality rights in the day-to-day work of IT freelancers is often underestimated. Legal consequences may arise in situations such as the following:

• Use of third-party trademarks or logos
• Development of names or designs that bear similarities to existing ones
• Publication of images of individuals without consent

You can read about a notable instance of trademark infringement by an IT freelancer in the article Trademark Infringement: An IT Service Provider Forgets to Do his Trademark Research.

What risks do IT freelancers face from the use of AI?

For many IT freelancers, artificial intelligence forms part of their daily work. While the use of AI brings benefits, it also entails new risks. Incorrect results, legal uncertainties and data protection issues can quickly lead to liability and financial issues. This is because the responsibility for the quality of the work delivered remains with the freelancer.

Incorrect results caused by AI

Although AI tools can significantly speed up work, they do not always produce accurate results. Errors in generated code, analyses or automated processes can result in systems failing to function as expected or security vulnerabilities arising.

Data protection risks associated with the use of AI tools

Many artificial intelligence applications process input data on external servers. If personal or confidential information is fed into these tools, it could breach data protection regulations.

Copyright and unresolved usage rights

AI-generated content is often based on training data from a variety of sources. It is not entirely clear whether this content can be used without facing legal issues, or to what extent it can be used. Therefore, if IT freelancers use such content without checking it, it can prove costly.

Lack of transparency (‘black box’)

AI systems often operate according to complex and opaque mechanisms. It is not always possible to clearly explain the results. This can cause problems in projects. Some clients expect clear reasoning behind the results delivered. Clear analysis is particularly important when errors occur.

Prompts as a source of error

The quality of AI outputs depends heavily on the quality of the prompts provided. Unclear or incorrect prompts can result in inaccurate or incomplete results. Therefore, sources of error no longer lie solely in the code, but also in the way the AI is controlled.

How can IT freelancers protect themselves against these risks?

It is important to be aware of risks and to actively manage and mitigate them. Many risks can be significantly reduced in the early stages. Clear structures, sound working practices, and a thoughtful approach to sensitive issues are all crucial.

Targeted coverage for residual risks

Despite taking all possible precautions, it is impossible to completely avoid pitfalls. In the IT sector, in particular, seemingly minor errors can have significant financial consequences.

exali’s Professional Indemnity Insurance provides support for IT freelancers in the event of claims, including those arising from the use of artificial intelligence. Should you cause damage to third parties during your professional activities, the insurer will assess any claims made against you. Valid claims will be settled up to the agreed sum insured within the agreed policy terms and limits, in accordance with the terms and conditions. Unfounded claims will be defended on behalf of the freelancer concerned.

Additional coverage for cyber risks

Cyber risks extend beyond traditional liability issues, as they can also cause damage to the IT freelancer’s own systems. The optional add-on module First-Party Cyber and Data Risks Insurance (FPC) provides protection against certain first-party losses resulting from cyber attacks.

Laying the foundations for a stable and successful business in a dynamic and demanding environment such as IT requires identifying risks early, managing them effectively and taking sensible precautions.