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With data breaches increasing annually, businesses need to be more vigilant in implementing security measures. Large companies also experience mega data breaches that affect their business, but the hacks rarely lead to closure. However, breaches in small businesses may not be large-scale, but the affected companies have a slim chance of recovery.
Unfortunately, most data security breaches take a short time to pull off, but the consequences are dire. Statistics show that 93% of successful hacks take less than a minute, and 80% of businesses will not notice the breach for weeks or months. Therefore, small businesses should utilise resources at their disposal like Microsoft 365 security to secure their data from external breaches.
Most small firms only worry about the legal ramifications of a data breach, but cyberattacks have more severe consequences than fines. Here are some of the consequences of a data breach and ways to prevent them:
The aftermath of a data breach features thorough investigations on the affected systems to uncover the source of the breach. That means all business processes will come to a halt until the investigation is complete. It could take weeks or days, depending on the level of breach. If the breach resulted in data loss, a business might have to shut down operations temporarily. Unfortunately, the disruption in operations has a trickle-down effect since when you shut down, customers will seek out your competitors. When you reopen, you will start by looking for new customers. Business disruption is the primary reason 60% of small businesses are out of business within six months after a cyberattack.
Customers expect your business to be secure from hacking and external breaches. Therefore, a data breach destroys the trust and confidence they have in your company. According to research, financial institutions affected by a data breach will lose a third of their customers. Also, 85% of customers will share negative experiences on social media and your website. The negative reviews are a significant blow to your business since you will lose potential customers. Not to mention the negative press and associated identity theft further darkens your reputation. The cost of rebuilding the damaged brand reputation often outweighs the cost of data protection.
Apart from customers, your employees will lose confidence in your leadership, especially if you lose employees’ during the breach. If they feel you do not treat employees’ data as valuable, they will lose morale, and turnover rates will increase. Taking a reputational hit will also reduce investor confidence, and you will not attract the best talent or suppliers in the market.
Ponemon Institute points out that the cost of a data breach increased by 12% in the past five years. The financial impact has significant consequences on small businesses that do not have substantial resources. After a breach, a company will incur the cost of dealing with the breach and regaining its systems. The costs of investigating the breach and conducting a security audit can skyrocket since the process requires legal fees.
If there are ransomware demands, you will spend more money in your attempts to regain access to your digital infrastructure and sensitive data. On average, most ransomware demands fall below a hundred thousand pounds, but that amount can cripple a small business. After regaining your data, you must also invest in new security measures and compensate customers affected by the security breach. With significant cash outflow compared to inflows, your revenue reserves will deplete. Other hidden costs associated with a data breach include increased insurance premiums and a high cost of raising debt.
Businesses rely on data for daily tasks and decision-making. Small firms collect data about their social media platforms, lead generation, business processes and customers. From the information gathered, you can track sales effectively, predict emerging trends and find creative ways to target more customers. You can also find loopholes in your business processes and streamline them to save time and money. When a data breach leads to the loss of valuable data, your company loses the ability to predict trends and adapt efficient business processes. Your competitors will have an advantage over you since they can embrace the new trends and snap up your customers.
While data used for prediction is valuable, losing it is not as catastrophic as losing sensitive personal data. Any information that could identify an individual like email, name and biometric data can cause devastating consequences when in the wrong hands. Besides, in businesses that rely on real-time personal data like a hospital, the data loss could result in the wrong diagnosis. Computer hackers can also sell the information leading to identity thefts and financial losses for your customers.
Instead of targeting data, some hackers steal the blueprints, strategies and design elements of your business. Such loss of intellectual property can be catastrophic since it affects your competitiveness. Loss of intellectual property is common in manufacturing sectors, but it can also affect small businesses that rely on unique designs to stay ahead of the competition. Besides, your rivals will not hesitate to use the stolen information to gain an advantage and steal your customers.
Small businesses have a legal obligation to guard all their information against external breaches. If your business data falls into the wrong hands, customers have a right to claim compensation. For instance, the 2017 Equifax breach led to class action lawsuits in the UK and USA, with customers seeking monetary compensation for the breach. The legal fees and the settlement amounts can cripple small businesses. The authorities may also restrict certain business operations leading to further losses.
Some countries impose fines and monetary penalties for data breaches. Authorities often perceive a data breach as a consequence of failing to comply with the data protection legislation. The penalties combined with settlement payments can threaten your business to insolvency.
A cyberattack may be a scarlet letter that brands your business for years. Today’s consumers do not easily forgive if you cannot protect their data. With many transactions taking place online, customers’ data is vulnerable if your business does not have any security measures. Therefore, it is understandable when customers stop engaging with a brand online due to fear. If they cannot trust you to do your job, why should they trust you with their money? Customer rejection can prevent a company from recovering since the revenue will decrease at alarming rates. For a small business without a financial buffer, it will be impossible to stay afloat.
Statistics show that a quarter of hacks use stolen credentials to access business data. The same hackers can use the stolen data to gain access to the company without detection. The successive attacks make reputational recovery close to impossible.
Online vandalism can also lead to continued attacks. For instance, the hackers will start with a few changes on your website. While the changes will be subtle and hardly noticeable initially, it can escalate to changing a few words or numbers on your contact page. Some hackers can also add vulgar content. Such continued attacks may force you to start a new website from scratch, erasing years of hard work in building up your site’s authority.
Many businesses learn about data breaches the hard way, which is devastating. With the rising data breach cases, it is crucial to understand your vulnerabilities and seal the security gaps in your systems. Carry out an audit to assess your cybersecurity and preparedness in case of a breach. Microsoft 365 security helps identify security threats by alerting you of suspicious activity. When you link the security feature with various devices, you can wipe your information remotely when your device gets into the wrong hands. The feature limits access to business information and protects businesses from data leaks that could cause a significant breach.
A recent survey revealed that 54% of small businesses do not plan to deal with cyberattacks. The worrying trend increases the vulnerability of such companies to external threats. While it can be costly to put a robust data security plan, businesses can utilise tools like Microsoft 365 security to boost their data security and prevent the above catastrophic consequences.