What Is the Real Cost of a Data Breach?

When contemplating a cybersecurity framework for a business, it’s vital that company-owners consider what the true cost of a data breach would be to them. Only then is it possible to determine how much time, attention, and money should be spent on cybersecurity.

The cost of a data breach not only refers to the monetary value of such an incident, but also the implications regarding loss of respect and credibility as a business. A severe data breach can be hugely detrimental to a company, particularly where stakeholders are concerned.

The financial cost of a data breach

After analysing data breaches that happened across the world between April 2018 and April 2019, researchers at IBM reported that the average, total cost of a data breach to a business is a phenomenal $3.92 million. They also found that companies in the US had the highest average cost of all countries, at around $8.19 million. To reach these figures, the researchers considered the monetary losses that were incurred in the four areas involved in a data breach:

Detection and escalation – this refers to any costs resulting from detecting and reporting a cybersecurity incident, such as auditing and investigation.
Notification – this aspect includes the financial cost of having to notify people of the incident, such as time spent making calls or writing letters to customers.
Response – this relates to the costs involved with the company’s response to the breach. This could be anything from legal advice to free gifts and discounts for customers.
Business losses – when a breach occurs, it will usually cause disruption and even downtime to a business. This area relates to the loss of revenue experienced as a result.

The cost of losing credibility

Even when a business can make it through the financial difficulties that are associated with a data breach, sadly there are still further problems to contend with. When a business suffers from a cybersecurity incident, this can often deter new and even existing customers, who feel that their personal information is not in safe hands with your company. For small businesses in particular, this damaged reputation can be extremely hard, or even impossible to recover from.

Rebuilding a business reputation is vital in order to attract new customers, and keep existing clients on the books. After a breach, these stakeholders need to know that the business has taken the incident seriously, and is doing as much as possible to guarantee the protection of sensitive information going forwards.