What are the financial losses related to a breach of information?
In a previous article, we discussed about the consequences of a breach of information. If you follow our page or attended to our training, you must know much on the consequences by now. For recap, when an organisation is victim of a breach of information, it generally suffers from financial loss, reputational loss, loss of competitive advantage and other opportunity cost.
While it is quite clear how a company will lose reputation, competitive advantage and suffer from opportunity cost, the financial loss is still unclear for many. Most people tend to think that the financial loss is about ransom only and underestimate other related costs.
In this article, we will discuss about the elements of the financial loss.
According to industry insights, the loss due to data breach are composed of various elements. Here below is a list of some factors of financial losses.
1. Cost of investigation.
It takes on average 212 days for an organisation to identify a breach of information. Unfortunately, most organisations that are victims of breach of information do not have the expertise to investigate properly and have to hire external consultants for the forensic analysis. Moreover, if the organisation is insured by a cyber-insurance, they will have to bear the cost of hiring an investigator as required by the insurance.
2. Cost of remedies.
In average, a breach of information takes 75 days to be treated properly and most organisations which are victims of breach of information do not have the proper team to take actions and need to hire an expert for remedies.
3. Cost of communication.
Once a breach of information is identified, the board of directors of the organisation has the obligation to communicate about it to all its stakeholders. It might seem a simple task, but this implies a lot of work and expenses. From the organisation of the crisis committee, consultation with PR team, communication with the concerned authorities, the press communique and letters to shareholders, etc.
In some cases, breach of information is subject to extortion from the attackers. Some organization accept to pay the ransom in order to mitigate the impact of the breach of information. You might probably guess that a ransom will not be cheap.
5. Legal actions.
When an organisation is victim of a data breach, clients or customers of the organisation also suffer from the incident. In many cases, the clients sue the organisation and the cumulated amount of money claim can rise very high. Imagine that you have 100 clients who are claiming you $1M each, as compensation for the damaged caused by the leak of data.
If an organization suffer from data breach and is found guilty of not being compliant with the existing regulation at the time of the breach, the data protection authority can fine them. For example: the GDPR commission can fine the organization up to €20M or 2% of their global turnover, whichever is the highest.
When an organization is victim of a breach of information, it will eventually suffer from reputational loss. For those who manage to survive, they generally proceed with a rebranding exercise. If you are not familiar with the costs related to a rebranding exercise, we invite you to read more about it in order to understand the financial implication.
The list of factors mentioned above are examples and are not limited to them. If you want to know more about elements that compose the financial loss due to data breach, you can enroll in our training program. If you wish to have a risk assessment of your organization and implement security measures that will mitigate all those types of risks, contact us for a free consultation.