Data breaches cause lasting reputation damage

Reports of data breaches affecting some of today’s largest companies continue to grab the headlines of prominent news outlets nationwide. The damage experienced by a company after a data breach has lasting negative effects on brand equity and reputation.

In fact, a recent survey of nearly 850 executives, conducted by the Ponemon Institute, reports that the average time it takes to restore an organization’s reputation is one year.

In addition to the time and energy it takes to rectify the situation, a data breach has the potential to severely affect a corporation’s brand equity over the long term.

Depending upon the type of information lost as a result of the breach, the average loss in the value of the brand ranged from $184 million to more than $330 million, with an average brand value prior to the breach of $1.5 billion. Hence, the minimum brand damage was a 12 percent loss, increasing to nearly a one-quarter loss of the brand value in some instances.

“A solid reputation is a company’s greatest asset, and it is therefore imperative that business leaders take precautionary steps to protect themselves, their customers, their employees and their intellectual property against data breaches,” said Ozzie Fonseca, director at Experian Data Breach Resolution.

“The way business protocols worked five years ago, even two years ago, has drastically changed, and we must prepare ourselves for the new threats to data and privacy. Data breaches are happening to all businesses — small, medium and large — and no industry is immune.”

All companies are susceptible to breaches of data, yet many are not prepared or equipped to handle the aftermath. Research findings showed that 43 percent of the companies represented in the survey had not instituted a data breach incident response plan prior to having such a breach.

Companies spend a great amount of time putting crisis plans together — who’s going to call whom, who can speak to the media, etc. However, they are not including data breaches as part of this plan.

In addition, most companies surveyed reported that they had experienced more than one data breach in the past few years.

“The loss or theft of sensitive customer data, as our study quantifies, can have a serious impact on the economic value of a company’s reputation,” said Dr. Larry Ponemon, chairman and founder of the Ponemon Institute. “We believe this study makes a powerful point about the importance of taking steps to reduce the likelihood of a data breach.”


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