In the US, the financial cost of a data breach is rising year on year. IBM’s Cost of a Data Breach Report, is independently conducted annually by the Ponemon Institute. This year, the report included data from more than 15 regions, across 17 industries. They interviewed IT, compliance, and data protection experts from 477 companies. As a result, the true average cost of a data breach is more accurate than ever.
Crunching the Numbers: The Average Cost of a Data Breach
According to the study, the average cost of a data breach in 2018 is $3.86 million, which has increased by 6.4% since last year’s report.
While the risk of a data breach is around 1 in 4, not all breaches are created equally. Of course, the more records that are exposed, the more expensive and devastating a breach will be. A single stolen or exposed data record costs a company an average of $148, while 1 million, considered a Mega Breach, will cost $40 million. 50 million may be reserved for the largest enterprises, but this will raise the financial cost to $350 million.
Beyond a Ransom: The Hidden Cost of Data Breach
Although many businesses worry about the rise in ransomware, the cost of a data breach is about much more than any malicious demand from a hacker could be. The true cost can be broken down into dozens of areas, from security upgrades in response to the attack to a drop in your stock price when word of the breach gets out. Research by Comparitech found that companies tend to see a stock price slide of 42% following a breach. Other costly elements of a data breach include Incident investigation, legal and regulatory activity, and even updating customers. These all contribute to the escalating cost when you fail to adequately protect your company against a data breach.
The Ponemon study found that the largest cost comes from customer churn. The US sees the highest cost in the world in terms of lost business due to a data breach, more than two times the average figure, at $4.2 million per incident. Most analysts put this discrepancy down to the nature of commerce in the United States. In the US, there is far more competition and choice, and customer loyalty is both harder to hold onto and almost impossible to retrieve once trust is lost.
Customers also have more awareness of data breaches in the US, as laws dictate they must be informed of any issues as they are uncovered. This kind of reputational damage is devastating, especially in the case of a Mega Breach. In fact, 1/3 of the cost of Mega Breaches can be attributed to lost business.
Of course, there is also the fear that even if you manage to recover from a data breach, the worst is not over. The IBM study found that there is a 27.9% chance of another breach in the following two years after an attack, making your company extremely vulnerable unless you can make considerable changes, and fast.
Preparing Your Business for the Average Cost of a Data Breach
The numbers don’t lie. The speed and impact of data breaches is something to which every company, no matter the size, should be paying attention. There are definitely ways to protect your business and to position yourself responsibly for the worst case scenarios.
According to Verizon, 81% of all breaches exploit identity, often through weak passwords or human error. Malware can piggyback onto a legitimate user to get behind a physical firewall, which is why most IT professionals agree that even next-gen firewalls are insufficient. To limit the potential repercussions of this, all businesses need to be employing a zero-trust model.
With micro-segmentation, perimeters can be created specifically for the protection of sensitive or critical data. This ensures that all networks are considered not trusted. Using a granular approach to limit communications, and tagging workloads themselves with labels and restrictions. Containment of attacks is built into your security from the outset, by limiting the attacker’s freedom of movement and restricting ability for any lateral movement at all. As the financial impact of a data breach rises with the amount of data records stolen, this is a significant weapon to have at your disposal.
Rapid Response Can Limit the Cost of Data Breaches
Efficiency in identifying an incident as well as the speed of the response itself has a huge impact. Rapid response can save money, as well as proving to your customers that you still deserve their trust. According to the IBM report, the average time it took companies to identify the data breach was 197 days. Even once a breach was detected, the average time to contain it was a further 69. When it came to a Mega Breach – it could take an entire year to detect and contain.
With micro-segmentation, the visibility is immediate. All communications are logged, including East-West traffic. This includes private architecture, cloud-based systems, and even hybrid solutions. The best solutions will offer alerts and notifications in case of any unusual behavior, allowing you to stop threats in their tracks, before any damage has been done.
The quicker this happens, the less financial damage will be done. In fact, on average, companies who suffered a breach that managed to contain it within 30 days saved more than $1 million over companies who couldn’t. The larger the breach – the more significant these savings are likely to be.
Ensure You’re Fully Armed Against a Data Breach
The complex nature of most businesses IT systems explains the growing threat of cyber-crime, and the increasing financial cost of lax security holding us all to ransom. Traditional security systems are not enough to ensure adequate protection from a data breach, or rapid detection and response in case the worst happens.
Micro-segmentation offers granular flexible security that adapts to your exact environment, detecting and limiting the force of an attack, and providing the visibility and response tools you need to keep your customers loyal.