Recently it seems like large-scale data breaches are an almost weekly occurrence. But, just because they are more commonplace does not mean their impacts are any less severe for businesses or for customers whose data is compromised.
Though there were several high profile data breaches in the last 9 months — eBay, AOL (again!), Neiman Marcus and more — the Target hack stands out from them all. With more than 40 million credit card numbers stolen, Target is still reeling from the cost of its data breach. So, just how much does a breach like Target’s actually cost?
The Cost of Data Breaches is on the Rise
In its ninth annual report on the global cost of data breaches, the Ponemon Institute found that the average cost to a company was $3.5 million, a 15 percent increase over the cost of a data breach in 2013. In the US, the cost incurred for each compromised record rose to $201, while the cost for breaches caused by malicious attack had a price of $245 per record. While big companies like Target may receive insurance money to offset the direct cost of a breach, data breaches carry many hidden costs.
The impact of any data breach goes well beyond just dollars and cents, but here’s the effect on the bottom line for Target: fourth quarter profits down 46 percent, and a profit outlook below Wall Street estimates for the entire next fiscal year. The company’s Q1 profits fell 16 percent, and it announced that the data breach has cost it a net $18 million so far, and that number is sure to rise.
The Cause of Data Breaches
While criminal activity and hacking make headlines, most data breaches are caused either by human error or system glitches. According to Symantec and Ponemon, 64 percent of breaches in 2012 were cause by human mistakes or system problems. And in the case of the Target breach, human error allowed the breach to continue to grow even after it was detected by security specialists. Organizations that have strong security postures, or those who have chosen strong partners to secure their sensitive data were able to reduce the cost of data breaches by 20 percent, according to the report.
How to Minimize Cost
The Ponemon report found that while the financial cost of a data breach was immense, a poor reputation and a loss of customer loyalty caused the most damage to the bottom line. Like any disaster, cleanup is not a one-time cost: companies must spend heavily to repair their brand image, fix relationships with old customers and acquire new ones.
The report also showed that heavily regulated industries such as healthcare, financial services and manufacturing have a higher per capita breach cost, with healthcare data breach costs averaging $316 per compromised record. With that much on the line, it’s important to have a strong secure cloud partner
Whether you’re choosing a private or secure public cloud, Layered Tech can offer a flexible cloud platform that meets your most pressing needs. Our secure cloud solution can connect to physical databases, providing you with a hybrid solution for high availability, site failover and disaster recovery. Optional add-ons provide additional security and compliance, back-up services, managed services, and application and system monitoring for a robust solution. Layered Tech is proud to partner with clients to drive innovation, to be a leader in secure cloud and compliant hosting solutions, and understands the importance of helping grow your business, and secure your data.
About the Author: Dennis Pickard holds CIA & CISA certifications and is the IT Audit Lead in the Compliance and Security Group of Layered Tech. He has more than 20 years of experience in compliance and technology audits, primarily in the Financial Services industry. Throughout his professional career, he has directed and performed numerous PCI DSS & HIPAA security and privacy analysis activities.