New Report: Cost of Data Breaches on the Rise

New Report: Cost of Data Breaches on the Rise

Late last month, the online auction site revealed that hackers had gained access to its primary database, which was used to store user passwords. Although the company maintains that there is no evidence that the compromise resulted in unauthorized activity, it has advised all users to change their passwords. For companies like eBay, the cost of data breaches and cleaning up after cyberattacks and other security breaches continues to rise. According to the Ponemon Institute’s 2014 Cost of Data Breach Study, the average cost of a data breach was $3.5 million last year, representing a 15 percent increase over 2012 figures.

In the United States, the study examined the cost of data breaches incurred by 61 companies across 16 different industries. Below are several key takeaways from the report:

Source of breaches:

The report confirms that the top causes of data breaches continue to include malicious attacks, human error, and system malfunctions. Cyberattacks account for 42 percent of all data breaches, while employee negligence and system glitches account for 31 and 25 percent of data losses, respectively.

Type of breach influences cost:

Malicious or criminal attacks result in the costliest breaches at an average of $246 per compromised record. By comparison, system malfunctions and human errors resulted in a much lower average per capita cost at $171 and $160, respectively.

Impact on customers:

Companies are losing more customers following a security breach. The average abnormal churn rate between 2013 and 2014 increased 15 percent. Reputation and the loss of customer loyalty cause the most serious damage to a company’s bottom line.

Reputation Losses Vary by Industry:

In terms of customer relations, the hardest hit include the pharmaceutical, financial services, and healthcare industries. Surprisingly, retailers have less difficulty bouncing back from a breach.

Reducing the cost of data breaches:

For the first time, the study found that having business continuity management involved in the remediation process reduces the cost of the breach by an average of $13 per compromised record. Other factors, such as having a strong security posture or a formal incident response plan in place prior to the incident, reduced the cost by as much as $21 and $17 per record, respectively.

So what’s your opinion on the cost of data breaches? Feel free to leave a comment below.