Reputation, Ransom, and Recovery: The True Cost of a Data Breach

Data breaches continue to rise in frequency, sophistication, and severity—and despite IT advancements and lessons learned over the digital years—containment is nowhere in sight. According to Cybersecurity Ventures, the global annual cost of cybercrime is?expected to reach $10.5 trillion?in 2025.?

From small businesses to large enterprises, no organization is invulnerable to cyberattacks. Hospitals and schools, in particular, have both been hit hard, paying out millions to restore operations and regain access to patient records, social security numbers, birthdates, and other important data. ?

Even big-name companies—which have the financial means to implement cutting-edge security—fall prey to cybercrime. According to the?Identity Theft Resource Center, T-Mobile took the top spot in a 2023 data breach, when the personal information of a staggering 37 million customers was compromised and destined for the dark web.?

This article explores the multifaceted financial costs and reputational damage data breaches cause, how organizations can mitigate their fallout, and how to architect the?cyber resilience?you need to thrive in today’s complex digital landscape.?

Join Team Wasabi to learn everything you need to know about protecting your data...not just during Cybersecurity Awareness Month, but all 365 days a year, in our upcoming webinar series.

The soaring cost of cyber-crime?

Data breaches have occurred since the early days of digital computing, but they advanced quickly with the rise of the Internet in the 1990s. The escalating nature of data breaches is easy to see. One of the first known data breaches happened in 1984 when a teenage hacker accessed the credit data of thousands of individuals—known as the 1984 Credit Bureau of Tulsa Hack.??

Fast-forward to 2023 and the?MOVEit Breach, which has impacted more than 2300 organizations—including the US Department of Energy—3.4 million people, and put large portions of the Internet at risk. In the MOVEit Breach, hackers use a null string—a programming concept for no value—as a public encryption key during the authentication process. With it, the hacker can log in as an existing, trusted user.?

The devastating fallout organizations face from data breaches is wide-ranging and exorbitant:?

• Financial loss?— Theft of funds, valuable data, and ransomware attacks that require direct payments to recover locked data.?

• Regulatory fines and legal costs?— Fines for non-compliance with?data protection regulations?(such General Data Protection Regulation [GDPR] and the Health Insurance Portability and Accountability Act [HIPAA]) and legal fees for lawsuits from affected customers.?

• Operational downtime?— Business disruption resulting in significant downtime and lost revenue.?

• Incident response and recovery expenses?— Organizations often hire expensive cybersecurity experts to conduct forensic investigations and implement recovery plans.?

• Loss of intellectual property?— If sensitive company data or trade secrets are stolen, the long-term impact on innovation and competitiveness can be immeasurable.?

• Reputation damage?— Losing consumer trust in your brand is probably the biggest hit organizations take from data breaches. Losing the respect of customers, partners, advertisers, and the public is challenging to overcome.?

Brand recovery takes $ billions from IT security budgets?

After a major data breach, keeping customers from taking their business elsewhere can cost organizations big time.?According to a?recent Gartner study, by 2028, enterprise spending on battling misinformation will surpass $500 billion and take 50% of marketing and cybersecurity budgets.?

A prominent example of?reputational damage following a data breach?is the case of Facebook's Cambridge Analytica scandal in 2018. Data from over 87 million Facebook users was used without consent to influence political campaigns, sparking outrage over privacy violations. There was a massive backlash, including the "#deletefacebook" movement and Facebook experienced one of the largest single-day drops in stock market value, losing $120 billion. Facebook responded by overhauling its data protection policies and introducing stricter controls, but the long-term impact on user trust continues to challenge the company.?

Reputation recovery depends on several factors, including breach severity, company response, and steps taken to rebuild trust, such as:?

• Transparent communication?— Clear, open communication with customers, clients, and stakeholders is crucial. Companies should promptly disclose the breach, explain its impact, and outline the steps being taken to address it.?

• Immediate action?— Quickly fix vulnerabilities, strengthen security measures, and prevent future breaches.?

• Compensation and support?— Provide compensation, such as identity theft protection or credit monitoring services for affected customers; even offer refunds or discounts as goodwill gestures.?

• Cybersecurity improvements—Invest in stronger cybersecurity defenses and demonstrate a commitment to better security practices to prevent future incidents.?

• Strategic public relations?— Shift the focus from the breach to the remedy. Work with a PR firm to manage the narrative around the breach and publicly emphasize recovery efforts.??

• Long-term customer engagement: Focus on customer service, address concerns in real time, and show a long-term commitment to security.?

• Third-party endorsements?— Partner with cybersecurity experts and earn merit for improved security (such as an ISO/IEC 27001 certification).?

While a breach may initially harm a company's reputation, consistent, transparent efforts and implementation of stronger security measures can help regain customer trust and market confidence.?

The true cost—data breaches damage lives?

Data breaches jeopardize personal and corporate security alike. Perhaps the biggest cost of all is the havoc they create in your customers' personal lives. While you are busy recovering from the damage to your business,?many of your customers might also be?putting the pieces of their identity and financial lives back together. ?

In 2023 alone,?data breaches impacted more than 343?million people, individuals just trying to live their lives when they suddenly found themselves dealing with the fallout of being a cyber victim:?

• Financial?— Stolen payment information resulting in unauthorized purchases or withdrawal of funds from bank accounts. Fraudulent loans or credit card charges that go unresolved can damage a customer’s credit score, leading to long-term consequences like difficulty securing loans, higher interest rates, and challenges renting housing.?.?

• Identity theft?— Personal information, such as credit card details or social security numbers, can be used for fraudulent activities, leading to direct financial loss. Hackers may use stolen identities to open lines of credit or loans in the customer's name, leaving them with large debts.??

• Exposure of sensitive information?— Personal information, medical records, or private communications may be exposed, leading to a loss of privacy and vulnerability to further fraud or embarrassment. Personal data, including browsing history or location data, may be exploited by hackers for targeted attacks or sold on the dark web.?

• Emotional?— Being a victim of hacking can cause significant stress, worry, and feelings of violation. Breaches leave people feeling helpless and angry.?

• Burden of proof?— The victim must prove their innocence. Recovering from being hacked often requires significant recovery efforts to dispute charges, freeze accounts, and secure personal information. ?

Analyzing the aftermath?

Once the breach is contained, figuring out what went wrong, and the totality of damage is essential to recovery and prevention of future breaches. Thorough assessments include:?

• Incident details?— Document how the breach occurred, including entry points, compromised systems, and vulnerabilities exploited.?

• Scope of impact?— Determine the volume and type of data affected, including personal, financial, or sensitive corporate information.?

• Root cause analysis?— Investigate and identify the underlying reason for the breach, whether it was a human error, misconfiguration, or software vulnerability.?

• Response effectiveness?— Evaluate how well your incident response team reacted, including detection, mitigation, and communication.?

• Regulatory compliance?— Assess which data privacy laws and regulations (like GDPR, HIPAA, and so forth) were violated and the potential legal ramifications.?

• Third-party involvement?— Identify any external vendors or partners that may have contributed to the breach.?

• Financial impact?— Estimate direct and indirect financial costs, including lost revenue, fines, and reputational damage.?

• Preventative measures?— Recommend actions to fix vulnerabilities and improve defenses, including updating security protocols, implementing better encryption, and training staff.?

Creating a data fortress with cyber resilience solutions?

While Wasabi can’t prevent data breaches, we can be part of a comprehensive data protection plan (DPP) that strengthens your cyber resilience and an ability to quickly recover and maintain operations should one occur. ?

Cyber resilience?brings together all the security policies and procedures needed to bounce back from incidents and outages. Wasabi integrates enterprise-level standards and tools for physical, data, and access security so your critical information is protected against ransomware attacks and easy to recover: ?

• The 3-2-1 golden rule?— Keep three total copies of your data on at least two different storage solutions (should a single device fail) and keep one copy offsite in the cloud.??

• Zero-trust?— In the?zero-trust approach to cybersecurity, organizations are constantly authenticating network traffic and only granting access to data and applications to approved users. Anyone without the proper profile will be blocked.??

• SSO?— Single sign-on streamlines how access is controlled, minimizing the use of passwords that can be compromised.?

• MFA?— Multi-factor authentication adds another layer of security to access data, such as requiring an additional authentication code on top of a password to log into an account???

• Immutable backups?— Uses encryption and hashtags to lock data, ensuring thieves cannot alter or delete stored data. Immutable?object lock?maintains the data chain of custody so organizations remain compliant and can restore information in the wake of a breach.?

• Account security?—?Multi-user authentication,?a feature unique to Wasabi,?builds in redundancy so that no one user can perform critical operations, such as deleting cloud storage. Multiple authorized users will need to approve such actions.?

With the advantage of up to?80% lower costs than the major hyperscale providers,?Wasabi allows you to store more data longer, which is crucial because malware can hide in on-prem backups for months.?

Additionally, Wasabi doesn’t charge egress or application programming interface (API) request fees—that means you can test and recover your data without unpredictable charges, keeping your total cost of ownership low and manageable and not blowing your companies budget.?

Storage is security?

Data breaches can have severe financial repercussions, including breach containment, legal fees, regulatory fines, and compensation for affected customers. The indirect costs are also substantial, encompassing reputational damage, reduced revenue, and expenses tied to improving security infrastructure. Wasabi plays a pivotal role in helping your organization remain resilient with cost-efficient, secure, and scalable cloud storage solutions.?

When it comes to surviving dynamic cybercrime, remember that storage is security. You can’t lose what you have locked down and duplicated safely against all cyber threats.?