The Financial Toll of Data Breaches
Data breaches can result in a direct blow to your business’s bottom line, and in fact, the average cost of a data breach worldwide is reported to be $4.45 million. Not only can bad actors steal money using the data they access (for example, banking information), but there are also many costs associated with addressing a data breach. The processes of investigation, remediation, and notification can all be costly, as people will need to be paid to complete these tasks. Further, your business may be subject to fines and penalties from regulatory bodies as a result of the data breach.
Meanwhile, there are many potential indirect costs of a data breach. For example, your organisation’s reputation may take a hit that could result in loss of business and decreased stock value.
Immediate Expenses and Long-Term Financial Impacts
A data breach will often result in serious short- and long-term financial consequences. Short-term costs include things such as temporary loss of business and immediate response effort expenditures. According to Harvard Business Review, in the healthcare space, the downtime associated with data breaches contributed to over $7.8 billion lost. Long-term costs include things like extended security upgrade efforts and loss of contracts. Audit fees, for example, can be roughly 13.5% higher for firms that have experienced a data breach.
Reputational Damage: A Long-Lasting Consequence
As mentioned, damage to your reputation can cost you financially, and a blow to your reputation is often not mended as easily as cybersecurity vulnerabilities. Customers’ data is private and when they give it to your organisation, they expect you to take security seriously. A data breach tells them that you did not take it seriously enough, especially if sensitive consumer information was exposed during the breach.
Not only will this affect your current customer base, but it can also affect how potential customers perceive your company down the line. News articles, online reviews, word of mouth, and more can let future prospective customers know what happened. Therefore, a data breach can seriously damage your competitive edge in the market, as customers may seek out a competitor without such a blemish on their record.
Rebuilding Trust After a Data Breach
It is often difficult to rebuild trust with your business partners, stakeholders, and customers following a data breach, but it can be done. Things you can do to rebuild trust include:
- Demonstrating transparency and communicating with all affected parties clearly throughout the investigation and remediation process;
- Demonstrating accountability as appropriate for the data breach, and clearly outlining future measures that will be taken;
- Improving security measures and showing all parties of interest how your updated security solutions fix the issues that caused the breach, as well as any other potential vulnerabilities.
It will also be important to be very strategic in how you approach public relations following a data breach. How and what you say will likely be heavily scrutinised, and you need to make sure you’re sending a message that people feel they can trust.
Legal Ramifications of Data Breaches
Many potential legal ramifications may come with a data breach. First, your organisation may be subject to penalties for any violations of laws or regulatory standards relating to data security. In the U.S., there isn’t comprehensive legislature that covers all forms of private data, but there are laws around specific types of data, like HIPPA. In the U.K. the Data Protection Act 2018 lays out strict principles that must be followed. Additionally, affected customers and stakeholders may bring a lawsuit against your organisation.
Navigating the Legal Landscape in the Aftermath
It can be very difficult to navigate the legal aspects of the situation following a data breach. It is important to understand what your legal obligations are when it comes to notifying affected individuals about the data breach and appropriate response measures. In the U.S. the laws for notification vary by type of breach and by state; in the U.K., businesses have 72 hours to report certain types of breaches, and then in high-risk cases, must notify affected individuals without delay. It will be ideal to seek out legal counsel to help you navigate this and ensure everything is done to the letter. Additionally, you should carefully document all of your response efforts to provide proof that you complied with laws or standards.
Best Practices for Protecting Against Data Breaches
The best way you can prevent these negative outcomes is by ensuring data is properly protected in the first place. This will involve everything from secure networks and devices to access restrictions to proper employee training and awareness.
Implementing Robust Security Measures
To improve your security, you may need to make improvements such as the following:
- Encrypting sensitive data;
- Using dedicated servers;
- Upgrading user authentication methods;
- Upgrading antivirus programs;
- Upgrading your firewall;
- Implementing new security standards and procedures.
You should also schedule regular security audits and vulnerability assessments to ensure that your security measures do not retain or develop any vulnerabilities. Ideally, you should hire a cybersecurity professional to do this, even if it is just on an as-needed basis.
The Critical Role of Secure Hosting Services
Secure hosting services can provide an additional layer of protection to your sensitive data. When choosing a good, secure website hosting provider you should consider the size of the hosting structure, confirm that the provider utilises offsite backups, and determine whether the server is fully managed. This extra layer of protection can also significantly bolster data recovery efforts in the event of a data breach.
Creating a Data Breach Response Plan
Organisations must have a clear, comprehensive data breach response plan in place. Create a plan in anticipation of future breaches, not in response to one. An effective response plan should include the following:
- Steps for identifying the breach;
- Steps for containing the breach;
- Steps for notifying stakeholders and customers;
- Steps for remediation;
- Investigation procedures.
The steps your organisation should take and the methods you use should be clear and actionable and should comply with regulatory standards. Update security and the response plan itself as needed based on the findings of the incident investigation.
