At the end of 2021, Capital One agreed to pay a settlement of $190 million to 98 million customers whose personal data was stolen in a 2019 data breach. Similar class-action lawsuits were filed in 2021 against T-Mobile, Shopify, and Ledger. When it comes to the cost of breaches, however, those are just the legal fees.
Every year, businesses lose millions of dollars in revenue to cyberattacks and data breaches. From ransom payments to stolen funds to settlements like the ones listed above, data breaches cost companies millions, sometimes billions of dollars. Unfortunately, breach costs are rising.
How much does the average data breach cost?
According to the Ponemon Institute’s annual Cost of a Data Breach report, data breaches became 10% more expensive in 2021 than they were the year before. The average cost of a data breach, according to that report, was $4.24 million in 2021, up from $3.83 million in 2020. The average cost of a data breach in 2022 remains to be seen when Ponemon releases its new report mid-year.
While $4.24 million is the average global cost of a data breach, many breaches cost much more. Certain elements of an attack can amplify the cost of a data breach, often considerably.
Industry: The healthcare industry has suffered the most costly data breaches for the past 11 years. The average healthcare breach in 2021 cost $9.23 million, up from $7.13 million in 2020. Other industries with higher than average breach costs include the financial industry and the pharmaceutical sector.
Type of attack: The initial attack leading to a breach impacts the cost of a breach. Business email compromise is one of the most expensive attack vectors, causing breach costs averaging $5.01 million. Ransomware attacks cost an average of $4.62 million (although these costs do not include the ransom itself.) Phishing and malicious insiders are also cost amplifiers when it comes to a breach.
The number of records compromised: The more records are compromised, the more expensive the breach. Breaches of 50 to 65 million records are nearly 100 times more expensive than breaches of 1,000-100,000 records.
How long it took to detect the breach: The longer an attacker is in a company’s system, the more costly a breach becomes. According to Ponemon, breaches that took longer than 200 days to identify and contain cost an average of $4.87 million — those that were addressed within less than 200 days cost an average of $3.61 million.
Was a third party involved? Some of the most costly breaches are the result of attacks on third parties: suppliers, vendors, and partners who may have access to your systems or data. Additionally, vulnerabilities in third-party software caused 16% of data breaches.
What makes a breach so expensive?
Breaches are so expensive because they hit an organization in more than one area. Between lost work, lost revenue, potential ransoms, loss of customer trust, and possible lawsuits, the cost of a data breach can be drawn out over months or even years. It can be hard to know how much today’s breach will cost tomorrow.
The four main cost centers affected by a data breach illustrate the broad financial impact of a successful attack.
Detection/escalation: The first stage in uncovering and preventing a breach, this cost center is made up of the expenses around finding and stopping an attack. It can include bringing in specialists to stop an attack, paying a ransom, or other recovery efforts, like forensic analysis and security audits.
Lost business: When an organization is the victim of an attack, the downtime and lost productivity that can happen during the breach costs money. A breach may also cost a company customers or damage its reputation, and so this category can also include the costs of brand rehabilitation and winning new customers.
Notification: Organizations are required by some laws and regulations to notify data subjects and regulatory authorities of an attack. This cost center includes those expenses.
Response: A post breach response can look different for every organization. This may entail the costs of setting up a help desk for victims whose data was stolen, legal fees, regulatory fines, or shoring up defenses so a similar breach doesn’t happen again.
Taken together, these costs add up, causing a significant data breach cost that may linger for years after the breach itself has been contained.
How can SecurityScorecard help?
If you’re trying to mitigate the cost of a breach, time is of the essence, which makes continuous monitoring a must for organizations.
SecurityScorecard’s platform assigns A-F security ratings that reflect your cybersecurity posture in real-time. Security Ratings also provide you with instant and continuous visibility into the cyberhealth of your third parties, so you can detect suspicious activity as soon as possible and protect your data as well as your finances.