The cost of a data breach is far more than just the monetary value of a cyber-incident: loss of respect and credibility of the business and damaged relationships with customers and key stakeholders are also major concerns. A severe data breach can be hugely detrimental to a company.
The real cost of a data breach depends on the scale and nature of the attack. While the overall goal of a cyberattack is usually financial, this cost may not always be the most detrimental factor. Reputational damage can often be the bigger concern for the organisation.
Here we explore the main factors posing a threat to a business following a data breach.
The financial cost of a data breach
According to Ponemon Institute’s Cost of a Data Breach Report 2020, the average cost of a data breach to a business is £2.9 million.
This figure includes the costs associated with detecting and reporting a cybersecurity incident, the cost of having to notify people of the incident, the costs involved with the company’s response to the breach including legal costs and costs incurred recompensing affected data subjects and in rebuilding relationships.
Additionally, this figure includes the cost of lost business due to a breach. When a breach occurs it will usually cause disruption to a business, due to downtime or loss of custom, and the organisation could experience loss of revenue as a result.
The researchers found that organisations take an average of 280 days to detect and respond to an incident. However, those that can complete this process within 200 days save approximately £750,000.
When an organisation falls victim to a severe cyberattack, this can often deter customers, who feel that their personal information is not safe. For small businesses in particular, this damaged reputation can be extremely hard to recover from.
Rebuilding trust is vital in order to attract new customers, and keep existing clients. After a data breach, customers need to know that the business has taken the incident seriously, and is doing as much as possible to guarantee the protection of sensitive information going forwards.
As well as customer relationship concerns, a data breach can also lead to unrest or even the resignation of employees – particularly if their personal information was leaked.
Shareholders too may start to doubt the company because a breach has been allowed to happen. An Oxford Economics study revealed that after a breach, the value of a company’s shares fell by an average of 1.8%.
What is the overall cost of a data breach?
Taking into account the financial, credibility, and relationship implications of a data breach, it is clear that the cost of this kind of incident can be severely damaging. For SMEs in particular, who may have a small budget and therefore less of a defence against cybercrime, the costs can even lead to the demise of the business. Sadly, cybercriminals are all too aware of this, and are often known to target SMEs.
The best defence against a data breach is to put in place robust procedures against cybercrime, before an attack happens. This should include the use of quality security software, data encryption, and educating your staff about staying protected online.
Our cybersecurity experts are on hand to advise you on the best way to protect your organisation – contact us at email@example.com to find out how.
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