Data Security & Privacy

The Costs Associated with a Data Breach

 
There is a huge disconnect between CEO-type personnel and CTO-type personnel when it comes to the discussion of cyber-security.  Technology officers often are aware of the risks and vulnerabilities associated with running an IT network, but they have been unable to translate those same risks and vulnerabilities into language that financial minds can comprehend.  Similarly, financial people have a difficult time thinking outside the box when it comes intangible assets and product returns.  The CEO wants to know 2 things: (1) how much is this going to cost me? and (2) what is my return on investment?  The ability of the CTO to communicate this in terms that the CEO can understand, and the ability of the CFO to comprehend the importance of implementing sound IT practices, will ultimately determine whether or not the project gets corporate approval.
 
The Washington Post recently reported that, according to the Ponemon Institute, companies that experienced data breaches in 2008 paid an average of $6.6 million last year to rebuild their brand image, and retain customers.  The Ponemon Institute is a Tucson-based research organization that looked at 43 organizations that reported a data breach last year, and found that roughly $202 was spent on each customer record that was compromised.  The average number of consumer records that was exposed in each breach was 33,000.  In determining this amount, the study measured the direct costs of a data breach, such as hiring forensic experts; notifying consumers; setting up telephone hotlines to field queries from concerned or affected customers; offering free credit monitoring subscriptions; and discounts for future products and services.  The survey also sought to measure more intangible costs of a breach, such as the loss of business from increased customer turnover and decreases in consumer trust. Following a data breach disclosure, customers who leave one brand for another, known as customer churn, was highest among health care and financial services companies, according to the survey, which found rates of 6.5 percent and 5.5 percent, respectively.
 
Ponemon Institute founder, Larry Ponemon, stated that the results of the survey show that the churn rate for businesses is a reality, and that customers do look at how a business goes about protecting vital mission-critical information, especially personally identifiable information.
 
To read more about this article, please click here:  Data Breaches Are More Costly Than Ever
 

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