New research from the US\u2019 Ponemon Institute shows that a data breach costs South African companies on average $3.06 million – nearly R50 million.<\/p>\n
By comparison, the average data breach in the UK costs $3.88 million (R60 million), Germany $4.78 million (R73 million) and in the United States, $8.19 million (R130 million), the most of all countries.<\/p>\n
The research showed that globally, the average cost of lost business after a data breach was $1.42 million (R22 million).<\/p>\n
“With data breaches becoming commonplace it seems as if businesses need to now consider not whether they will be victims of a data breach but rather when,” says Ahmore Burger-Smidt, a director at Werksmans Attorneys.<\/p>\n
“People doing business with any company expect them to keep their data safe. So when there is a data breach it results in not only a large cost to the company but also a massive loss of trust by clients, many of whom will never deal with the company again.”<\/p>\n
Burger-Smidt said that the costs of data breaches are so high because there are four cost components to any data breach:<\/p>\n
“When surveyed by Gemalto, a Dutch digital security company, nearly two-thirds of people indicated that they would likely end their relationship with a business after their personal information had been exposed. Such is the strong correlation between data breaches and customer loyalty,” said Burger-Smidt.<\/p>\n
“But it\u2019s not just a once-off event and then it\u2019s business as usual. There is an insidious long-tail impact too that most organisations are not prepared for.<\/p>\n
“Not only will a business likely continue to bleed customers for years after a breach, but it also deters customers who were considering using the company such is the damage to brand and reputation.”<\/p>\n
She added that while it is still possible to acquire new customers, this will come at a much higher cost than before the breach.<\/p>\n
“This higher cost of acquisition is a long term phenomenon and an ongoing cost for companies which reduces profits,” she said.<\/p>\n
“When businesses consider the full impact of a breach, they are likely to take much greater care to prevent it happening.”<\/p>\n