February 3, 2023

The Consequences of a Data Breach Lawsuit: What Businesses Need to Know

On average, hackers target about 30,000 websites daily. Hackers only need a few minutes to perform a hack, but most companies can go several weeks without noticing their systems have been compromised.

Because of this, any business that collects, uses, and stores data is vulnerable to cyber-attacks and data breaches. And there are severe consequences of a data breach, including lawsuits, financial loss, and reputational damage.

This article will discuss everything your business should know about the impact of a data breach, to prepare and protect yourself.

What Is A Data Breach?

A data breach is a cybersecurity threat that exposes confidential, protected, and sensitive information to an unauthorized individual.

Anyone can be at risk of a data breach, ranging from private individuals to multinational corporations. In a recent report, IBM found that the top five regions with the highest data breach cost include the United States, the Middle East, Canada, the United Kingdom, and Germany respectively. Here's how much an average data breach costs in each area:

  1. The United States - $9.44 million
  2. The Middle East - $7.46 million
  3. Canada - $5.64 million
  4. The United Kingdom - $5.05 million
  5. Germany - $4.85 million

What Are The Business-Related Consequences Of Data Breach?

1. Loss of Revenue

After a data breach, your business is most likely to experience significant revenue loss. This can stem from multiple things but primarily from theft of money and information, loss of business contracts, and business disruptions.

Some external expenses may also impact your budget because you'll need to hire cybersecurity experts to repair affected systems, networks, and devices. In addition, one of the legal consequences of data privacy breaches is the massive sum of cash settlement you may be required to pay out to the affected individuals – this will take a extreme toll on your business resources.

2. Damage to Brand Reputation

A data breach can significantly impact more than just your finances and revenue. One of the most significant long-term effects is reputational damage.

You're responsible for your customer's data. From their house address, credit card information, and bank details, it's a company's job to protect it. So, If their data gets leaked because of your company, one of the biggest hurdles to rebuilding your business will be re-gaining the trust of your customers.

And the same goes for potential customers because they wouldn't want to be associated with a business with a reputation for inadequate data security.

3. Loss of Intellectual Property

Besides targeting sensitive financial information, hackers may also go for your company's designs, blueprints, strategies, and other business plans.

For example, businesses in the manufacturing and construction sector often produce copyrighted designs. If a hacker gets their hands on one of the unproduced designs, the hacker can sell the IP for that particular piece, and some competitors would not hesitate to take advantage of this.

4. Layoffs and Decrease in Productivity

A common result of a data breach is employee turnover. While some may leave due to the stress that comes with mitigating the incident, some may need to be laid off as a result of the financial strain on the company, especially at the executive level.

After losing valuable employees, your company can likely experience a decrease in productivity. Moreover, you'll need to replace employees, which isn't an easy task in a normal circumstance, let alone during or after a data breach. This is mainly because anyone who enters the company at an executive level will need to start with post-data breach cleanup.

5. Legal Consequences

Depending on your business' location and type, you should do whatever it takes to ensure you comply with data protection and privacy regulations mandated in your state, as well as federal laws, international statutes, contracts, and regulatory bodies related to cyber insurance.

If your organization fails to protect sensitive information from hackers, these are the legal consequences of data privacy breaches you may face:

  • Personal and professional liability
  • Litigation of third-party data breach
  • Various fines and sanctions
  • Compensation claims

When dealing with the impact of data breaches, it's essential to understand that regulatory body notices can encompass various factors. These include law-specific deadlines, investigations, formal notifications, and other necessary follow-up actions.

Protecting Your Business From the Impacts of Data Breach

Understanding the consequences of a data breach is a crucial first step on your business' road to safeguarding itself and your clients. The next step would be creating an action plan to thoroughly discuss everything you need to know and how to handle a cybersecurity attack. And that's where 1Fort comes in.

1Fort helps businesses mitigate data breach attacks with its cyber risk assessment, which prepares them for best-in-class cyber insurance by ensuring they meet all the application requirements and unlock coverage and savings.

Schedule a demo with 1Fort today to learn more!