Gary Audin
Gary Audin is the President of Delphi, Inc. He has more than 40 years of computer, communications and security...
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Gary Audin | December 16, 2016 |


That Data Breach Will Cost You

That Data Breach Will Cost You A Ponemon Institute study sheds light on the true costs of the average U.S. data breach.

A Ponemon Institute study sheds light on the true costs of the average U.S. data breach.

Yahoo this week disclosed that a 2013 data breach exposed the private information of more than 1 billion Yahoo users, putting into question Verizon's $4.83 billion pending acquisition of the company. As details continue to trickle out about what is being called the biggest data breach in history, it's fair to say that security and data breaches are top of mind this week.

While not every data breach will involve millions or billions of compromised records, any breach of your company's records will certainly cost you. What is your average cost per record for a data breach? If you knew, you could use the cost figure as a benchmark for budgeting for security. The average cost paid for each lost or stolen record containing sensitive and confidential information in 2016 is $221 per record in the U.S., according to a study from Ponemon Institute. The average worldwide cost in 2016 is $158 per record, a 29% increase since 2013.

Studying Data Breach Costs

The June 2016 report mentioned above, performed by Ponemon Institute and sponsored by IBM, is "2016 Cost of Data Breach Study: Global Analysis," and covers global trends and costs of data breaches. It estimates there is a 26% probability you will have a material data breach involving 10,000 lost or stolen records.

There were 383 companies located in 12 countries participating in the study, all of whom experienced a data breach ranging from about 3,000 to more than 101,500 compromised records. A compromised record is one that identifies the individual whose information has been lost or stolen in a data breach.

Identifying and Containing a Data Breach Takes Time

There are some new terms to describe the events of a data breach. Mean Time to Identify (MTTI), measured in days, is used to determine the effectiveness of an organization's incident response processes. The Mean Time to Contain (MTTC) metric measures the time it takes for the responding staff to resolve a situation and finally restore service.

Ponemon Institute estimates the companies in the study, on average, had a MTTI of 201 days, with an extraordinary range of 20 to 569 days. The MTTC, on average, was 70 days, with a range of 11 to 126 days. Taking these two statistics together, this means the average vulnerability time for these companies was 271 days, or about 9 Months.

Detection and Escalation Costs

The detection and escalation event costs were not found to be especially high in the U.S. The highest cost per event is in Canada ($1,600,000) and the lowest in India ($530,000). The U.S. cost was found to be $730,000 per event. This may be due to more investment in the security tools and training. Detection and escalation include assessment, auditing services, forensic and investigative activities, and crisis team management. Do not forget that there will be costs associated with dealing with executive management and the board of directors.

Notification Costs

Once a data breach has been discovered, there will be costs associated with notifying those who may be affected. The notification can help reduce or eliminate the malicious use of the compromised data. Ponemon found that notification costs were the highest in the U.S. ($590,000). Notification activities include the production of contact databases, determining and fulfilling regulatory requirements, dealing with and engaging external experts and consultants, the cost of producing notices and the associated postage, resolving email bounce-backs, and contending with and organizing inbound communications due to the notifications.

Source: Ponemon Institute

After the Breach Expenses

The U.S. leads with the after-breach event costs associated with response and detection ($1,720,000/event). These costs include special investigative activities, help desk activities, supporting inbound communications (calls, emails, chat, IM), problem remediation, legal expenditures, product discount offers for customer retention, third-party identity protection service subscriptions, and regulatory interventions.

Source: Ponemon Institute

Lost Revenue Costs

The U.S. also leads in the lost revenue organizations experienced per event for losing customers after a data breach ($3,970,000). These costs include the customer turnover, increased customer marketing and sales activities (it usually costs more to regain a customer than it costs to obtain them), reputation losses, and reduced goodwill and trust.

Source: Ponemon Institute

Adding Up the Bill for a U.S. Data Breach


When you add all these costs up, the average U.S. bill for a data breach then comes to just over $7 million. How much are you spending in staff time, security tools and services, security consultants, lawyers, and other internal staff? Compare your liability at $221 per record to what is presently budgeted. You may be able to use the potential liability costs to leverage a larger security budget.

Trend Predictions, Lessons Learned

The report authors looked at the trends observed since 2013 in every industry, outlining seven global megatrends:

  1. The cost of a data breach globally has remained relatively stable over time, leading to the conclusion that this is a permanent cost to organizations. Organizations have to be prepared to deal with and integrate their data protection strategies into every line of business.
  2. Lost business is the biggest financial consequence to organizations that experienced a data breach. Organizations need to institute processes to retain customers' trust to limit the long-term financial impact.
  3. Data breaches continue to be caused most often by criminal and malicious attacks, which take the most time to detect and resolve. These attacks produce the highest cost per record.
  4. The longer the detection and resolution times are, the more costly the resolution. To counter this situation, investments should be made in technologies and developing better in-house expertise.
  5. Regulated industries, healthcare and financial services, experience the most costly data breaches. This is due to fines and penalties and the higher rate of lost business and customers.
  6. Organizations need to improve data governance to reduce the costs of data breaches. Implementing incident response plans, appointing a CISO who has authority not just responsibility, conducting continuous employee training, producing awareness programs with penalties, and having a business continuity management strategy will all help in reducing data breach costs.
  7. Invest in certain data loss prevention controls and activities like encryption and endpoint security solutions. The 2016 study revealed a reduction in the cost when companies participated in threat sharing and deployed data loss prevention technologies.

For more on the topic of sharing threat data, see my other recent No Jitter article, "Cybersecurity Sharing: Think Before You Participate."


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