What is The Cost of a Data Breach

  • By David Lukic
  • Published: Oct 29, 2021
  • Last Updated: Mar 18, 2022

 Wondering how much would be the cost of a data breach on your company is entirely normal, given how often data leaks are happening these days. It is an excellent idea if you want to know the extent of damage you might face if such a situation occurs and adequately prepare yourself for it.

How Often Do Data Breaches Occur?

With the rate at which data breaches are happening and the ingenuity of the hackers, the question for most companies is not “if” a data breach will happen to them, but “when.” Statistics show that the number of breaches from January 2021 to September exceeded the total number of violations in 2020.

According to Purplesec, 29.6% of companies in the US will experience a data breach between 2020 and 2021, and 43% of these data breaches will involve small businesses. In every data breach, the average number of records leaked is 25,575, and each record leak costs an average of $150.

The key factors behind the rising number of breaches are:

A larger amount of information to steal: These days, companies rely more on data for their operations than in previous years. They store this data in the cloud, and any hacker capable of gaining access to it could easily use it or sell it to make a quick buck.

Increased adoption of digital solutions: When the pandemic came, most companies went virtual due to the restrictions that countries placed. There was a corresponding digital shift by consumers. Thus increasing the amount of data available online for hackers to assess.

Human error: Unfortunately, the digital shift did not educate users about the best online practices to follow. So there were more people using digital solutions, but they weren’t all aware of the risks involved. This created an ideal environment for phishing scams and credential theft which could easily lead to data breaches.
 
security breach cost

How Much Does a Data Breach Cost?

A single data breach in a company will cost an average of about $3.86 million. You can break down this cost into some possible post-data-breach expenses.

Cost of fixing the breach

After detecting a data breach, the first action a company takes is to secure its systems against future violations. This is an expensive process that might involve one or more of the following

  • An entire overhaul of servers or vital equipment, 
  • Hiring of a special anti-data-breach team (if your company does not have one), 
  • Adoption of a more sophisticated security system, 
  • Extensive migration of company data to the cloud,
  • Carrying out of numerous penetration tests to ensure the system is secure.
  • Setting up an Incident Report system to alert the company of a future breach.

Reputation damage

This is the most long-lasting consequence of a breach. These days, consumers know how important their data is, and they would leave a brand or company if they feel that their information is not secure there.
A data breach’s effect on companies would affect their ability to gain new customers, hire new personnel, and subsequently, it will hinder their profit-making ability.

Cost of paying hackers

In some data breaches, the hackers steal and re-encrypt the data of customers. Then, they demand a certain amount of money from the company to keep the data secret. This form of cybercrime is known as ransomware, and it has risen in popularity in recent years. 
There has also been a whopping 300% increase in the amount of ransom companies are told to pay. Since this year, a number of companies caught in this situation have been forced to pay between $4.4 to $50 million to secure their data.
This form of cybercrime is by far the most expensive data breach a company can experience.

Legal action

Customers of an organization that has been breached can take legal action against them and seek compensation for their leaked data. According to data regulation laws, organizations are legally required to ensure the security of their user’s data. Therefore the user can sue if any event puts that information in danger, whether it was the company’s fault or not.

There has been a rise in class-action lawsuits against companies by people affected by data leaks, and the money that goes into compensating them can reach millions of dollars. This is primarily because of the large number of people usually affected by a data breach.

Operational downtime

When a data breach occurs, organizations might have to totally or partially shut down operations for some time to investigate and fix the violation. According to IBM, it takes an average of 280 days for a company to identify and contain a data breach thoroughly. 
This is a long time within which there will be a large-scale loss of revenue due to the disruption in its services as customers cannot be expected to keep waiting for their operations to come up.
 
data breach cost

Can Insurance Safeguard Business From the Security Breach Cost?

Yes, you can. There are essentially two types of insurance that can adequately cover a company from any loss incurred by a breach.

First-party cyber liability insurance: This covers the losses your network might have.

Third-party cyber liability insurance: This covers the lawsuits your company might face because of the breach

Tech companies would be better off getting a “Technology Errors and Omission” policy instead, as these cover more tech-specific protection.

 
About the Author
IDStrong Logo

Related Articles

What is Data Leak and How to Prevent Accidental Data Leakage

Data breaches take many forms, and one of them is through data leak and accidental web exposure. M ... Read More

The Saga of T-Mobile Data Breach: 2013, 2015, 2021 and 2023 Hacks

T-Mobile has experienced a number of data breaches in the past decade. The first case occurred som ... Read More

Anthem Data Breach Exposed 78 Million Records

In the Anthem Data Breach of 2015, hackers were able to steal 78.8 million member’s records. ... Read More

Everything You Need to Know About Insider Data Breach

Data breaches are on the news frequently, but the average person doesn’t really know that much a ... Read More

The NSA Hack, How Did it Happen?

The National Security Agency (NSA) was the main attraction in a major data breach involving three ... Read More

Latest Articles

Google Voice Scams: What They Are and How to Stay Safe

Google Voice Scams: What They Are and How to Stay Safe

Google Voice scams continue to pose a risk for users of this service. Scammers continuously attempt to lure users into divulging their verification PIN code.

What Are Pretexting Attacks: Scam Types and Security Tips?

What Are Pretexting Attacks: Scam Types and Security Tips?

Have you ever received a text from someone you do not know? Did you become alarmed by the message? Did the message contain information about you and the people you know?

What is a Time-based One-time Password (TOTP)?

What is a Time-based One-time Password (TOTP)?

Authentication is the process that verifies the user's identity to control access to resources, prevent unauthorized users from gaining access to the system, and record user activities (to hold them accountable for their activities).

Featured Articles

How to Buy a House with Bad Credit

How to Buy a House with Bad Credit

Buying your own home is the American Dream, but it might seem out of reach to those with bad credit. However, the good news is, if your credit is less than perfect, you do still have options and in most cases, can still buy a home.

How Secure Is Your Password? Tips to Improve Your Password Security

How Secure Is Your Password? Tips to Improve Your Password Security

Any good IT article on computers and network security will address the importance of strong, secure passwords. However, the challenge of good passwords is that most people have a hard time remembering them, so they use simple or obvious ones that pose a security risk.

Top 10 Senior Scams and How to Prevent Them

Top 10 Senior Scams and How to Prevent Them

Senior scams are becoming a major epidemic for two reasons. First, seniors often have a lot of money in the bank from a life of working hard and saving.

Notice

By proceeding with this scan, you agree to let IDStrong run a Free Scan of supplied parameters of your personal information and provide free preliminary findings in compliance with our Terms of Use and Privacy Notice. You consent to us using your provided information to complete the Free Scan and compare it against our records and breach databases or sources to provide your Free preliminary findings report.

Rest assured: IDStrong will not share your information with third parties or store your information beyond what is required to perform your scan and share your results.

Free Identity Threat Scan
Instantly Check if Your Personal Information is Exposed
All fields below are required
Please enter first name
Please enter last name
Please enter a city
Please select a state
Please enter an age
Please enter an email address
Close