The International Data Corporation (IDC) predicts that by 2020, a quarter of the world’s population will have been affected by a data breach. In today’s hyper-connected world, these breaches are a looming threat for many organizations and their leaders. For example, Oracle’s Mark Hurd notes a data breach as one of the greatest concerns for an organization, from a business risk perspective. The extensive and variable risks businesses face upon falling victim to a data breach can be damaging to revenue and reputation, and managing the aftermath can be very costly. Here, we’re reviewing four damaging after-effects of a data breach.
For many, the most fateful consequence of a data breach is the financial loss incurred. Depending on the nature of the breach, there are various financial problems that can result. Businesses that suffer breaches may have to grapple with costs incurred from containing the breach, compensating affected customers, realizing a decreased share value and heightened security costs. Although business leaders can’t definitively forecast how or if financials will be affected in the event of a breach, historically, the losses are significant. Studies show 29% of businesses that face a data breach end up losing revenue. Of those businesses, 38% experience a loss of 20% of more. Additionally, according to the 2018 Cost of Data Breach Study, the average cost of a data breach in the U.S. is $7.91 million.
In today’s hyper-connected world, news travels fast. Even those whom may have never heard of your company will likely hear about a breach within the days following. The damage a data breach can have on a business can be devastating, particularly if the breach was an avoidable one or put customer data at risk. Lost confidence, negative press, associated identity theft, and potential customer’s views toward your company can all take a hit, leaving dark clouds over your reputation and creating long-term complications. Survey research shows, in the event of a breach, consumers are quick to turn their backs, with 65% of data breach victims reporting lost trust in an organization as a result of a breach. Additionally, 85% will likely tell others about their negative experience, with 33.4% using social media and 20% commenting directly on a company website. With all the attention pointed at you after a breach, it’s crucial to ensure your aftermath-management is handled properly. If not, you risk losing current and potential customers to competitors who may be viewed as more secure.
From the moment your data is compromised, to the entire investigation and recovery process, the effects of a data breach significantly impact business operations. Depending on the severity, data breaches can result in a complete loss of important data, which requires victims to spend long periods time recovering. The most common course of action in these scenarios is to totally shut down operations until a solution is found, allowing for ample time to focus on finding the source of the breach. Unsurprisingly, this has a trickle-down effect. The longer operations are shut down, the more likely customers are to leave, which can result in even more lost revenue. Sadly, 60% of SMBs close within six months of a cyber attack.
Cyber breaches involving individual’s personal information often result in class-action lawsuits. In recent years, examples of breaches that affected consumers and led to tens of millions of dollars being paid out via lawsuits and settlements include Target, Home Depot, and Neiman Marcus. Tack on all the legal fees that go along with these payouts, and businesses stand face much higher costs than most can prepare for. In some cases, authorities may even restrict companies from performing certain operations until legal investigations are complete, which can lead to additional long-term issues.
If you feel you’ve noticed a pattern among these four sections, you’d be correct. What makes each of these after-effects so devastating is how they are all circumstantially linked to one another and how once you get caught up in one issue, the other three are soon to follow. Preparing yourself for the threat of an attack and taking proper preventative measures is the best way to ensure your business doesn’t fall victim to a cyber breach. If you organization doesn’t take cyber security seriously, there could be serious consequences.