The Overall Financial Impact of a Cyber-Attack

Cyber criminals pursuing financial gain through identity theft, fraud and blackmail; competitors disrupting businesses or stealing intellectual property to gain advantage; and “hacktivists” penetrating firewalls to make political statements, cyber crime has never been as rampant as it is today.

This has made it very critical for organizations especially those running business-critical operations over the web to ensure high levels of security. For product companies, leaking of proprietary knowledge is most damaging whereas for service companies, loss and release of identifiable information on customers is graver than service disruptions.

SSL is the only way to protect this sensitive information. Encrypted information will be useless to the criminals since they will not have the key to decrypt and understand it. Additional benefits of an SSL certificate include free site seal, warranty from certificate autohrity etc. With SSL certificate and its providers like ClickSSL you can have user’s data secured on website and get uninterrupted performance for the website.

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When “protect the perimeter” security strategies prove insufficient 

The pace and sophistication of attackers seem to be increasing faster than the ability of businesses to defend themselves. Breaches have become very common and all businesses can hope for is a proper mitigation strategy when their security fails. In spite of this reality, the real resulting impact of an attack remains largely unproven.

Due to the lack of a true picture of the impact of a cyber-attack on a business, technology executives are not developing proper cyber risk programs. After falling victim to a cyber-attack, businesses most likely end up facing a much higher bill than they are prepared for and struggle to manage the event. Much of the damage to a business results from a poor response to a breach rather than the breach itself.

The Cost Of a Cyber-Attack

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What is the real cost of a cyber-attack? Do executives accurately gauge the impact of breaches on their businesses while crafting a mitigation strategy?

Few would dispute the menace of cyber-attacks but many fail to appreciate its true impact beneath the surface. This is mainly because they are not privy to the struggles their peers face as they try to recover from cyber-attacks.

Breach notification and protection costs, regulatory fines, public relations costs, ransom payments and other superficial costs of data breaches are well understood. The “slow-burn” effects however, most of which are intangible and can ripple for years are largely unproven and unknown to most business owners.

These slow burn effects are tied to operation disruption, reputation damage or loss of strategic assets like proprietary information. They result in a wide range of hidden costs and they are the reason most businesses go under after a cyber-attack.

The Full Catalogue of Cyber Attack Impacts 

To gauge the real potential impact of a cyber-attack, businesses ought to avoid misleading assumptions typically shaped by ostensible public reports and conduct more comprehensive investigations to unearth the less visible, long-term costs. With a more accurate idea of what to expect, they can create better risk mitigation programs to protect their businesses and increase their chances of survival in the face of a cyber-breach.

Leading advisory firms like Deloitte and Mckinsey have released various reports outlining the depth of cyber incidents. A report by Deloitte for example tries to quantify the potential damage of a cyber-attack scenario by identifying 14 business costs that can play out over a five year incident response process.

These costs constitute the overall impact of a major cyber-attack incident. The overall impact can therefore be classified into direct and indirect losses incurred by the affected enterprise.

  1. Direct Financial Losses

Even when there is no theft of money, great expenses are incurred in the event of a cyber-security breach.

The first and most evident financial loss after an attack is the cost of incident response. This includes:

  • Cost of containing and responding to an attack
  • Cost of investigating the breach
  • Compliance fines
  • Attorney fees and litigation expenses
  • Public relations expenses
  • Cost of strengthening security to make sure that the attack cannot be repeated

These costs have an impact on business continuity. It is easy to attach a dollar amount to each and that is why executives generally focus on these. Depending on the size of the business, these expenses can easily amount to millions of dollars.

  1. Indirect Financial Losses 

Beyond the initial incident triage, an enterprise is bound to suffer additional losses in the long term mainly due to the reputational damage sustained. After a cyber-attack, customer trust in an enterprise’s brand will be eroded especially if the cause is failure to adequately protect information. Relationships with suppliers, investors, partners and all other third parties vested in the business will take a dip.

The consequences of operational disruption, loss of sensitive data and regulatory compliance implications also constitute the broader impact of a cyber-attack. Others include:

  • Loss of proprietary information like intellectual property or client data like personal identifiable information (PIN)
  • Devaluation of the brand name
  • Loss of customers
  • Increased insurance premiums
  • Lost contract revenue
  • Business destruction/disruption
  • Increased cost to raise debts

According to Deloitte, these losses though indirect and often difficult to quantify, account for about 90% of the total financial impact to an enterprise.

Conclusion 

Business owners and executives need to broaden their thinking on what may be at stake in the event of a cyber-attack. An approach of quantifying the costs of an attack based on the recovery costs that hit the balance sheet is narrow. The devastation to the business value has to be factored in the preparation for and response to cyber incidents of all types. All departments have to be involved in ensuring that the business is secure and that policies are in place to mitigate the blow of a cyber-attack.

According to McKinsey, majority of companies have nascent or developing cyber-risk management capabilities. Their research in partnership with World Economic Forum reveals that there is plenty of room for improvement in terms of cyber-attack readiness.

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About the Author: Shameem

I am Shameem, Software Engineer, Web Addicted, Living in Chennai, India.

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