Posted on Aug 6, 2019
You may think that you can’t afford advanced cybersecurity, but the truth is that, in our modern business world, you can’t afford not to institute the right processes, people and tools to keep your company safe from cyber threats. Remaining complacent may seem tempting, but this complacency will catch up to you, resulting in financial loss and damage to your reputation that you may not bounce back from. Being proactive in addressing your cybersecurity will ensure that your company can have a brighter future.
The 2019 Cost of a Data Breach Report from Ponemon Institute and IBM Security revealed that since 2014, the average total cost of a data breach has increased by 12 percent, from $3.5 million to $3.92 million. With the cost of a data breach on the rise, it is imperative that organizations understand where these costs come from so they can better understand and mitigate the associated cyber risks. This understanding will help organizations develop cyber risk management strategies and avoid the potential financial impacts that stem breach.
There are a number of different factors that influence the cost of a data breach. Below, we’ve outlined the top aspects to keep in mind when determining your cyber risk management strategy:
Your industry and company size has a major influence on the cost of a data breach. Large financial services organizations have an obligation to protect critical data like personally identifiable information, social security numbers, and payment card information (PCI). Likewise, the healthcare industry is made to protect equally sensitive patient information and private health information. In essence, if your industry is sizable and houses highly sensitive data, both the potential and cost of a data breach increase when compared to smaller industries that carry less sensitive data.
The Ponemon Institute found that the most expensive data breaches stem from third-party organizations. Focusing on third-party cyber risk management and continuous monitoring can help offset these potential costs.
If the breach causes enough damage to your organization, you may need to contract a third-party to investigate the breach. This can cost your organization a considerable amount of money. Further, a significant breach can lay the foundation for a class-action lawsuit which will result in your organization having to pay for legal fees and potential payouts.
When an organization experiences a data breach, they need to issue a public disclosure to alert stakeholders and consumers of potential compromise. Public disclosures could result in a loss of trust in your organization and cost money in lost revenue and investment. Additionally, breaches have the ability to disrupt or completely stop business operations which can lead to losses in sales or the inability to assist customers and fulfill service agreements. In both scenarios, the breached organization suffers losses due to a decline in consumer confidence.
If your organization is in the process of an M&A deal during a period of the breach, business values could be affected. This could have either a negative or positive effect on costs depending on whether your organization or the company to be acquired was affected. If the company you are acquiring was affected, you will likely be able to renegotiate at a lesser price. However, if your organization was affected, this could result in losses.
When attempting to determine the potential cost of a data breach for your organization, it is important to consider the factors listed above. Taking preventive steps like enacting third-party risk management programs, obtaining cyber insurance, and continuously monitoring your cybersecurity ecosystem can help your organization avoid a breach or better deal with the fall out should one occur.
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