The Real Cost of a Data Breach Based on a 2022 Analysis
Recent IBM data breach cost reports show that the average cost of data breaches has reached $4.35 million, roughly a 13% increase from 2020. This number doesn’t even account for the incalculable costs of data breaches, such as operational downtime, brand reputation damage, customer distrust, and loss of valuable intellectual properties and trade secrets.
In most cases, businesses never fully recover from a data breach and are forced to shut down. The real cost of data breaches is even higher for firms and agencies that collect and process users’ personally identifiable information (PII), such as medical and legal practices.
Detection and Escalation Costs
Data breach detection and escalation involve implementing processes to identify and respond to cyberattacks, and these processes do not come cheap. For instance, you would need pen-testing tools to identify system and infrastructure vulnerabilities early on.
You would also need to invest in appropriate technology and personnel to ensure you are ready to respond to a data breach effectively. There are the costs of hiring external consultants, conducting periodic audits and assessments, and crisis management as well.
The 2022 report highlights that these costs have risen by 16% from 2021 figures and are currently the largest cost incurred in relation to data breaches at $1.44 million per breach. Organizations can significantly reduce detection and escalation costs by implementing an incident response framework and having a standby incident response team.
However, healthcare data breach statistics show that many medical practices and affiliate organizations that are at a higher risk of suffering a data breach do not have an incident response team. A study by Cybellum revealed that over half of medical device manufacturers still did not have a product security incident response team (PSIRT) as of 2022.
Lost Business Costs
Data breaches can cause significant reductions on the business level, which comes at a heavy price. This is often due to lost revenue, new customer acquisition, reputational damage, and legal expenses. These costs typically increase with the duration of the data breach lifecycle, which is the time it takes for a business to identify and contain a data breach.
In 2022, average lost business costs were reduced from $1.59 million to $1.42 million thanks to the increasing adoption of XDR technologies which reduces business data breach lifecycle by at least 29 days.
Your business can incur much fewer data breach costs from lost businesses if you ensure the effectiveness of your record management system. By understanding and avoiding common record management mistakes, your business can optimize its record management system and proactively reduce the risk of a costly data breach.
Data Breach Notification Costs
Once a data breach occurs, businesses are required to communicate the breach with their customers and stakeholders. Acts like HIPAA require businesses in the healthcare sector not only to notify affected individuals but also to alert the Department of Health and Human Services (HHS) in the event of a data breach.
Data breach notifications cost was as high as $310,000, a slight increase from 2021. Factors that may influence your data breach notification costs include the geographic scope of the attack, the dispersion of affected customers and stakeholders, the type of data compromised, and the complexity of the IT infrastructure.
You may ask, can I send a HIPAA-compliant fax to notify stakeholders of a data breach? The answer is yes. HIPAA allows you to transmit protected health information (PHI) via fax, as long as the fax machine is secure and the recipient is authorized to receive the information.
You should implement security measures to ensure that the fax is sent to the correct recipient and that the information is not intercepted or disclosed to unauthorized individuals.
Post-Breach Response Costs
A post-breach response is responsible for a large portion of the costs involved in managing a data breach and preventing further data breaches. This cost currently averages $1.18 million per data breach. The activities that comprise these costs range from containment and investigation to remediation and recovery and, finally, post-incident review.
Usually, the costs of a post-breach response depend on the type of data that was affected by the attack. Sensitive data, such as Social Security numbers and credit card information, would cost more than non-sensitive data, like publicly known information or anonymous data.
Post-breach responses usually include all the activities involved in reducing the impact of the data breach and managing IT risk.
The Incalculable Costs of Data Breaches
In addition to the costs of data breaches that we have already listed, there are other costs that cannot be accurately measured in monetary terms. These costs relate to the emotional and mental damage individuals may suffer due to a data breach.
Individuals may feel violated and vulnerable when their personal information is exposed, causing anxiety, stress, and even depression. There are also the broader social and economic consequences of data breaches.
For example, a large-scale data breach can erode public trust in vital institutions like banks, healthcare providers, and government agencies. This loss of trust can lead to a decline in economic activity as people become more hesitant to engage in transactions that require sharing personal information.
Increase Your Data Protection and Reduce Costs of Data Breaches
Data breaches are no longer a matter of “if” but “when” they will occur, and recent data breach trends support this. The reviewed IBM 2022 data breach report indicates that over 83% of businesses have experienced more than one data breach.
To safeguard your organization against data breach incidents, you should enhance the security of your data storage, management, and protection. While moving your data and files to the cloud seems like a seamless way to do this, it is not a foolproof guarantee of data security.
As a matter of fact, IBM revealed that nearly 50% of data breaches occur in the cloud, proving that cloud storage will not provide you with the data protection that your business needs. Fortunately, Corodata offers expert-vetted insights and guidance to fortify your data security defenses and minimize the impact of potential breaches.
Corodata is the largest independent records management company in California. You can ensure your data is safe with their secure record storage, data protection, and scanning and imaging services. If you need to dispose of sensitive information, Corodata also offers HIPAA-compliant shredding and media destruction services.