The Financial Consequences of a Data Breach

A recent study has found that 62% of Americans will stop buying things from a company for a few months after a data breach. This number seems incredibly high and probably doesn’t manifest itself in reality. However, it must be true to some extent as stock prices typically take a large short term hit right after the breach. Many of these companies continue to suffer for several years after. 

The study examined a group of companies that experienced a data breach of over a million records including: Apple, Equifax, and Sony. 3 years after the breach, their stocks had risen about 28%, but were down about 16% compared to the NASDAQ over the same time period. This is a massive amount of money being lost and it is not simply due to chance. Data breaches will often create negative headlines for a few weeks, creating a downward spiral for the company’s share price due to pure speculation. Consumers will see these and create an image of incompetence and loss of trust in the company’s brand. In many cases this will lead to lower quarterly profits and the stock dropping even lower. Although there are many other factors to consider, the fact remains that a data breach is simply not good for business.

More and more consumers are taking data privacy very seriously and it is starting to creep into legislation as well. As discussed in a previous blog, companies are beginning to back a federal data privacy law. In order to create a more coherent data privacy landscape, this must happen. As a result, companies may also soon face bigger fines in addition to the lost equity from share price dropping. This combo may prove to be too much for struggling businesses that don’t have the means to pay the fines and keep their company afloat. The downward spiral will only become quicker and more deadly. In order to avoid the consequences of a breach, companies will have to increase the effort that they put into data protection. It is currently on the to-do list, but it is definitely not the most urgent item. Data protection is one of the easiest and most important things a company can do.

SecureCircle protects your data regardless of location including on-premise file servers, edge devices like phones and laptops, as well as public and private cloud storage. Over the past year, we’ve heard overwhelmingly positive feedback from compliance officers and auditors because as a byproduct of data protection that works everywhere, SecureCircle is also able to track files at all times. Protection and visibility for your company’s sensitive data. Visit our website to learn more about what we do.