A recent Gartner study found that over 90% of companies integrate emerging technologies into their workflow. With that in mind, there are more chances than ever for boards to accomplish incredible feats. Software, apps, social media, and an array of tech-forward instruments can take organizations to new heights.
However, just as much as these new technologies can work for boards of directors, they can also work against them. And when they do, it can have disastrous consequences on data privacy and intellectual property. For example, a single data breach may cost a business millions, leading to tremendous financial loss. IBM estimates the average cost of data breach consequences was $4.45 million in 2023.
Yes, this tech age in which we live is undoubtedly a double-edged sword. No more is this evident than when it comes to the genuine risk of data breach incidents and the harmful consequences cyber threats can have on a board or committee, such as identity theft.
This article explains the consequences of a data breach for a company, and its financial and operational impact. In addition, it delves into document security, particularly regarding the protection of confidential information and customer data.
What are the potential consequences of a data breach?
The effectiveness of digital governance depends heavily on a secure and well-managed network of interconnected technologies. However, although beneficial, this cross-connectivity also creates vulnerabilities that hackers can exploit.
Potentially, a cyber breach can set off a catastrophic chain of events, and legal fees, impacting a company’s financial stability, disrupting its daily operations, and tarnishing its reputation. The fallout can extend far beyond immediate expenses.
Underlining this threat, a recent Forbes report projects the global cost of data crime will hit a staggering $8 trillion in 2023 and is expected to climb even higher, reaching $10 trillion by 2025.
Let’s delve deeper into the potential consequences of data breaches to better understand associated risks.
Financial losses
The financial impact of a data breach can be significant. Investigating the incident, implementing containment measures, and notifying affected customers entails substantial costs.
Additionally, legal liabilities and regulatory fines for non-compliance with data protection laws can be severe, depending on the jurisdiction and the nature of the data compromised.
On top of that, the potential for litigation is perhaps the most crippling consequence, as customers and partners may file lawsuits seeking compensation for damages incurred due to the compromised systems.
Reputational damage
A data leak may significantly impact the company’s reputation. When a security incident is publicly disclosed, it can lead to a loss of trust among customers, partners, and investors.
Moreover, negative media coverage worsens the situation, making it difficult to restore public trust. As a result, the company gets a decline in sales, brand loyalty, and ultimately, market share.
In fact, studies indicate that as many as one-third of customers in the retail, finance, and healthcare sectors will cease doing business with organizations that have experienced financial fraud or a cyber attack.
Operational disruption
Dealing with a data breach may be extremely disruptive to a business. According to IBM’s Cost of Data Breach Report 2023, it takes an average of 277 days to identify and contain a breach. During this time, critical systems may need to be shut down to control insider threats, which can have a significant impact on essential business functions.
Additionally, the company may need to implement employee training on updated security protocols. In the worst-case scenario, the consequences of security breaches may include a complete shutdown of operations, resulting in substantial revenue loss.
Intellectual property theft
One of the most serious consequences of data leakage involves disclosing an organization’s intellectual property (IP). Competitors might use stolen information such as trade secrets, product designs, and proprietary research to gain an unfair advantage in the market.
Why boards need to worry about data breaches
In a given board meeting packet, there’s an array of valuable and sensitive information that is highly privileged. There’s a reason these matters are being discussed by the board. And that’s because it’s confidential and integral to the growth and overall health of the organization. It’s important to note that effective board governance hinges on the secure handling of such information.
Then, paint a scenario where that sensitive data is breached by unauthorized parties with malicious intent, such as a competitor who’s not exactly playing above board.
In most instances, share prices will drop, and the organization is suddenly dealing with significant financial loss. On top of that, both shareholders and stakeholders (such as employees and clients) might lose faith in the company.
Furthermore, the organization will experience a severe blow to its reputation and data security. Sure, it’s not their fault that someone committed such a reprehensible act. Still, when a data breach occurs, companies tend to appear incompetent.
This might be a relatively moot point if data breaches weren’t so prevalent in today’s climate. Unfortunately, they aren’t some mythical boogie man being used to scare people into taking security measures. They are, in fact, a tremendously scary reality.
According to a recent Apple report, breaches increased by 20% from 2022 to 2023, with over 360 million victims.
An action plan for data breaches
Data breaches continue to be a constant concern for businesses. This heightened awareness is reflected in rising IT budgets. In fact, a projected 40% of organizations will increase their IT spending in 2023, with cybersecurity being a top priority for those additional resources.
This necessitates robust cybersecurity measures, security controls, and a well-defined action plan for navigating the consequences of data loss.
It’s important to note that this plan is not about prevention but crisis management. Given this, consider the steps to develop a framework when data breaches occur:
- Coordinate efforts with the digital company secretary in crafting a timely public statement acknowledging the breach and notifying affected parties. Further, think about compensating affected customers.
- Work with legal counsel to ensure the message accurately reflects the steps being taken to address potential legal consequences of the data breach. Implement a customer support program to handle complaints and provide help.
- Create a comprehensive communication strategy for all stakeholders. For this, establish a dedicated committee with relevant expertise to oversee recovery.
- Conduct an independent review to find the cause and suggest security changes. Allocate resources for improving cybersecurity infrastructure and personnel training to protect data privacy.
- Raise cybersecurity discussions to the board level, with regular reporting and monitoring. Also, review and update cyber insurance policies and prevention strategies.
Finding the right solution
Avoiding such a catastrophic situation comes down to being proactive. Being reactive means something terrible has already happened, and by then, the damage is already done.
This means it’s important to prioritize data security best practices such as secure file sharing amongst the board and committee, and finding the right solution to achieve this. In this regard, implementing iDeals board portal can significantly enhance security measures and help prevent data breaches.
How to manage data breach consequences with iDeals Board
Fortunately, one of the main benefits of the digital age is the technologies that contribute to data breach prevention. There are board portals with general data protection regulation (GDPR) licenses that implement strong security measures. With them, organizations may avoid the significant legal and financial GDPR consequences of a data breach.
In fact, board portal software allows directors to gain access to highly confidential, privileged materials, such as financial information or even medical records, from anywhere while removing the concern that they’ll end up in the wrong hands.
iDeals Board is a comprehensive board portal designed to facilitate secure and efficient communication and collaboration among board members and committees. It offers robust security features to protect sensitive information, ensuring that confidential data remains safe from the effects of data breaches.
Here’s what iDeals Board offers:
- Centralized repository. The platform securely stores all breach-related documents, reports, sensitive information, and communication threads in one place.
- Real-time document sharing. This feature facilitates swift decision-making and a unified response to cyber attacks.
- Version control. With this tool, board members can keep records of all actions taken in response to the breach.
- E-signature. This feature allows for quick breach response signing contracts with legal counsel or data recovery firms.
- Granular permissions. This tool allows access control to sensitive information like specific access to view, change, or share documents based on their roles and responsibilities.
If you’re interested in enhancing your organization’s security measures, get acquainted with iDeals Board. Contact us today and we’ll guide you through the features and benefits of our market-leading solution.
