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Measuring the Reputation Cost of Data Breach

Posted on: May 19th, 2015 by Daniella Lundsberg

The security landscape is constantly evolving, with businesses today fighting a cybercrime ecosystem that encompasses global players. Hackers now invest as much – if not more – toward exposing vulnerabilities as companies do in securing them. Assuming the right solutions are in place, most enterprises can stay under the radar and avoid a major breach. But there’s never a guarantee, and recent exposures at companies like Home Depot, Sony, and Target offer valuable insight that can help us all plan for and better comprehend the magnitude of loss potential.

The initial breach primarily affects the consumer, who faces bank-imposed limits and time-consuming card cancellations. For the business itself, along with that data loss, one of the greatest risks is long-term damage to the brand’s reputation. A trusted and established reputation can take decades to build – and mere seconds to destroy. Security breaches force companies to invest heavily in resources aimed at salvaging employee morale, stock valuation, consumer trust and loyalty. When customers are afraid to transact with a business, this also naturally puts a strain on traffic and revenue. For companies that survive a scandal, the fallout and ramifications can still take months to years to reconcile.

The extent of the damage and the time it takes to reinvigorate a brand’s reputation is largely dependent on the breadth of exposure and the manner in which the crisis is handled. Data breaches are one of three occurrences to have the greatest impact on brand reputation, according to a survey conducted by Ponemon Institute and sponsored by Experian’s Data Breach Resolution unit entitled “The Aftermath of a Mega Data Breach: Consumer Sentiment”. In this survey, data breach was ranked up with environmental disasters and poor customer service.

When evaluating potential risk, planning for crisis resolution, and assessing the cost of an enterprise security solution, tangible assets alone aren’t enough. Decision makers must also estimate the monetary value of, and the earning potential in, their brand reputation. They need to ask themselves: “How much is our brand reputation worth?”

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