While companies were adapting and transforming businesses during the COVID-19 pandemic, cybercriminals continued to adapt and evolve with them. For example, the shift to predominantly remote, cloud-based environments has made it easier for attackers to steal information when employees use their personal devices to work or connect to insecure networks.
In Canada, remote work has become more common since 2020, with 9.4% of staff working hybrid as of November 2022. As of May 2022, one in five Canadians worked exclusively from home. With remote work becoming more prevalent, the number of stolen records will likely rise.
What does this mean for businesses? The consequences of a data breach can be devastating and long-lasting. From financial losses to loss of brand reputation, data breaches can seriously affect a company, sometimes to the point of bankruptcy. This blog post will outline the five major consequences of a data breach and why cybersecurity is more important than ever.
The financial impact of a security breach can depend on many factors. The amount of information stolen, how long it took to detect the breach, whether a company had to pay a ransom, the length of downtime caused by the breach, whether or not a company had cybersecurity insurance etc. However, in almost all cases, cybercrime costs small businesses disproportionately more than enterprise businesses relative to their size. For large corporations, the millions of dollars that a data breach could cost them would be a small amount compared to their overall revenue. Still, for a small or medium-sized business, the financial losses from a data breach could potentially bankrupt them. According to IBM, Canada ranks as the country with the 3rd highest cost of data breaches at $7.3 million. This number has increased year over year since 2019 and will likely continue to grow.
On top of the financial losses from the attack, data breaches are often accompanied by several legal penalties for failing to protect private information. With the rise in ransomware, security insurance premiums have continued to grow. In addition, Canada has several compliance requirements (PIPEDA in Ontario) to ensure that companies protect their customer’s data with the bare minimum level of security. In the case of a data breach, organizations could face litigation that would evaluate whether compliance violations contributed to the failure to mitigate the breach. Failure to meet compliance can result in fines of up to $100,000. Furthermore, the law in Canada and many countries require companies to notify their customers if their data is compromised, with additional fines for failing to inform customers in a timely manner.
Perhaps the most obvious consequence of a data breach affecting customer data is the loss of trust from current and potential customers. Customers expect companies to protect their personal information; a data breach can shatter that trust. In addition, a data breach can lead to current customers turning to competitors for their business needs. This inevitably leads to a loss in sales and reputational damage that can create long-lasting financial losses in addition to the initial financial losses incurred by a data breach. For companies to rebuild customers’ trust, it may take significant time and resources. This can include implementing new security measures, offering compensation or other incentives to affected customers, or launching a targeted marketing campaign to rebuild the company’s image.
Data breaches can have a significant impact on employee morale and job security. Executives are often held responsible for protecting their organization’s data and may face termination or resignation due to the adverse effects of a breach. This can leave a leadership vacuum and create additional challenges in finding and training suitable replacements. In addition, financial losses resulting from a data breach can lead to layoffs to reduce costs. Moreover, the stress and blame involved in managing a data breach can overwhelm employees at all levels, leading to burnout and a higher turnover risk. Employees may feel that their efforts to prevent the breach were insufficient or that they are being unfairly blamed for the incident. Hiring new employees after a breach is complex due to reputational damage, especially in fields with talent shortages. The negative publicity associated with a breach can make it harder to attract top talent, who may hesitate to join a company with a tarnished reputation. As a result, companies may have to offer higher salaries or better benefits to attract and retain qualified employees.
Lastly, and perhaps the most long-term consequence of a data breach, is the negative publicity that follows. Some companies will forever be tainted with the damage a data breach did to their reputation. Marketing departments will spend anywhere from months to years to do damage control on Google search results. They also need to create organized responses on social media platforms to minimize the reputational damage to the company. For small companies, brand reputation can be tough to recover after a data breach.
The shift to remote work brought about by the COVID-19 pandemic has made it easier for cybercriminals to steal sensitive information, which is likely to continue. The consequences of a data breach can be devastating and long-lasting, including financial losses, legal penalties, loss of customer trust, employee turnover, and negative publicity. With Canada ranking as the country with the third-highest cost of data breaches, cybersecurity has become more critical than ever before. Companies must take steps to prevent data breaches, such as educating employees, implementing strong passwords and encryption, maintaining best practices, and conducting regular security audits. By doing so, they can protect sensitive information and avoid the significant consequences of a data breach.