Are the Consequences of Data Breaches Serious?
- Ryan Fick, at Freelance Content Writer
- 21.07.2022 11:45 am data breaches
Data breaches are one of the most serious dangers a business faces in today's world. They’re highly developed, cyber-attacks that focus on obtaining sensitive data and exploiting the businesses and customers to whom it belongs.
It’s one of the scariest threats to businesses out there.
Whether you’re a big corporation or a small business, data breaches are definitely something you should be concerned about.
According to the 2021 CyberSecurity Ventures report the cost of data breaches has been increasing 10% year to year. Linked to that is the mounting cost of cybercrime which reports say is heading towards reaching $10.5 trillion per year by 2025.
Most data breaches occur as a result of one of the following origin points:
Cyber attacks: Hackers using anything from phishing emails to malware and social engineering are a common source of some of the world's worst data breaches.
Device loss: Because most people store various passwords and information on their personal devices, this exposes businesses to data breaches whenever these devices are misplaced or stolen.
Human error: Reports show that at least 20% of all hacks are due to human error. Whether it's employees clicking suspicious links or accessing their information through unsafe networks, human error is a common weak spot for any business.
Employee theft: Corporate sabotage is nothing new, so it’s no surprise that in 2022, it’s a common source of data breaches.
With things like credit card numbers, Social Security numbers, driver's license numbers, and all sorts of personal information common targets of data breaches, it’s definitely worth being concerned about.
If someone obtains this information, with negative intentions, it can prove disastrous for the individuals concerned. From common theft to something as major as identity theft, data breaches are not something to take lightly.
5 Consequences of Data Breaches
Data breaches present a significant threat to modern businesses. Most businesses today rely on online-based transactions, interactions, and mediums to interact with their customers. This means one security breach can have effects that are far more disastrous than you’d expect.
Costly unexpected downtime
One of the harshest, yet most unexpected effects of data breaches are the way they can cause business operations to come to a halt.
When data breaches occur, a business is often forced to change track as they direct all their attention to dealing with the breach. Investigating and containing the source of the breach can take days or even weeks to deal with depending on how major the breach is.
Not only can a data breach affect your business in terms of lost time, but this time can have a financial knock-on. If your business doesn't have cyber security insurance, for example, you may be forced to cover the cost of cyber incident claims without any financial assistance. Something that’s sure to give your CFO and their budget heart palpitations.
Downtime is incredibly costly to a business.
Studies have shown that this can equate to as much as $5,600 per minute and between $140,000 and $540,00 per hour, depending on the industry.
Expensive legal ramifications
One of the most serious consequences of a data breach is the legal issues your business is exposed to.
Not only are there increasing concerns today about online privacy and its importance for users, but the onus is also being increasingly placed on businesses to look after their users' information.
If your business stores and collects information like social security numbers, phone numbers, and other personal information, you are legally required to protect that data. While different states may deal with legal liabilities slightly differently, the law ultimately mandates businesses protect their consumers' privacy. Failing to do so, in the case of a data breach can leave you open to class-action lawsuits by their customers.
Understanding how different laws and regulations like the CRPA ( The California Privacy Rights Act of 2020) can be incredibly complex, especially for the layman. Luckily, there are some great online resources to assist you and your business. Services like Osano can help ensure that you remain compliant with regulations like the CPRA and more.
If you do fall victim to a major data breach, be sure to take the following steps to protect both your business and its consumers as much as possible:
Inform your employees and clients ASAP
Check with your legal representation to see what fines you may have to pay
Begin a thorough forensic investigation as fast as possible
The legal ramifications of a data breach can also prove to be incredibly costly.
As recently as 2017, Equifax was made to pay $575 million (potentially $700 million) over the company’s “failure to take reasonable steps to secure its network”. Home Depot is said to have paid out over $134.5 million to credit card companies and banks as a result of what was said to be the largest POS breach in history.
That’s not to mention legal fees, damage to the company's reputation, and other fines incurred as a result of failing to protect their consumer's data.
Unrepairable reputation damage
In today's world, there’s nothing bigger than a company's reputation or “brand”.
Your reputation is linked to a variety of important factors, from awareness, marketability, consumer confidence, and trust. If consumers trust you and your brand, they’re far more likely to engage with you, both now and in the future.
A data breach incident can severely erode that consumer trust and with it, negatively affect just about every facet of your business and brand. It’s so damaging in fact, that studies show the effect of a data breach incident can even directly impact a business's turnover.
A good reputation is a company's most prized asset. It’s vital to growing your business and getting people to share sensitive personal information that you may require for sales or data collection. If you let your customers down and expose their data, even once, their odds of trusting you in the future are greatly reduced.
That can be catastrophic for your businesses.
A Verizon study indicated that 69% of people would avoid companies that had suffered a data breach. As much as 29% of those surveyed would never visit that business again. Another similar report showed similar results and reported that 85% of consumers won’t return to a business if security concerns are an issue.
Successful businesses can’t afford to endure damaged reputations. Not only is reputational damage difficult to come back from, but the financial implications of a tainted brand are also far worse.
Customer loss avalanche
A damaged reputation is a terrible consequence of data breaches, but ultimately, it’s the loss of customers and the decrease in sales that comes with it that's hazardous.
As soon as you’ve experienced a data breach and the loss of social capital that comes with it, your brand worsens. Often, in an incredibly public way. Once this has happened, customers will start turning to your more “secure” competition.
Your brand and the data breach it experienced can quickly become almost inextricably linked. Imagine, every time someone Googles your company, an article about your data breach pops up alongside it. That’s an incredible turn-off for any potential new customers as well as your already established customer base.
Data breaches are especially difficult to come back from, so trying to prevent them is crucial to securing your company's future.
High financial cost
Corporate theft and sabotage have always been a part of doing business. With modern business becoming more and more complex, security has needed to adapt to try and counter it.
Even the smallest breach can affect even a small business drastically.
In a study by the Ponemon Institute in 2018, the average cost of a data breach globally was said to be $3.86 million. Small businesses often assume they’re too small to be a target which often means they underestimate the need for proper data security. That leaves them vulnerable.
Criminals exist in every shape and form and there’s nothing to prevent them from downloading or manipulating your employees into giving them access to your data. Weak passwords, poor employee cyber security awareness, etc., direct theft is just
As a small business, you’re just as exposed to theft-based data breaches, although you may not have the resources to combat a data breach.
Final Thoughts
Data breaches are about as bad for business as anything you can think of. Always evolving, hard to recover from, and catastrophic for your bottom line, you’d be hard pressed to find a more serious threat to a modern business.
Restoring, fixing, or combating data breaches is an incredibly difficult, complex process that can take weeks and even months to fully address. Even then, it’s difficult to restore your brand's tarnished reputation.
It’s much easier, safer, and cost-effective for a business to invest in good cyber security and cyber insurance. Combating data breaches is an ongoing process that no one person or business can do on their own.
The truth is, the consequences of a data breach are much more serious than one may assume.
In fact, it’s one no business can (literally) afford to ignore.
