How Do Data Security Breaches Impact Business Stability?

  • Anuj Saxena


<p>A data breach occurs when confidential information is <strong>intentionally or unintentionally</strong> exposed to unauthorized parties. Data has become one of the most critical components in the digital era, and data leakage poses significant risks to organizations, including substantial monetary and reputational losses.</p><p><img src="https://kradminasset.s3.ap-south-1.amazonaws.com/KR+Blogs/Data+breaches+-+Banner.jpg" /></p><p>Despite the focused efforts to ensure data security, new instances of security data breaches surface every day. Data loss detection and prevention has emerged as a business's most pressing security concern.</p><p>Some of the most common methods for data breaches include malware, ransomware, viruses, and phishing attacks. All it takes for cybercriminals to gain access to business-sensitive data is a single click on a malicious link.</p><h2><span style="font-size: 14pt;">Data Breaches: Threats and Consequences</span></h2><p>Threats of data breaches don't always come from cyber criminals. Employees, consultants, and suppliers may also threaten data security.</p><p class="bbox"><em>Cybercriminals may use malicious websites or infected emails to gain access to your networks via malware. And with data being accessible from mobile accounts and cloud applications, traditional security measures, like firewalls, are no longer enough to protect your data.</em></p><p>In the short term, you may face direct fines and fees because of the high regulatory burden. You may also be required to pay for an investigation to identify the source of the data breach and future remediation costs. In the long run, customers will lose trust in your business, and you will lose your reputation as you fail to protect customers' sensitive information.</p><p>And as past examples have shown, this results in a decline in stock value and sales growth. For example, large firms and retail companies have experienced a 3.5 and 5.4 percentage point decline in sales growth, respectively, following a data breach attack.</p><h2><span style="font-size: 14pt;">The Connection Between Geopolitical Tensions, Market Instability and Data Breaches</span></h2><p>Geopolitical conditions have always affected market conditions, making markets unstable. Historically, a crash in the stock market has always followed wars. Geopolitical tensions can also lead to market instability through their impact on data breaches.</p><p>As tensions rise between countries, businesses may become more vulnerable to cyberattacks as nation-states or non-state actors may use cyber means to achieve their goals. This can result in large-scale data breaches that can significantly impact the financial markets stability.</p><p>Data breaches can lead to:</p><ul><li>A loss of sensitive information, such as trade secrets, financial data, and personal information, can hurt a company's reputation and lead to a decrease in its stock price and overall market instability.</li><li>Regulatory fines and legal repercussions.</li><li>A loss of consumer trust can harm the company's long-term prospects and negatively impact the overall market.</li><li>Exposing vulnerabilities in a country's infrastructure, which can be exploited by nation-states or non-state actors, lead to market instability as investors may become more cautious and withdraw their investments.</li></ul><h2><span style="font-size: 14pt;">The High Costs of a Small Business Data Security Breach</span></h2><p>Big multinationals and corporates are not the only targets for security data breach attacks. Small organizations may be more susceptible to data breaches than major enterprises due to their relatively inadequate data security practices. Companies are liable to protect customer data, and by failing to do so, they may be responsible for paying future remediation costs to the affected customers.</p><p style="line-height: 1.4; padding-bottom: 12px;">Additionally, companies also lose trust and reputation among their customers. <a href="https://www.pwc.com/us/en/advisory-services/publications/consumer-intelligence-series/protect-me/cis-protect-me-findings.pdf" target="_blank" rel="noopener">According to a PwC survey</a>:</p><ul class="bbox"><li style="list-style-type: none;"><ul><li style="line-height: 1.4;"><em>92%</em><em> of the customers expect even small businesses to be proactive about data protection </em></li><li><em>85%</em><em> of the customers avoid an organization if they have concerns about data security</em></li><li><em>69%</em><em> would avoid a company that had suffered a data breach</em></li><li style="line-height: 1.4;"><em>29% would never visit the affected business again</em></li></ul></li></ul><p style="line-height: 1.4;">As a result, <a href="https://www.fisglobal.com/en/insights/merchant-solutions-worldpay/article/how-the-consequences-of-a-data-breach-threaten-small-businesses" target="_blank" rel="noopener"><em><span style="color: #3598db;">approximately 60% of small businesses go out of business within six months of a data breach</span></em></a>. Therefore, it is critical for every business, small or large, to be proactive about data security measures and protect themselves from potential cyberattacks.</p><h2><span style="font-size: 14pt;">Business Uncertainty in the Face of a Data Breach</span></h2><p>Cyberattacks and data breaches have the potential to spread false information or misuse business-critical information. With many businesses experiencing multiple data breach attacks, they must choose between assessing the risk and investing in more stringent security protocols or increasing prices and making customers bear the cost of the data breach investigations.</p><p>A study revealed that 83% of businesses experience multiple data security breach attacks, and 60% have increased prices post-data breach to pass the costs onto customers. Organizations must assess, plan for, and mitigate data breach risk as any other operational risk and not let cyberattacks create an environment of business uncertainty.</p><h2><span style="font-size: 14pt;">Effective Ways to Prevent Data Security Breaches</span></h2><p>No set of security measures is entirely impervious to a breach, as seen by recent security breaches of several significant, tech-savvy businesses, including Target, LivingSocial, Facebook, Gmail, and Twitter. Therefore, the next thing that organizations must consider is their plan of action in the case of a data breach.</p><p><img src="https://kradminasset.s3.ap-south-1.amazonaws.com/KR+Blogs/Data+breaches+-+Thumbnail.jpg" /></p><p>In today's digital business ecosystem, while you cannot avoid data security breach attempts, you can take proactive steps to reduce the risk of cyber security breaches by:</p><ul><li style="list-style-type: none;"><ul><li>Treating the risk of security breaches like any other business risk and strategizing for risk management, mitigation, and response.</li><li>Training your employees and raising awareness about common data breach attacks so employees can identify and report potential breach attempts.</li><li>Establishing protocols, hierarchies, and employee best practices to eliminate human error as a potential source of a data breach.</li><li>Limiting access to your most sensitive data.</li><li>Hiring data security experts to improve and continually update security protocols, practices, and technologies, like traffic monitoring, VPNs, security AI, and automation.</li><li>Periodically auditing and reevaluating your data security strategy to account for emerging threats, eliminate obsolete security practices, and keep protecting your business from data breach risks.</li></ul></li></ul><h2><span style="font-size: 14pt;">How Can Knowledge Ridge Help?</span></h2><p>At <a href="https://www.knowledgeridge.com/" target="_blank" rel="noopener">Knowledge Ridge</a>, we have access to experts with specialized industry know-how to help you navigate the constantly evolving digital business ecosystem.</p><p class="bbox"><em>Our subject matter experts are knowledgeable about the latest data security policies and protocols and the most-current technological tools. They can help organizations strategize and prepare for and prevent potential data security breach attacks</em><em>.</em></p><p style="padding-bottom: 12px;">Many small businesses may not have the technology and resources to accomplish this in-house, and Knowledge Ridge can help. With our extensive network of 353,000+ experts across 40+ countries, our <a href="https://www.knowledgeridge.com/Knowledge-RidgeExperts" target="_blank" rel="noopener">custom-vetted experts</a> can help you:</p><ul><li style="list-style-type: none;"><ul><li>Train employees on data security best practices</li><li>Strategize for cyber security breach risk management, mitigation, and response</li><li>Set up and implement stringent data security protocols</li><li>Audit data security strategy to identify and address network weaknesses</li></ul></li></ul><p><a href="https://www.knowledgeridge.com/Knowledge-Ridge-Contact" target="_blank" rel="noopener">Get in touch with us </a>to safeguard your business from potential data breaches and consequent business instability.</p><h3><strong><span style="font-size: 14pt;">Frequently Asked Questions</span></strong></h3><h2><span style="font-size: 12pt;"><strong>What are three implications that occur as a result of a data breach?</strong></span></h2><p style="padding-bottom: 12px;">Because of a data breach, organizations:</p><ol><li style="list-style-type: none;"><ol><li>Are levied fines that affect the company's bottom line in the short term</li><li>Lose their hard-earned reputation and customers' trust</li><li>Losing its customer base affects the company&rsquo;s long-term sales growth and stock value</li></ol></li></ol><h2><span style="font-size: 12pt;"><strong>How do data breaches affect the economy?</strong></span></h2><p>Businesses lose millions of dollars as a result of data breaches. And if these security concerns increase the cost to businesses, the prices for goods and services would also increase, creating a state of economic instability and business uncertainty.</p>