What Happens After a Data Breach?

Here at ITFIRM.COM, we stress that in terms of a data breach, it’s not a matter of IF, it’s a matter of WHEN. You can have the best, state of the art cybersecurity, but that won’t stop an employee from clicking something in a phishing email.

So, after you’ve suffered a data breach, you got it cleaned up, instituted stronger security measures, if necessary, maybe stepped up your Security Awareness Training for your employees, and perhaps even had to pay substantial fines. Is that the point where you get to say, “Whew! I’m glad that’s over?”

Maybe… but not so much.

History tells us that there are lingering damages and costs. Data has always been the lifeblood of business, and never more so than in this digital age. Data fuels operations, decision-making, and customer interactions, but there is a dark underbelly of this data-centric landscape: The persistent threat of data breaches and the after-effects.

Businesses can be haunted for years by repercussions beyond the immediate aftermath of a data breach. According to IBM’s 2024 ‘Cost of a Data Breach Report,’ only 51% of the costs associated with a data breach occur within the first year of an incident. The other 49% happen in year two and beyond.

Let’s do a deep dive into the long-term consequences of a data breach by examining a real-world example. You’ll see how a single breach can have enduring implications that impact a business's reputation, finances, and regulatory standing.

Data Breaches: The Unseen Costs

The First American Title Insurance Co. Case

This breach is a bit older, but it remains perfect example of how a data breach can be an Energizer Bunny and keep going, and going, and going. Let’s look at the 2019 cybersecurity breach at First American. It reminds us of the far-reaching consequences of a data breach. In this case, the New York Department of Financial Services (NYDFS) imposed a $1 million fine for failing to safeguard sensitive consumer information, which security sites announced in the fall of 2023, causing even further damage to First American’s already decimated reputation.

This breach exposed over 880 million documents containing personal and financial data, representing a significant violation of data protection standards. This is just one example of how costs can come long after an initial breach. Here are some other ways security incidents can haunt businesses for years.

The Lasting Impacts of a Data Breach

Financial Repercussions

These are significant and unfold over time. The immediate costs include:

Breach detection

Containment

Customer notification

While those are immediate, they are never the end of it. Beyond those initial costs, businesses face long-term expenses relating to legal battles, regulatory fines, and reparations. Regulatory penalties are only one facet of the financial repercussions. Others include potential legal actions from affected individuals, as well as class-action lawsuits adding to the monetary strain.

Reputational Damage

Costs can be replaced over time, but rebuilding a damaged reputation is much trickier, and the most enduring consequence impact on a business after a breach is arguably the loss of trust in a company's ability to protect their sensitive information, so customer retention begins to decline. It also has a negative effect on any Mergers and Acquisitions the company may have been looking at. Some folks are reticent to hitch their wagon to a wounded horse, and a breach has long-lasting damage to the brand image.

It takes concerted efforts over a bit of time to rebuild a tarnished reputation. These efforts may involve public relations campaigns and making a big display of enhanced security measures. While these actions may help assure stakeholders of renewed commitment to data protection, customers are undoubtedly worried.

Regulatory Consequences

Want to become a huge blip on your regulatory agency’ radar? Just let them find that negligence played a large part in your data breach – that will put you squarely in their crosshairs, and you will stay there for some time. A data breach triggers heightened regulatory scrutiny which may lead to fines and ongoing compliance requirements.

As government entities, regulatory authorities are very serious about the stringent stance they take on data security and look very closely at companies that failed to meet cybersecurity standards. The fallout includes financial penalties and increased oversight and mandatory security improvements.

Operations Disruption

In the aftermath of a data breach, normal business operations will undeniably be disrupted. To minimize this, companies must take remediation efforts and may need to put in place enhanced cybersecurity measures, which are necessary, but divert resources away from core business functions.

No department in the company will be immune to this disruptive impact, affecting productivity and efficiency. The ripple effect of operational disruption can extend for years, impeding growth and hindering the organization's ability to adapt to market changes.

Customer Loss and Acquisition Challenges

A data breach often leads to customer churn and outright loss when individuals lose confidence in the business's ability to protect their data. This may be temporary or permanent. If you’re lucky, customers may only stop using your company for the time that it takes for you to reach a remedy, although some will be gone for good.

Once you experience this type of customer loss, you enter the challenging cycle of trying to acquire new customers at a faster rate than your norm, which is hard enough without a burnt reputation. Potential clients are wary of associating with a brand that has suffered a breach. The prolonged effects on customer acquisition can hinder the company's growth and its market competitiveness.

A Cautionary Tale for Businesses Everywhere

A data breach is never a ‘one and done’ event The repercussions extend far beyond the immediate incident, impacting the financial health and reputation of a business for years, as well as its regulatory standing.

We see nothing but a snowballing rise in the frequency and sophistication of cyber threats. Proactive security measures are not just a necessity, they are a strategic imperative for safeguarding the long-term success of businesses.

At first glance, the true cost of a data breach is not always evident. It's a complex interplay of things like:

Financial penalties

Reputation damage

Regulatory consequences

Operational disruption

The damage a breach causes will not disappear as soon as the ‘fix is in’ – the ensuing downside can last for years. It’s wise to take heed and learn from real-world examples. Focus on robust cybersecurity measures and continuous employee security training because better defenses and recovery mechanisms help businesses mitigate the risks associated with data breaches and safeguard their immediate interests and long-term viability.