As more people around the world gain internet access, the risk of your business falling victim to a cyber attack continues to grow. While the immediate impact of a cyber attack can be devastating, it is important to understand how the costs of a cyber attack can impact your business immediately and for years afterwards.
How does a cyber attack affect business?
Cyber attacks will often result in substantial financial losses, which can massively impact a business and how it begins to operate once it has been recovered.
Cyber attackers can financially gain from businesses in a number of ways, including:
- Customer and client bank details
- Financial records
- Business ideas
- Product design
- Intellectual property
- Patent applications
- Employee information and records
No two cyber attacks are the same, but many businesses face unavoidable costs, ranging from operational disruption to reputational damage, making preparation essential.
Initial response
Whether your business is large with an in-house incident response team or smaller and relies on a third-party provider, there will be costs associated with the initial response once a cyber attack is detected.
Hiring a specialist agency during an emergency, such as a cyber attack, can be expensive. You will also need to decide the scope of their work, for example whether you want a full investigation to support potential legal action later. Costs can vary, but you can expect a third-party response team to cost anywhere from £500 – £1,000 a day.
Notifications
If you have a Cyber Incident Response Plan, notifying key stakeholders and customers will be one of the key tasks.
Ensuring customers know that their data has been leaked will require thorough communication and it may also need in-house teams to liaise with external specialists. The cost of this downtime being spent communicating instead of doing work can be drastic if it is not dealt with quickly and effectively.
Loss of business
If a cyber attack brings your business to a complete standstill, you may be unable to serve your customers, resulting in a loss of revenue and profits. Customers might turn to competitors, and there is no guarantee they will return once your business is back up and running.
Cyber attacks can also damage a business’s reputation, which can further increase costs. The financial impact of reputational damage is difficult to predict, making it challenging to determine how it will affect your profits.
Recovery
The costs associated with the recovery process span over a long period of time; sometimes years after the accident has occurred.
Costs related to recovery can include:
- Communications – Ongoing communications with stakeholders can be costly, especially if the impact is severe.
- Reparations – These may be required to build trust again with customers in the form of credit monitoring, payouts or product discounts.
- Legal costs – If the business chooses to prosecute the person responsible, there can be large legal costs associated with it.
- Regulatory fines – Depending what industry you work in, you have to pay a regulatory fine, particularly if you work in a highly regulated industry.
What is the most expensive consequence of a cyber attack for a business?
The most expensive consequence of a cyber attack is usually reputational damage. This is because a cyber attack will often negatively affect the trust that customers have for a business, leading to long term consequences.
Even if you manage to recuperate all of the money lost from the attack, the long term damage that can occur due to having a bad reputation can be catastrophic and may even result in business closure.
Depending on the size of your business, regulatory fines can also be a huge expense and may also be extremely detrimental to your business.
Example of cyber attacks financially affecting a business
It’s not too uncommon nowadays to hear about cyber attacks affecting businesses, and so you may already be aware of some big names that have been attacked; but do you know how it really affects them financially?
A good example to show how a cyber attack can financially affect the biggest of companies is a cyber attack on Equifax
Equifax, one of the biggest global credit bureaus, had a massive data breach with 13.8 million UK consumers being affected due to data being outsourced to US servers for processing. The data stolen included customers’ names, birthdays, phone numbers, login details and even credit card information.
As a result, they were fined £11 million by the Financial Conduct Authority in regulatory fines due to Equifax failing to stop ‘preventable’ attacks and failing to provide sufficient oversight of how data was properly managed and protected.
Reducing the financial impact of a cyber attack with cyber insurance
From small businesses recovering data from ransomware to larger organisations navigating data breaches, cyber insurance will play a vital role in helping businesses bounce back, no matter what size they are.
At Stanmore Insurance, we specialise in professional cyber insurance for businesses, charities and other organisations. We understand how financially ruining a cyber attack can be, which is why we always work with you to understand your needs and integrate a comprehensive cyber security strategy to ensure you are protected should the worst happen.
Contact our team of experts today to learn more about how we can help protect your business from cyber incidents and hacking attacks.