What is The Cost of a Data Breach
Table of Contents
- By David Lukic
- Oct 29, 2021
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.
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.
Cost of paying hackers
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.
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.