The consequences of company data breaches and how to avoid them
In today’s digital age, data breaches have become a significant concern for businesses and individuals alike. With the rise of cyberattacks, the consequences of a company data breach can be devastating.
From financial losses to damage to a company’s reputation, the impact of a data breach can be felt long after the initial attack. In this article, we’ll explore the consequences of company data breaches and discuss some ways to avoid them.
Financial losses
One of the most obvious consequences of a data breach is financial losses. A company can face direct financial losses due to the costs of responding to the breach, such as hiring forensic experts, legal counsel, and public relations firms.
“All of these services can be expensive, and the costs can quickly add up, especially if the breach is large and affects many individuals,” said Gina Iovenitti, Growth Operations at Carda Health. “The costs of remediation may be compounded by regulatory fines or penalties if the company is found to have been negligent in its handling of personal data.”
There may also be indirect financial losses, such as lost revenue due to a damaged reputation and customer loss. In 2020, the average cost of a data breach for a company was $3.86 million, according to a study by IBM.
Legal ramifications
Data breaches can also have legal ramifications for a company. If personal data is compromised, the company may be in violation of data protection laws and face fines or legal action.
“One of the most significant legal ramifications of a data breach is the potential for class-action lawsuits,” explained Andrew Mavis, CEO of 98Strong. “If personal data is compromised as a result of a data breach, affected individuals may file a lawsuit against the company for damages. These damages can be anything from financial losses, to emotional distress, to other potential harms. Class-action lawsuits can be particularly damaging for companies, as they can involve a large number of plaintiffs and result in significant legal fees and settlements.”
Companies may also face legal consequences for failing to disclose a data breach in a timely manner. Many jurisdictions have laws requiring companies to notify affected individuals and regulatory authorities of a data breach within a certain timeframe. Failure to comply with these laws can result in fines and legal action.
Damage to reputation
A data breach can also cause significant damage to a company’s reputation. Customers may lose trust in the company, leading to a loss of business and potential revenue.
“Perhaps most damaging of all, a data breach can have long-term effects on a company’s reputation,” stated Susan Kim Shaffer, President and Co-Founder of Pneuma Nitric Oxide. “If customers lose trust in the company’s ability to protect their personal information, it can result in a decline in brand value and a loss of goodwill. This can cause a decline in sales and damage to the company’s reputation that can take years to overcome.”
The negative publicity from a data breach can also attract unwanted attention from regulators and the media, further damaging the company’s reputation.
Loss of intellectual property
In addition to personal data, a data breach can lead to a loss of intellectual property, such as trade secrets, patents, and proprietary information that is critical to a company’s success.
“If this information falls into the hands of competitors or cybercriminals, it can result in a significant disadvantage for the company,” John Berry, CEO and Managing Partner at Berry Law said. “If a company’s intellectual property is stolen as a result of a data breach, it can cause a loss in revenue and damage to the company’s competitive advantage.”
Moreover, data breaches can also result in the loss of copyrighted materials, such as software code or other creative works.
Operational disruption
A data breach can also lead to operational disruption for a company. If critical systems are compromised, it can result in downtime and lost productivity.
“In order to investigate and contain the breach, companies may need to shut down systems or applications, which can cause disruptions to business operations,” said Nicholas Mathews, CEO of Stillwater Behavioral Health. “This can lead to negative things like missed deadlines and increased costs. Plus, a data breach can result in the need for data recovery and system restoration, which can be time-consuming and expensive.”
If critical data is lost or corrupted as a result of the breach, it may need to be restored from backups, which can take hours or even days.
How to avoid company data breaches
Data breaches might seem commonplace, but there are several ways to protect yourself and your constituents. Here are some tips to avoid data breaches and stay safe in the digital business world.
Implement strong security measures
One of the most effective ways to avoid a data breach is to implement strong security measures. This includes using firewalls, antivirus software, and intrusion detection systems.
“Try implementing access controls to limit access to sensitive data and systems,” said Den Montero, Marketing Director of Moeflavor. “This means utilizing strict password policies, multi-factor authentication, and role-based access control.”
Companies should also ensure that all software and systems are up to date with the latest security patches and updates.
Train employees on security practices
Employees are often the weakest link when it comes to data security. It’s essential to train employees on proper security practices, such as creating strong passwords, avoiding phishing scams, and recognizing potential threats.
“Companies should have clear policies and procedures in place for handling sensitive data,” said Brandon Adcock, Co-Founder and CEO of Nugenix. “Training can help employees understand the importance of data classification and how to properly handle different types of data. You want to teach employees how to identify sensitive data, how to store and transmit data securely, and how to dispose of data when it is no longer needed.”
Regular training can also help ensure that employees stay up-to-date with the latest security threats and trends and are better equipped to respond to security incidents when they occur.
Conduct regular security audits
Regular security audits can help identify vulnerabilities and potential risks before a data breach occurs.
“You should conduct regular security assessments to identify vulnerabilities and weaknesses in your systems and applications,” explained Stephanie Venn-Watson, CEO of Fatty15. “Companies in high-risk industries, such as finance or healthcare, may need to conduct security assessments more often to ensure that they are meeting regulatory requirements and protecting against the latest security threats.”
The frequency of security assessments depends on a variety of factors, including the size of the company, the complexity of its IT environment, and the nature of the data it handles. However, in general, security assessments should be conducted at least once a year, and more frequently if there are significant changes to the IT environment or if there is a high risk of security incidents.
Secure third-party partners
Third-party vendors and partners can also pose a risk to a company’s data security. It’s essential to ensure that all third-party vendors have adequate security measures in place and adhere to the company’s security policies and procedures.
“Always review the security controls and processes of your third-party vendors to ensure that they meet your security standards and regulatory requirements,” recommended Nick Allen, Founder and CEO of SportsLingo. “You’ll want to review any third-party vendor’s security policies and procedures, conduct a security audit of the vendor’s systems, and verify that the vendor has appropriate security certifications.”
Consider checking the track record of their third-party vendors to determine if they have experienced any significant security incidents in the past and how they responded to those incidents.
Develop an incident response plan
Despite the best security measures, a data breach may still occur. That’s why it’s essential to have an incident response plan in place. This means it’s important to identify key stakeholders, develop a communication plan, and outline the steps to take in the event of a breach.
“Most importantly, an incident response plan should have detailed procedures in place for detecting and analyzing security incidents,” said Max Schwartzapfel, CMO of Fighting For You. “This means monitoring system logs, network traffic, and other security data to identify signs of a potential incident. The incident response team should then analyze the data to determine the nature and scope of the incident.”
Once an incident has been identified, the incident response plan should include procedures for containing and mitigating the incident to limit the spread of the problem.
Stay smart, stay protected
An effective security plan starts with knowing the threats and recognizing the possible consequences of a data breach. From there, you can put the right systems in place and prepare your team to prevent a worst-case scenario.
