Data breaches can happen to any company, whether it’s a giant corporation based in Manhattan or a local business in Orlando. Their effects are often dire, too. Just look at what happened after the data breach at Equifax in 2017, which exposed private data from over 143 million people. In the incident’s aftermath, the Atlanta-based credit agency spent $1.4 billion on cleanup and upgrade costs and lost $555.9 million in revenue as of 2019.
Although smaller companies are not likely to suffer financial losses and penalties as severe as Equifax’s, the consequences of a data breach can be just as ruinous and far-reaching.
#1. Revenue losses
Losing your customers’ confidence could be one of the most damaging effects of a data breach. A survey found that 83% of consumers become less willing to spend on a business for several months after a breach, with 21% stating they won’t ever return.
If you suffer downtime — and you very likely will — because of the breach, the repercussions could be worse. Should your company be unoperational and unable to serve your clients, even your loyal customers might leave and take their business elsewhere. In fact, this is why approximately 60% of small- to medium-sized businesses (SMBs) fold after a data breach.
#2. Marred brand reputation
Even years after the incident, potential customers may hesitate to do business with you. People put a premium on their privacy. For this reason, they will trust companies they perceive to be secure and capable of protecting their private information.
#3. Intellectual property losses
Losing your intellectual properties can cripple your brand. Your business’s unique blueprints, strategies, formulas, and recipes represent your edge over other companies in your industry.
Needless to say, some of your rivals may cash in on your loss by imitating your products or services. This will hamper your competitiveness and prevent your business from standing out as it used to.
#4. Heavy penalties
Businesses that handle private customer information are duty-bound to protect these details from theft, exposure, and loss. If you belong to a regulated industry, such as healthcare and finance, failure to uphold this duty could incur severe penalties for your business.
Take Massachusetts-based Fresenius Medical Care North America (FMCNA), for example. The healthcare company reported five data breaches between February and July 2012. After an investigation revealed FMCNA’s failure to conduct a thorough risk analysis, which contributed to the breach, it was fined $3.5 million.
#5. Additional costs
A data breach is expensive and not just because of the hefty fines involved. As the government determines the extent of your culpability in the incident, you’ll have to shoulder legal and related costs. These expenses could become even heavier the longer the investigation drags on.
After the breach, your company will likely be regarded as a high-risk entity, entailing a steep rise in your insurance premiums. You will also have to focus on rebuilding your cybersecurity or fixing its weaknesses. This means investing in new hardware or software, or hiring new people.
Furthermore, keep in mind that thanks to social media, word travels fast these days. You must invest in very good marketing and reputation management to attract both new and old clients. These services are not cheap at all and rarely produce immediate results, so you likely have to spend on them long term.
How can an MSP help?
A managed IT services provider (MSP) ensures you don’t suffer the negative consequences of a data breach by reducing the risk of the breach happening. An MSP can provide the newest and most effective cybersecurity solutions in the market.
Moreover, they can monitor your network 24/7. This proactive measure allows them to detect issues, whether hardware-related or a data breach, and address these before these can affect your operations.
At Cutting Edge, we help companies remain compliant with industry regulations by providing new and well-rounded cybersecurity solutions. Discuss your IT needs with our experts by booking your FREE IT consultation today!