The True Cost Of Cybercrime For Businesses
POST WRITTEN BY
Nick is a Partner at TrafficSafetyStore.com and the Founder of I’m From The Future.
It’s estimated that cybercrime will cost approximately $6 trillion per year on average through 2021. That’s a massive figure, one that is almost impossible for most people to imagine.
But more concerning than the number itself is what it means for modern businesses. Everywhere, companies are upping their cybersecurity budgets in an attempt to lower the catastrophic costs of a potential data breach.
The average cost of a breach tallies into the millions, but the dollars lost only account for the direct cost of a breach. That figure is quantifiable for businesses, but the true costs cut even deeper.
When investigating the collateral effects of a cyberattack, the outlook for businesses in the aftermath becomes bleak. Dollars and cents aside, some businesses never fully recover from a data breach, and there can be some potentially disastrous consequences.
Damaged Shareholder And Investor Perception
Even with a proactive security posture and preventative measures in place, a breach can still happen. Businesses in some industries are more vulnerable to attacks, and shareholders are usually aware of these risks. But once a breach occurs, a precipitous drop in a company’s perceived value may follow.
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Negative press can fuel the “sell now” groupthink, and once that train gets rolling, it’s hard to keep it on the rails. This is especially true for smaller companies that don’t have the corporate infrastructure or brand recognition to keep things afloat in the wake of an attack.
Investors and shareholders want their money to be safe with a company they feel can be trusted, and trust is all about perception. Simple logic will tell you that bad press from a data breach equals public mistrust, at least in the short-term. If that short-term blow is large enough, it can weaken a company in the long-term.
Luckily, the damage is not always irreversible. LinkedIn, for example, lost 117 million user passwords, and still remains the most popular business networking site.
Yahoo, on the other hand, has been through three data breaches in recent years, where nearly two billion accounts were compromised in total. Those breaches may be behind why Verizon is now paying about $4 billion less to purchase the company than was offered just over a year ago.
The lesson here is that crisis management can be effective if you get the chance to do it. But unfortunately, a large percentage of businesses that suffer a major data breach never recover their value.
Loss Of Data
According to recently collected data on cybersecurity, over 159 million sensitive records were compromised in 2015 alone. The loss of this information racks up larger bills than just the initial data recovery and added security measures. A breach can lead to potential fines, penalties and litigation for a business.
In May 2017, Target paid out a $18.7 million settlement over a large-scale data breach that took place in 2013. The company said that the total cost of the breach was over $202 million.
The even bigger issue is that a large percentage of sensitive records taken are usually filled with customer data. When a company has a data breach, it undermines a customer’s trust in the company and their confidence in the company’s ability to keep their financial information out of the wrong hands.
It’s a big enough red flag when a company loses its own data, but customer data is a different ball game. Identity theft is a real concern for consumers, and customers may feel less inclined to shop with companies that could mishandle their information.