Technology plays a key role in modern businesses by helping them run efficiently and offer their customers quality services. Potential customers use technology to reach out or communicate with a business, and the company benefits because better interaction helps them maintain a good public image. But, have you ever asked yourself what would happen if an organization experienced a major data breach? What are the consequences if a business lost all its data due to a cyber-attack such as malware?
Major data breaches hit the headlines every day. Cybercriminals continue finding new ways to infiltrate business software and databases to steal sensitive information from undetectable malware to social engineering attacks. That is why businesses must have cybersecurity policies in place to protect their databases from possible data breaches. Business owners can implement different personal measures such as using password managers, two-factor identification and using VPNs to safeguard their privacy.
Business owners also need to fully understand the far-reaching consequences of data breaches to their businesses to mitigate any data risks. Below are five severe consequences of data breaches to business owners.
Whenever your business encounters a data breach, the data that facilitates your daily operations is not available, which means that your business won’t be able to make money as usual. Financial loss is one of the most detrimental effects of a data breach an organization has to deal with. Financial losses include loss of revenue, investigating the breach, compensating affected customers, legal fees, implementing new security measures and regulatory penalties for non-compliance with General Data Protection Regulation.
The finances get even more hindered if your organization doesn’t have data backup to work with for the time being. A data breach can significantly impact a company’s share and valuation, like what happened to yahoo in 2013, whereby they had to sell the company in 2016 at $350million less.
A data breach exposes your business to legal ramifications such as fines, legal actions, and lawsuits. Under the data protection regulations, a company is under a legal obligation to ensure that they have all the necessary measures in place to protect customers’ sensitive data. If customers’ data is compromised, you may face legal implications for not adhering to data protection regulations. Again, customers can sue you for compensation whether the data breach was intentional or not. We have seen many cases whereby customers sue organizations for loss of privacy to their data.
Moreover, shareholders are more likely to sue your business for failing to protect their investment. All these legal ramifications can be overwhelming to your business which makes recovery even more challenging.
Loss of employee morale and productivity
A data breach impairs productivity as well. Employees lose the morale to work due to loss of work databases, interference of workflows, making it hard for them to continue working as usual. After a data breach, you have to investigate what caused it and how it occurred, which causes operational downtime. For instance, it might be inevitable to shut the business down until the data breach is investigated, which may take days to several weeks, depending on the severity of the attack. That has a negative impact on productivity which puts the future of your business at a huge risk.
Loss of customer trust
It is not easy to gain customers’ trust in your business. It may take years to obtain customers’ faith, but it may take a single data breach to lose all that. When your business experienced a data breach, customers lose the trust they have in your business including their loyalty as well. The most challenging thing is winning customers’ trust once it has been lost, especially in a devastating experience such as the loss of privacy to their sensitive data.
Whether it was intentional or not, customers perceive a data breach as negligence on your part as a business owner. It even magnifies any discontentment they had with your business. That results in the loss of loyal and potential customers, and it may take very many years to win their trust back.
Brand reputational damage
A data breach leads to the loss of your brand reputation, which might have taken you years to build. According to research, a third of customers will immediately stop doing business with an organization that has experienced a data breach. Remember that news spread very fast in the digital age, and within no time, everyone knows of the data breach. These days, customers go online to vent out their discontentment and anger about an organization, so you can imagine what would happen if a data breach occurred. Keep in mind that brand reputational damage has long-lasting effects on the business. It impacts the ability to attract new customers, investors, and new employees.
It may take years for you to rebuild your brand after a data breach, so it is best to enforce data security measures early enough to protect your business.