Our world is hyper-connected; companies of all sizes rely on dependable data transmission to run their business with insight and competitive knowledge. However, this reliance can significantly increase the potential damage from data breaches, which can ruin an organization’s reputation and devastate its bottom line. The actual cost of a data breach includes more than a financial impact, as it can also erode customer trust, demoralize employees, and put your organization in legal jeopardy. In extreme circumstances, the company’s very survival may be at risk.
Data breaches each represent unique issues and consequences. Understanding the various types of attacks that may occur and their potential business impact is essential when developing a comprehensive cybersecurity strategy. These breaches may take the form of:
Accidental breaches happen when sensitive information is mistakenly disclosed due to human error or network glitches. These can occur when:
- employees inadvertently send confidential data to unauthorized recipients
- cloud storage settings are not configured correctly
- unencrypted devices containing sensitive information are lost or stolen
Although these circumstances may not involve malicious intent, they can still result in financial losses, reputational damage, or regulatory penalties.
Insider breaches involve the unauthorized disclosure or theft of confidential or sensitive data by personnel within the organization. These scenarios can be especially damaging, as insiders often possess in-depth information about the business’s systems, processes, and data assets. Insider breaches may be caused by disgruntled employees or employees looking to gain financially from their actions.
External breaches are carried out by bad actors outside the company. They can be perpetrated through hacking, malware, ransomware, social engineering, or phishing. External breaches often target customer records, intellectual property, and financial information, resulting in severe economic, operational, and reputational issues for the affected organization.
Impacts of Data Breaches on Companies
According to IBM’s Cost of a Data Breach Report, the average cost of a data breach is $3.86 million, and that number is increasing constantly. Direct expenses associated with this type of event generally include the costs related to detecting, containing, and responding to the breach, such as hiring external experts, performing forensic investigations, and contacting affected stakeholders.
Indirect costs are more difficult to quantify as they include long-term financial impacts. This may include lost revenue, reputational harm, and reduced competitive advantage. Companies may experience higher cybersecurity insurance premiums and require ongoing monitoring, remediation strategies, and investments in new technologies. The indirect costs of a security breach can accumulate for months or years after the incident.
A company’s reputation can take a severe hit after a data breach, with challenging consequences. Social media allows bad news to spread rapidly, instantly damaging image and customer trust. Loss of client trust is arguably the most visible consequence of a data breach – and it manifests quickly. Having sensitive information compromised can leave customers feeling vulnerable and putting the blame on the organization. Companies can lose current customers and have difficulty convincing new customers to sign on, resulting in significant revenue losses in both the short and long term.
Data breaches can damage a business’s relationships with all major stakeholders, such as partners, suppliers, and investors. These parties may see the affected organization as a risky investment or an undependable partner, resulting in a loss of partnership opportunities and possible loss of funding.
Protect Your Business from Data Breaches
In our next article, we will examine how to protect yourself from data breaches more in-depth. However, one of the best proactive strategies is to schedule a technology assessment with qualified IT consulting professionals. They can determine existing vulnerabilities and recommend positive changes to protect your organization. If you are ready to get started, call Alliance IT today.
