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It’s no secret that a data breach will negatively impact your business, but understanding the potential extent of the damage can help you to react quickly and keep that damage to a minimum. As remote work is on the rise, your ability to handle a data breach becomes increasingly important. Remote workers have the potential to both increase the time it takes to identify and respond to an attack and increase the cost of the breach, according to IBM.  

 

No matter how small or large your business, you should take every step to prevent a data breach, and this includes preparing for the worst. From financial loss to reputation, the long term fallout of a data breach can be devastating—especially if you don’t have safeguards and a recovery plan in place. It’s critical to be informed and prepared for the impacts of a data breach so that your business has the chance to fully recover. 

 

Financial loss

Perhaps the most obvious impact of a data breach is the financial loss. This loss may be a direct result of the breach or, more often, it’s an indirect result of your website malfunctioning or being down altogether, leading your customers to do business with your competitors. Besides a loss or decrease in revenue,  a data breach often requires paying for a forensic investigation to uncover the cause of the breach. While helpful in the longterm to prevent hackers from gaining access to your data in the future, in the short-term they can be costly. 

 

Related reading: Not All Hackers are Criminals: Ethical Hacking, Hacktivism, and White Hat Hackers 

 

When your customers’ financial information is compromised, you may be required to invest in mandatory credit monitoring and pay for the costs of card replacement and any financial loss due to identity theft. Lastly, you may need to invest in PR and marketing to repair any damage to your brand’s reputation (see below).  

 

Damage to your reputation

When your customers provide you with sensitive information, they are entrusting you to have robust security practices in place to protect that data. If that data is breached, those customers are less likely to trust you a second time with that information. In fact, a 2019 Verizon study found that 69% of survey respondents would avoid a company that suffered a data breach  and 29% would never do business with that company again. Furthermore, a 2017 PwC study found that 85% of consumers won’t shop at a business if they even have concerns about their security practices. 

 

Related reading: How to Monitor (and Manage) What People Are Saying Online About Your Business

 

This is why it’s so important to do everything possible to prevent a breach in the first place, but if you do suffer a breach, transparency is key. Inform your customers immediately of the breach and once you know exactly what data was compromised, share this information as well. Follow-up with a detailed plan for how you are prepared to compensate those whose data was compromised (if applicable) and share what practices you’re putting in place to prevent a breach from happening in the future.  

 

Related reading: How to Leverage Cybersecurity as a Competitive Edge for Your Business

 

Cybercriminals may also take advantage of gaining access to your website through vandalism. This could take the form of offensive written or visual content that could deeply damage your reputation. It can also take the form of simply changing a few letters or numbers on your contact page, creating a barrier to customers who are trying to reach out. 

 

Disruption of operations

A data breach may cause the loss of critical company information, slowing or halting operations until the data is retrieved and the cause of the breach is resolved. Of course, any interruption to operations can result in a loss of revenue. According to IBM’s 2020 Cost of a Data Breach Report, it can take a company on average 197 days, or 6.5 months, just to identify a breach and another 69 days to contain it. This can be a huge setback in terms of operations (and can cost millions of dollars) so it’s important to have a plan in place for this recovery process.  

 

Legal consequences 

There are legal consequences to a data breach as well. Policies such as the European GDPR and the California Protection Privacy Act  provide legal protection to consumers in the face of a data breach. To avoid exorbitant legal fees and regulatory fines, it’s imperative that you put the required protections in place when it comes to consumer data. 

 

Related reading: Does Your Business Need a HIPAA Seal of Compliance? 

 

Planning ahead for the worst

Companies who are prepared for a data breach can both identify and respond to the breach much more quickly than those who aren’t expecting a cyberattack. This preparation includes a robust multi-layered security strategy, a regularly updated plan for how to respond to a data breach event, and an adequate budget for the associated costs and revenue loss. It’s also wise to invest in cyber liability insurance to cover the costs associated with recovering from a data breach or other form of cyberattack. Whether you store sensitive information in the cloud or on your computer, cyber liability insurance is an important protection against a data breach’s potential long-term damage to your business.   

 

Feature photo by ThisIsEngineering from Pexels

 

Related reading:    

 

Can PayPal Be Trusted with Your Financial Information? 

A Ransomware Attack Shut Down Baltimore’s City Government: Could Your Business Be Next? 

Are You Doing all You Can to Protect Your Customers’ Data? 

 

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About Pagoda Technologies IT services

Based in Santa Cruz, California, Pagoda Technologies provides trusted IT support to businesses and IT departments throughout Silicon Valley, the San Francisco Bay Area and across the globe. To learn how Pagoda Technologies can help your business, email us at support@pagoda-tech.com to schedule a complimentary IT consultation.