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The Importance of Password Policies

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EJ Phillips

Ah, password policies. We here at ProActive Information Management know that you and most of your employees wake up with your company’s password policies at top of mind. Fodder for the workplace water cooler, password policies are right up there with figuring out where to order take out from for lunch, right? Is that just us?

The truth is, password policies, while a tad dry (unlike today’s lunch order quesadillas from El Guapo), are a significant component to keeping your organization safe. A strong password policy helps protect sensitive information and minimizes the risk of data breaches. Passwords alone cannot guarantee foolproof data security, they do serve as an essential front line of defense. So grab your quesadilla and get ready for some information about password policies, their impact of reducing data breaches, and recommendations for how to help your organization enforce robust password policies and other best practices for overall cybersecurity.


Implementing effective password policies is crucial for your business as your network holds valuable customer information, financial data, and intellectual property. Weak or compromised passwords can expose your company to significant risks, including data breaches, financial losses, and reputational damage. Have a breach and you may be able to recover your information, but telling your clients that a breach put their information at risk? Well, that is a message that doesn’t go down well, even if served with extra guac.

According to recent studies, weak or stolen passwords are responsible for a significant percentage of data breaches. The 2021 Verizon Data Breach Investigations Report found that compromised credentials were responsible for 61% of all data breaches. This alarming statistic emphasizes the critical need for businesses to adopt robust password policies to reduce the likelihood of falling victim to cybercriminals.


To make password policies easier to enforce, small businesses can leverage a variety of tools. Here are some recommendations:

Password Managers

We have mixed emotions about password managers. On the one hand, we want you to have separate passwords for each of the 5 million accounts you have. And we know that is a lot to remember and we do not want you writing them down on post-its and attaching them to your monitor. On the other hand, not every password manager is created equal. Some password managers are encrypted and some are not. We prefer the encrypted ones because if someone gets into your password manager and it isn't encrypted? They now have the keys to the kingdom.

Password managers like 1Password use encryption systems that create a secret key called a password hash. These password hashes use 128-bit cryptography to create a non-replicable login credential. This makes your 1Password account much more secure than a normal web app password manager. Web apps like Google Chrome store your saved password using something called “zero-knowledge encryption”. Essentially, zero-knowledge encryption means that Google can see passwords that you have saved. Although there is a Google Chrome optional feature to enable end point encryption, the key to decrypt the password is stored on the device. Meaning, if you know the password to the device, you can decrypt and view the password in plain text.

Two-Factor Authentication (2FA)

Implementing 2FA adds an extra layer of security by requiring users to provide additional verification, such as a unique code sent to their mobile devices, in addition to their password. Think of 2FA as a bouncer requiring two forms of ID to get into the club. Sure, it may be a hassle, but it helps make sure only verified employees have access to your protected data, apps, and networks.

Regular Password Updates

Encourage employees to change their passwords periodically, such as every three to six months. This practice helps minimize the risk of unauthorized access resulting from compromised or stolen credentials. To make it easy to remember, simply remind employees at the start of each quarter its time to update their passwords.


In addition to enforcing password policies, small businesses should adopt other cybersecurity best practices. These include:

Employee Education

Conduct regular training sessions to educate employees on the importance of strong passwords, social engineering threats, and phishing scams. We provide this training FOR FREE not only for our clients but for ANYONE that may need a refresher course. So order tacos and schedule your cyber awareness lunch and learn today! (Our trainer really likes street corn, so get some of that too.)

get FREE cyberawareness training

Unique Passwords

Encourage employees to use unique passwords for each online account and avoid reusing passwords across multiple platforms. Password managers can help manage and generate complex, unique passwords effortlessly. Remember, passwords are like underwear: don’t share them, change them often, and the best ones are exotic.

Two-Factor Authentication (2FA)

Whenever possible, enable 2FA to add an extra layer of protection. This method typically requires users to provide a second verification factor, such as a fingerprint or a code sent to their mobile device.

Regular Updates and Patches

Keep software and operating systems up to date to ensure the latest security patches are in place, reducing vulnerabilities.

Small businesses must recognize the critical role of password policies in safeguarding sensitive data and protecting against data breaches. By implementing robust password policies, utilizing recommended tools, and following cybersecurity best practices, businesses can significantly enhance their security posture. Password managers offer a convenient and secure way to manage passwords and promote stronger password practices. Ultimately, prioritizing password security is an investment that can help safeguard both your business and your customers' trust. Stay vigilant, stay secure, and order the tacos!


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