Cost of Data Breach, Loss and Remediation

By Rachel Holdgrafer, Business Content Strategist, Code42

The Ponemon Institute’s 2015 Cost of Data Breach Study: Global Analysis reported that fallout and clean up efforts associated with a data breach cost companies across the globe $3.79 million on average. In the United States, organizations paid an average of $6.53 million per instance. This includes the cost of the data loss itself, impact on the company’s reputation, lost business and actual remediation costs. Breach hits organizations hard and squarely in the wallet. And year-over-year growth indicates the breach trend is heating up.

Estimating the outlay an organization can expect following a data breach is not a simple calculation. Factors affecting the per-record-cost of the breach include the cause of the breach, where it occurred and the organization’s industry or category. Organizations must also factor in the inevitable cost of lost business following breach.

Breach origin affects cost-per-record

In 2015, the average data breach in the United States exposed 28,070 records. If the breach was caused by human error or negligence, global average cost per record reached $134 or $3.76 million per breach. System glitches cost a global average of $142 per lost or breached record (or $3.9 million per breach) and malicious attacks, whether from inside or outside the organization, caused the most damage at a global average of $170 per record or $4.77 million per breach. This is up from $159 per record in 2014.

World trends and per capita costs

The per capita cost associated with a data breach varies based on where the breach occurred. Factors that increase per-capita cost include third party involvement, lost or stolen device value, time to identify and notify, and cost of consultants hired to mitigate breach damages. Factors that reduce the per-capita cost of a data breach include the use of an incident response team, the presence of a CISO at the organization, extensive use of encryption, employee training, business continuity management involvement, board-level involvement and insurance protection.

The United States continues to lead the pack at $217 per capita with Germany a close second at $211 per capita. Conversely, the cost of breach per capita is cheapest in India and Brazil at $56 and $78 respectively.

Industry (dis)advantage

Remember, the estimates above are averages. Depending on its industry sector, some companies face much higher financial consequences when a data breach occurs. For example, data privacy and security are heavily regulated in health care and education organizations to protect the personal information of patients and students. Breaches in these industries reach $363 and $300 per record respectively, while breached transportation and public sector records cost just $121 and $68 per exposed record. Clearly, not all data are created equal.

Lost business

Loss of business in the wake of a data breach is often overlooked. Suffering a data breach may result in an abnormally high amount of customer turnover and diminished trust. Moreover, customers (and prospects) will view the organization with suspicion after news of the data breach is announced. To overcome objections and win new customers, internal teams may incur additional costs to increase marketing and customer acquisition activities.

The cost attributed to lost business is significant. In 2015, an organization could expect to fork over a global average of $1.57 million in lost business alone, up from $1.33 million in 2014.

Reality check

Data breach is a very real threat. Ponemon reports that as of 2014, sixty percent of companies experienced more than one data breach in the previous two years. Organizations that aren’t worried about (or protected from) data breach because they’ve “never had one before,” are increasingly vulnerable to financial risk. Savvy organizations work to limit the risk and put a strategy in place to mitigate damage when breach occurs.

To learn more about how endpoint backup helps organizations recover quickly from data breach or loss and save money in the process, download the white paper, Protecting Data in the Age of Employee Churn.