By |Published On: December 13th, 2023|13 min read|Categories: Breach|

Understanding the True Cost of a Data Breach in 2023

Data breaches are growing in frequency and severity, as cybercriminal groups continue to advance their methods of bypassing defenses to access confidential data. 

Social engineering, malware and ransomware are just a few of the methods used by criminals to exfiltrate sensitive information, but despite the number of attacks increasing, many organizations are still unprepared for a breach.

Unfortunately, for companies that do fall victim to a successful attack, the consequences can be devastating. A data breach brings about many financial issues, but there’s also a price to be paid in terms of reputation, operational downtime and potential legal fines.

How Much Can a Data Breach Cost Your Business?

The answer to this question is a long one, but the short version is the average cost of a data breach stands at $4.45 million. That’s according to the Cost of a Data Breach Report 2023 by IBM and the Ponemon Institute, and it’s a record high.

This figure marks a 2.3 percent increase from the previous year and a significant rise of 15.3 percent from 2020. There are a multitude of factors that influence the number, including aspects such as the size of the victim’s business, the sector it operates in and where it is located, to name a few.

IBM’s report highlighted notable differences in the average cost of a data breach between different industries. At the top end of the spectrum were healthcare organizations, which, on average, lost $10.93 million. This is the 12th year in a row that the sector has topped the scale, but the current figure is a 9.4 percent increase from 2021.

What is the True Cost of a Data Breach in 2023?

When an organization falls victim to a data breach, there are numerous factors to consider before attributing a cost. On the surface, there is the price of lost data, which IBM’s report calculated to be $4.45 million, on average.

 However, this doesn’t account for other aspects, such as downtime, damage to reputation, idle employees or regulatory fines, all of which contribute to the total cost of cybersecurity breaches. 

By 2025, the money spent on managing cyberattacks is estimated to reach $10.5 trillion annually. That’s approximately five times the cost of mitigating natural disasters in the United States since the record began in 1980. If one thing is clear, it’s that data breach costs are on the rise, which means businesses should look to invest in threat detection and data security measures.

Why Do Data Breaches Occur?

A data breach takes place when a cybercriminal gains unauthorized access to a system, network, or other source of data, and then exfiltrates sensitive information, usually for personal gain.

There are many reasons why a data breach might occur. While in one instance a threat actor could create and send phishing emails to members of a company to gain access to the network, an incident could also stem from a malicious insider who is disgruntled with their organization.

Data breaches can be carried out physically or remotely, with the latter being more common. Criminals will always attempt to exploit the weak links in a target’s operation, which could be certain people, systems or networks.

But why are hackers trying to steal information in the first place? Certain types of data are particularly appealing to cybercriminals, like credit card details, social security numbers, trade secrets or highly sensitive, personal materials. 

The types of information businesses risk losing through a cyber breach include confidential company information, customer data, personal data or anything that could be of value. These items could be duplicated to make a profit, misused for identity fraud or even used as blackmail. In some cases, compromised credentials are also sold on dark web marketplaces to other malicious parties.

What Are the Different Kinds of Data Breaches?

The first step to protecting your organization from the growing threat of cybercriminals is to gain a comprehensive understanding of the different attacks they carry out. The following are among the most common types of data breaches.

Malware

Malware is an umbrella term used to describe any software that is intentionally designed to harm target systems and networks. This could be disrupting servers, stealing data, destroying sensitive files or any other nefarious activity.

Phishing, fraudulent websites, USB flash drives and fake apps are all examples of ways malware could find its way into your systems. Malicious third parties that engineer and distribute malware want it to spread, so the best line of defense is prevention.

Ransomware

A ransomware attack is when cybercriminals gain unauthorized access to sensitive data, networks or systems, then encrypt them, preventing the owner from accessing them.

The threat actor will then demand a ransom for the return of the stolen information. There is no guarantee that they will release the data upon receiving a ransom, so organizations are advised not to pay up.

Stolen Information

The weakest link in any security chain is usually the human aspect. Anyone can make a mistake, but some errors can prove extremely costly – especially if employees act in a careless manner.

For example, Apple suffered a data breach in which the details and specifications of its latest iPhone were leaked across the internet. This occurred after an employee left a prototype device lying around, unguarded.

It pays to be cautious, as criminals could be watching at any given moment. They could attempt to acquire sensitive information physically, by stealing a device, or remotely by orchestrating a successful hack.

Phishing

The majority of data breaches start with a phishing attempt. This is when a malicious third party creates content, such as emails, links or websites, which masquerade as a genuine version of the same thing.

 For example, some phishing emails pretend to be from PayPal and ask targeted users to log in with their credentials, which in turn gives the threat actor access to their account. Phishing scams are extremely common, with an estimated 3.4 billion spam emails sent every day.

If an employee within your organization clicks on a malicious link or attachment, malware could enter via their endpoint and spread to your entire network, putting all of your confidential data at risk.

Business Email Compromise (BEC)

BEC is a type of phishing in which emails don’t carry a link or attachment, but take advantage of impersonation tactics to convince victims to take an action, such as transferring data or changing bank account information.

Threat actors could impersonate an individual who holds a senior position, like the CEO, to coerce other employees into exposing data. BEC is a sinister tactic in the cybercrime playbook, as it exploits the fact that professionals wish to please their seniors.

What Are the Consequences of a Data Breach?

The frequency and severity of data breaches are both on the rise but, unfortunately, many organizations are still unprepared to react if they fall victim to cybercriminals. This complacency is worrying and exposes businesses to intense scrutiny. 

Although the cost of a data breach is undoubtedly one of the most significant consequences, several other factors need to be considered, including the loss of important and sensitive data, operational downtime, brand trust and legal action.

How Long Does it Take to Identify and Contain a Data Breach?

Data breaches are common in the modern world, which means even if your organization hasn’t suffered one, the chances of it happening aren’t negligible. Criminal groups stand to profit significantly from these actions, so they are innovative and invest time and money to conduct highly advanced attacks.

 This means that a data breach doesn’t simply appear one second and then disappear the next. An IBM report noted the average breach cycle lasts for 287 days, with businesses taking 212 days to detect it and an additional 75 to neutralize the threat.

Every organization should implement preventative measures to combat threat actors. This means building and exercising safe practices, like storing information securely, adhering to clear policies and training staff to understand data protection.

Ultimately, the longer a breach continues, the more expensive it becomes. The Cost of a Data Breach Report 2023 found that companies that contain a breach within 30 days save over $1 million in contrast to those that take longer, so it pays to have a strong recovery process in place.

Additionally, if a business takes too long to disclose a breach, it faces the risk of lawsuits from independent agencies and consumers. According to the same report, the cost of notifying customers about a breach stands at $740,000 alone.

The bottom line is that planning for a breach makes a huge difference in the consequences an organization faces in the fallout. Preparation is key, especially with automated technologies, such as Anti Data Exfiltration software (ADX).

This is a set-and-forget solution that prevents unauthorized data from leaving your devices and network. Rather than depending on endpoint security measures, an automated ADX tool can halt cybercriminals before they can access your sensitive information.

How Much Damage Can a Data Breach Cause?

The consequences of a data breach are not limited to financial problems. There are numerous pain points for organizations targeted by cybercriminals, which can prove devastating.

Operational Downtime

Upon identifying a data breach, routine business operations will be heavily disrupted. This is because an organization will need to mitigate the attack and launch a comprehensive investigation into how it occurred and what systems have been affected.

The average cost of downtime stands at $5,600 per minute, or roughly $300,000 per hour, according to Gartner. It’s expensive, but unavoidable. A company that falls victim to a breach can’t continue normal operations until investigations have concluded, which could be a matter of days or weeks, depending on the severity of the attack.

Damage to Reputation

When a business suffers a data breach, customers lose trust in it. According to the 2022 Thales Consumer Trust Index, the vast majority of organizations that did fall victim experienced a negative impact and 25 percent of global consumers have stopped using a company after an attack.

The modern consumer is well aware of the value their personal data holds. If a company doesn’t demonstrate an ability to keep that information secure, people will simply head elsewhere. Most likely, to a direct competitor.

When a data breach occurs, sensitive information becomes exposed to unauthorized third parties. Hackers will use this information to commit criminal activities, such as identity fraud and opening bank accounts, or simply sell it to another source.

Depending on the size and stature of your business, a data breach could become a global news story in a matter of hours. Word travels fast and once those stories break, the reputational damage will be long-lasting. In turn, this will impact your ability to attract new customers, secure future investment and even hire new employees.

Legal Action

Due to data protection regulations, businesses are legally obligated to demonstrate an undertaking of every necessary step to protect personal information. In the event of a breach, consumers are entitled to claim compensation for their lost data.

For example, the 2017 Equifax breach involved records of over 147 million customers globally. Following a lawsuit, the organization has paid more than $700 million in compensation to customers in the United States alone.

When a business suffers a successful phishing attack, depending on the geographic location of the firm and the rules it is obligated to adhere to, it might need to notify law enforcement agencies of the security breach immediately.

Ultimately, data breach prevention depends on businesses using up-to-date security technologies. Criminal groups are constantly innovating new methods to carry out attacks, so employers and employees alike must know what to do in the event of a data breach.

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