The Impact of Data Breaches on Small and Medium-Sized Enterprises
A data breach is a cyberattack that exposes confidential, private, or protected information to someone without authorization. Criminals often target small businesses because they usually don’t have the cybersecurity safeguards that larger organizations have.
Documenting everything that happens during a data breach is essential to protect victims from phishing scams and other consequences. Consider putting information on your website to allow consumers to track updates about your business’s response.
Loss of Confidential Information
When hackers successfully breach your company’s cybersecurity system, they gain access to confidential information that may be used for various purposes. For example, your data can be sold on the dark web or used to commit identity theft or steal trade secrets. In addition, your customer’s information can be used to commit fraud or other crimes.
Smaller businesses are desirable targets for cybercriminals because they usually have fewer security protections. Plus, they’re less likely to attract the attention of law enforcement agencies and the media when a data breach occurs at one of their locations.
A cyberattack can cause a data breach by accessing your business’s systems through an unsecured connection. It can happen if an employee clicks on a dangerous link or divulges authorization credentials in a suspicious email or phone call. It is crucial to ensure employees understand the dangers of clicking suspicious links or giving out their authorization credentials and have a robust training program to ensure they know these threats.
According to reports, almost 20% of breaches are caused by compromised third-party vendors in the supply chain. Other data breach causes include malware, stolen passwords, and phishing schemes. The longer a breach remains undetected, the more sensitive data is exfiltrated by cyber criminals. It is why implementing continuous monitoring is so important.
Damage to the Company’s Reputation
The impact of data breach damages a company’s reputation. Consumers are kept from cyber attacks so that a breach will erode their trust. Companies must work hard to recover their lost reputation.
In addition to repairing its reputation, a company that experiences a data breach has to spend extra time and money attracting new customers. As a result, customer retention rates decrease and churn rates increase, which can lead to a loss in total revenue.
A company’s reputation will suffer if it doesn’t disclose its breach quickly enough. It is a big no-no for both large and small businesses because hackers are often motivated by greed and will keep the attack secret for as long as possible. Furthermore, delaying the announcement can hurt a company’s public image, as it will appear irresponsible and careless.
A tarnished reputation will also affect how a company is perceived by its employees. It will ultimately reduce a company’s growth potential and limit its growth opportunities. For example, it can make it harder for a business to attract talent and recruit new team members. Moreover, it can make it difficult for a company to gain a foothold in the market because potential clients will be cautious when considering working with it.
The fines, clean-up costs, lawsuit payouts, ransomware payments, and lost business associated with a data breach can wipe out most small businesses. According to a 2020 analysis of the Ponemon Institute and IBM analysis, 60% of small businesses that experience a cyberattack close their doors within six months. It is an unspeakable tragedy for business owners who have invested time and energy into expanding and thriving.
In addition to the apparent loss of revenue, data breaches can result in indirect losses that may be challenging to estimate. It can have a ripple effect that affects the whole economy. For example, consumers may stop doing business with the company whose data was breached out of fear that they might be scammed by hackers in the future.
Moreover, the data breaches at Target and Equifax have made people associate those companies with a bad reputation in general, even though they have excellent products and services. That is an enormous damage that can be difficult to reverse. It can also negatively impact government agencies, which must protect sensitive information such as military operations, political dealings, and details on critical national infrastructure. The same can be said about other companies, such as Yahoo, that previously suffered data breaches.
Whether due to identity theft or violations of government or industry compliance mandates, data breaches can result in fines, litigation, and even loss of the business’s right to operate. The cost of a cyber incident can be financially devastating, and companies are often forced to close their doors after one attack.
For private enterprises, data breaches can result in customer loss, profits, and reputational damage, impacting all organizational departments. The CEO is particularly affected and may be held personally responsible for the breach. The legal department is often charged with ensuring state and federal laws regarding consumer notification are followed and working through discovery documents and forensic reports.
The risk of data breaches is even higher for small and medium-sized businesses. Those who have not yet implemented adequate cybersecurity measures are especially vulnerable, as criminals know smaller entities tend to have less robust security than more giant corporations. It is also easy for criminals to access smaller organizations that do business with large corporations, as the larger company is likely to have a “back door” into its network via the smaller SMB. For this reason, the first target of any cybercriminal is a smaller business with weak defenses. They are enticing targets because they have plenty of valuable information to steal, such as credit card numbers and insurance details.