What are the Financial Consequences of a Data Breach?
Cybercrime has increased significantly over the last decade as the dependence on IT has grown within businesses of all sizes. In fact, many cybercriminals target smaller and mid-sized companies in particular because criminals know they don’t have as much to invest in their cybersecurity efforts.
According to the Ponemon Institute, the global average cost of a data breach has increased by 12 percent over the past five years to an astounding $3.92 million. In the U.S., companies spend an average of $8.19 million on security incident recovery.
While some of these numbers are the result of data breaches that have occurred in larger corporations (which are as a result more expensive), a data breach can have a significant financial impact on small to mid-sized companies as well.
What Can a Data Breach Cost You?
Data breaches can be incredibly costly for a number of different reasons. A lot of smart IT teams will allocate money in the budget towards dealing with potential data breaches. It can cost a lot of money to simply identify the breach and fix it. Unfortunately, once the damage has been done, the costs will end up being long-term. According to the Ponemon Institute, companies pay on average 67 percent of the total cost of the breach within the first year of the breach occurring. 22 percent of the cost is paid in the second year and 11 percent of the cost is paid in the third year.
As for the actual cost, businesses with fewer than 1,000 employees end up spending an average of $2.65 million dealing with a data breach. This comes to about $3,533 per employee. This makes it incredibly difficult for smaller and mid-sized businesses to recover. According to many reports, around 60 percent of all small to mid-sized businesses that experience a data breach end up going out of business within half a year of the breach taking place.
It’s not just the monetary cost of repairing the breach, it’s the consequences of the breach occurring in the first place. Companies suffer from terrible PR when they experience a breach. Customers will lose trust in your ability to keep their data secure — and considering the fact that you may have their credit card information, fewer customers may be willing to do business with you again. Everything involved with this consequence, from the loss of revenue to the cost of acquiring new customers, results in the average cost of $1.42 million.
Other financial consequences include potential penalties for improper cybersecurity, legal fees, discounts, and incentives in an attempt to retain customers, and the investment in identity theft protection for current customers and employees.
How to Reduce the Risk of a Data Breach
Data breaches are incredibly expensive and can cause your business to go under. It’s why cybersecurity is so important. The following are a few tips for preventing data breaches:
- Install Security Software – Install modern anti-virus and malware software as well as firewalls to help keep your systems secure.
- Encryption – Encrypting your data is a way of converting information into a code to prevent unauthorized access. It can protect sensitive data and other important intellectual property. Although encryption cannot stop a data breach from happening, it can block cyber attackers from accessing the sensitive data once it’s stolen, thus mitigating the risk.
- Update Security Software – Whenever security updates are available, don’t ignore them. They are likely addressing security vulnerabilities.
- Train Your Employees – The weakest link in cybersecurity is your employees. This doesn’t mean malicious, disgruntled employees purposely sabotaging your business, although that scenario is possible. It’s more likely a lack of attention to detail, and not following protocol, either due to becoming laxed, or not understanding the security process. Reduce the risk of a data breach occurring by training them on how to avoid such mistakes (such as downloading attachments to emails from senders they don’t know, and keeping their computers locked when they’re not at their desk).
- Destroy Old Hardware – Data can be retrieved from old hardware even if it’s been deleted. Destroy your old hard drives and computers through a reputable data destruction company who has the equipment necessary to shred your old hard drives.
How AccuShred Can Help
We recommend getting CSR Readiness Pro Suite, which contains the CSR Readiness Program and the CSR Breach Reporting Service. The CSR Readiness Program will help you assess your current data security and provide tips on what you can do to strengthen it.
The CSR Breach Reporting Service will help prepare you with all of your legal requirements should a data breach occur, which can be very time-consuming and costly, especially if your customers live across state lines. If your business is near bordering states, you may have customers travel the short distance across state lines to do business with you. This may result in you having to report a breach to more than one state because the state you will need to report to is the one where the personal records reside.
When you enroll in this service through AccuShred, certified information privacy professionals will promptly and professionally report the data breach on behalf of your company to the proper authorities. They will handle all mandated state and federal notifications but can also help you through the process of notifying your customers about the breach. The use of this service will help to retain your reputation and, in some cases, minimize potential fines.
Being prepared for a potential data breach will allow you to take the appropriate actions quickly if it ever happens. Assessing your current security protocols will help to strengthen your security measures immediately. For more information about the CSR Readiness Pro Suite, and how to safely and securely destroy your data, contact us at AccuShred today.