There are multiple costs associated with a data compromise, whether it’s through a ransomware infection or network breach by a hacker. Some of these costs are easier to put a hard number on than others.
For example, the cost of emergency IT services to stop the breach, eradicate an infection, or restore lost data will generally come with an invoice so you know exactly what it costs. But what about costs that are harder to calculate like a damaged reputation and the current and future business that costs you?
If you don’t have strong anti-malware protection and fall victim to a data breach, it can have long-term consequences that have an impact on your bottom line far beyond the initial incident.
When your company has had a data breach that exposes sensitive client information, those clients are naturally not going to put the same trust in your company as they once did, and many will seek out a competitor that they feel with handle their data more securely.
Even if you’ve suffered a ransomware attack that hasn’t resulted in exposure of sensitive customer information, the downtime resulting from trying to recover from that attack can be enough to cause your customers to see your business as unreliable and unsecure.
Many organizations end up having to close or severely limit their services while trying to get their systems back online after a ransomware attack.
The costs of a lost business reputation are many. We’ll explore them in detail below.
The Costs of Reputational Damage Due to a Cyberattack
The average price tag of costs due to customer loss is $4.13 million. It includes things like:
- “Abnormal churn”, which is abnormal turnover of customers
- Increased costs to acquire new customers
- Reputational losses
- Loss of referral business
- Diminished goodwill
In fact, the reputational costs can end up being far more than the costs of getting your business back online after a cyberattack because they’re long lasting and can result in loss of customers that never come back.
According to IBM Security, costs from a data breach follow a company around for years after the incident. Just 67% of the costs come in the first year of the attack, with 22% happening in the second year, and 11% in the years following. One of the biggest contributors to these long-term costs is the reputational losses that accompany a cyberattack.
Here are the ways that your business suffers due to reputation damage.
Customers Leave & Go Somewhere Else
When a customer’s personal information (like their credit card number, SSN, or other data that can be used for identity theft) is exposed, it’s an instant feeling of being betrayed by a partner they trusted.
Even those long-term clients that have a good relationship with your company, may see the need to go elsewhere for security reasons even if they don’t directly blame your company for the breach.
Loss of Referral Business
Referral business is the lifeblood of many companies. B2B companies with referrals have a 70% higher conversion rate and 69% faster time to close than non-referral business.
Once your company has had a data breach or suffered a ransomware attack, it’s going to be harder for your customers to feel good about referring you to a friend or colleague, and your referral business will suffer as a result.
Loss of Potential New Business
One of the harder costs to quantify, but one that is very real, is the loss of business that you may have gotten from new customers. Once the news is out about a data breach at your company, potential new customers may bypass you and choose someone else because of their security concerns.
87% of consumers state that they’ll take their business elsewhere if they don’t trust that a company is going to handle their data securely.
Online personalized product giftshop CafePress reported a major data breach in September of 2019 that had happened about 6 months earlier and impacted the data of 23 million customers. Now the company is facing a class action lawsuit as a result of that breach.
Loss of reputation due to a breach of customer information can end up exposing you to potential costly litigation in the future.
Loss of Employee Confidence
In October of 2019 it was reported that the FBI was investigating ransomware attacks on Indiana companies that may have resulted in the temporary production shut down at Subaru of Indiana Automotive and Heartland Automotive, the auto plant’s supplier. It resulted in shifts being cancelled at both companies and worker’s sent home.
Data breaches and ransomware attacks can impact your employees in a very real way through loss of hours due to temporary operation shut down or having their own data exposed. This can make it harder for you to find talented workers in the future.
Avoid a Data Breach with Proactive Network Security
Protect your business from the costs of a data breach, including loss of reputation by taking a proactive approach. Magnify247.com has security solutions that keep your network actively monitored and protected from ransomware, hackers, and other threats.
Contact us today for a security consultation! Call 317-565-7094 or reach out online.