Cyber Security: Cost of Data Breaches Rise

Data breaches.  Not only are they becoming more frequent, the damage that they inflict is growing.  A study by IBM conducted by the Ponemon Institute found that the average total cost globally of a data breach increased 15 percent in 2013 to $3.5 million.  The average damage caused for each lost or stolen record containing sensitive information rose to $145.  The data was collected from 314 companies with operations across ten countries, and each company in the survey had experienced at least one data breach.

When just data from businesses in the US are considered, the cost of breaches are even higher.  In the US, the average cost of a breach is $5.9 million, and the average cost per record is $201.  And, as might be expected, the most costly data breaches were those caused by malicious and criminal attacks.

Often CEOs don’t understand the damage that can result from data breaches.  Unless the breach is massive, as in the case of the Target point-of-sale system attach, breaches are outside the radar of CEOs.  Larry Ponemon said that “data breaches of 10,000 to 100,000 records are really significant events for the people who are, unfortunately, victims, but a lot of CEOs would say, ‘Ah, that’s small change,’ relative to other things they have to worry about.  And that’s a mistake. Obviously, you want CEOs to be involved, at least to some extent, on dealing with the external consequences of the data breach.”

What can companies do?  Insurance is one option.  32 percent of businesses have invested in cyber insurance.  The IBM/Ponemon report found that  cyber insurance can play an important role “in not only managing the risk of a data breach but in improving the security posture of the company.  While it has been suggested that having insurance encourages companies to slack off on security, our research suggests the opposite. Those companies with good security practices are more likely to purchase insurance.”

Kristin Lovejoy, general manager for the IBM Security Services Division, said that “clearly, cybersecurity threats are a growing concern for businesses, especially when we consider how persistent data has become in the age of cloud and mobility.  A data breach can result in enormous damage to a business that goes way beyond the financials. At stake is customer loyalty and brand reputation.”