Data breaches can have very costly and long-lasting ramifications for companies of any size. The pervasive threat of cyber attacks merits a formidable response plan that proactively protects companies from the harm of a breach. In addition to establishing preventative safeguards, companies must also equip themselves to handle the aftermath if a safeguard should fail against emerging threats. Here are a few reasons why data protection needs to be a key priority in business’ risk management plans.
Keep Insurance Expenses Down
Claims against an insurance policy arising out of a cyber liability claim can have a deleterious impact on companies’ coverage opportunities in the years that follow. Having a pending claim in litigation can cause renewal quotes to run high as policies near the expiration of their term. A high money judgment or compensation for losses will result in a loss report negatively impacting insurers’ risk assessment of a company.
Protect Your Company’s Public Image
A data breach can have an extremely unfortunate impact on a business’ public image. In fact, many insurance carrier’s cyber liability policies include benefits that companies can use to pay for public relations campaigns to restore their brand image. Regaining confidence from consumers after the report of a breach can take a considerable amount of time, and companies may never be fully able to undo the total extent of the damage. Resultantly, the fallout could undercut revenues for an extended period of time. Likewise, the share price of a publicly traded company would foreseeably suffer a pretty big blow, and the depreciation of shares’ value could result in a suit against the corporation’s directors.
Defend Yourself Against Financial Crimes
Failing to use zero trust controls can make internal communications vulnerable to infiltration and fraud. When people feel a false sense of security because they are having an exchange with someone who is familiar to them, it is easy to fall victim to fraud. For example, an employee could receive a message originating from a supervisor directing the transfer of a fixed sum to a vendor and specify a routing and account number. Unfortunately, this message could have originated from a cyber criminal rather than the apparent sender, and an employee may understandably transfer the funds to a criminal. The repercussions of this type of fraud can create enormous financial hardship from companies, and it may necessitate the freeze of their assets or their utilization of credit.
Comply With the Law
Many jurisdictions impose statutory law that regulates the way that companies store consumers’ personal information. Failing to create a data security policy could expose a company to unnecessary liability because having a policy in place and complying with it can prevent liability in the event of a breach. Certain types of companies may be liable for negligence in connection with data breaches even though they were not the perpetrators of the breach. Failing to exercise a basic duty of care by taking reasonable steps to avert a breach could certainly amount to negligence. A company that was remiss in creating and policies could have to contend with a costly class action that could involve damages for direct harm to consumers as well as punitive fines.
Confidential Information and Trade Secrets
Companies in disruptive fields in sectors that rely on capital from investors need to keep their information secure. Compromising information about a developing project in medical technology or artificial intelligence applications, for example, could have a staggering effect on a venture’s profitability.
Ultimately, almost every type of business must continually keep an eye towards data security management. Good oversight of this key area of your operations can enable your business to avoid a myriad of potential problems.
Related: Six Actions You Can Take to Protect Your Personal Information