A data breach is a cyber incident that happens when an unauthorized user illegally views or retrieves the information of an individual or organization. Unfortunately, the number of business-targeted data breaches is constantly increasing. In 2021, cybersecurity consultants recorded 1,862 data breaches, 68% higher than the 1,108 data breaches in 2020.
The numbers are alarming, especially since data breaches can impact businesses long-term. This blog discusses some potential long-term negative impacts of data breaches on companies.
Increased Unexpected Expenses
According to a report by Harvard Business Review, most companies downsize their cyber insurance or don’t purchase one in the first place. Cyber insurance covers a company’s liability for a data breach involving sensitive customer information like credit card details or social security numbers. However, even if a business facility has cyber liability insurance, these policies are complicated and don’t cover all the costs caused by a data breach.
Therefore, a data breach can significantly impact a company’s finances. According to a 2022 report, the average cost of data breaches worldwide has reached 4.35 million, which is a 12.7% increase from 2021. Companies must spend money on handling reduced customer traffic, legal settlements, and rebuilding their reputation. In addition, businesses have a lower ratio of net worth to total assets for many future years.
Multiple Legal Penalties
Besides negatively impacting a company’s financial position, data breaches can also land a business in legal trouble. After a data breach, an organization’s legal team has to ensure that the company follows all state laws regarding notifying customers after the business finds the data breach. Businesses that fail to report a data breach to customers have to pay a significant fine.
Businesses that report the data breach timely to customers will have to face financial penalties. However, the amount varies and depends upon the data breach severity, the nature of the compromised information, and the number of people impacted by the data breach. In addition, customers have the legal right to file a claim against any business for failing to protect their information, which may lead to a class action lawsuit.
If a company complies with state regulations and follows a response plan, its financial penalties can be reduced significantly.
A Decline in Reputation
One of the most significant negative impacts of a data breach is that it seriously damages a company’s reputation. The marketing team at a business will have to spend ages doing damage control and ensuring that nothing negative about their company will be available at the top of Google searches or on social media.
Try Cybersecurity Defense Solutions to Avoid Data Breaches
The long-term impacts of a data breach are significant enough for businesses to take steps to avoid data breaches in the first place. At Iviry, we have launched CyberMentum. Developed by professional and experienced cybersecurity analysts and including our Cyber Security Compliance Stack, CyberMentum is a comprehensive and complete set of tools, processes, and systems that help businesses enhance their cybersecurity.
Our organization is NIST 800-171 compliant, which makes CyberMentum the optimal cybersecurity defense solution. Reach out to us and learn more about the phases of CyberMentum.