If there’s one thing that’s going to define the current (and possibly the next) era of business in an increasingly digital world, it’s data. The way that we gather data, glean insights from it, and use it to improve our services and our relationships with customers is nothing short of revolutionary. However, handling all that data, whether it’s internal or gathered from your target market, also means you’re in possession of a highly valuable asset; one that criminals might be all too keen to get their hands on. A data breach is not a small matter; it can have a ripple effect that can and has sunk businesses. Here are some of the consequences you need to be mindful of.
Business Downtime And Its Operational Costs
The first thing that tends to happen during a data breach is all of the business’s internal operations coming to a halt. You might have to shut down systems to contain the breach until it can be expelled, to investigate your system’s vulnerabilities, and to prevent further data loss. Your team might not be able to access their digital systems, including emails and files, which can paralyze their ability to do their job. Even a day or two of downtime can devastate a small business. Having redundancy systems set up in the event of a crisis can help you provide at least the minimum systems for your staff and your customers. However, your operational capacity is likely to be greatly reduced no matter what you do.
The Reputational Damage And Loss Of Trust
The main question on a customer’s mind after hearing about a data breach, once they figure out whether or not their data was exposed, is “how could they let this happen?” Their confidence in your business can be severely shaken, especially if you were trusted with sensitive data, such as personal or financial information. It can feel not just like a failure but a betrayal. As such, a lot of work has to be put into repairing trust as quickly as is safe. Offering transparency into how the failure happened, once you know, and ongoing assurance on further efforts to prevent such a breach from happening again, is vital.
Having To Notify Your Customers
Depending on where you are, you may legally be required to notify your customers if their data has been compromised. Ensuring that they’re fully informed typically involves more than just a single email. It can require official notices, mail letters, dedicated phone lines to handle customer inquiries, and even covering the costs of credit monitoring services. All of this is not just a monetary cost but an operational burden on your business, and how you handle it can further affect your reputation. A crisis is made all the worse by a business that doesn’t handle it well.
The Investigation And Security Response
It’s vital that you understand how a breach happened once you know the facts on the ground. Aside from discovering what data was accessed, you should find out which systems were compromised and how. It could have been through a brute force hack through a vulnerability in software you use, for instance, or social engineering, like phishing scams, getting access to your employees’ secure accounts. Working with cyber security specialists, you can find out the root cause of the breach, as well as what steps you will have to take, and what ongoing protections you will need, to prevent it from happening again. Of course, this comes with a cost, but it’s one that you should have been paying already to prevent a data breach in the first place.
Legal Fees And Regulatory Penalties
The consequences you face are not all going to be internal or customer-facing. You may face legal and regulatory consequences after a data breach, as well. Following a GDPR enforcement tracker, you can see that these fines often cost businesses thousands, but some of them even hit the seven-figure mark. The more severe the breach and the worse it’s handled, the steeper the fines. Beyond those initial fines, you might also find yourself subject to regulatory investigations and even legal claims from affected customers. As such, you’re very likely to need legal assistance, which comes with its own fees that escalate the longer that you’re in need of it.
Insurance Complications
A lot of businesses rely on cyber insurance policies, which can help them quickly get their business back up and running in the event of a data breach. However, once that actually happens, it can change how insurance companies treat you, especially if the leak was highly preventable. They may raise their premiums, reduce their coverage, or put in place stricter security requirements. You might even find it harder to renew your policy or to get a new provider in the future. This affects your business beyond cyber insurance, as well, as general liability insurance providers will also have to reassess your risk profile. These costs can last long after the breach itself, making the long-term financial picture of your business more tenuous.
The Opportunity Cost
The easiest cost to overlook is the cost of what the business doesn’t get to do due to all of the time, energy, and money that’s spent on handling the aftermath of a breach. This is money and momentum that you don’t get to spend on growing your business, acquiring new customers, or innovating your products and services. Your leaders and employees are going to be focused on dealing with the fallout, leaving them unable to carry out projects that can build the business’s future success. You may eventually get to reach these long-term heights, but you’re undoubtedly going to be delayed and held back by how long you have to spend dealing with the other costs of the data breach.
Doing your best to prevent data breaches can prevent many of the outcomes mentioned above. However, beyond that, you need a plan in place to handle those breaches as best as possible, as well.