If this bubble graph, produced by Information if Beautiful, says anything, it’s that the risk and occurrences of data breaches shows no signs of slowing down. Even the largest, most respected companies have fallen victim to hackers. Already in 2015, the country’s second-largest health insurer, Anthem, experienced a breach of about 80 million of its members’ data, including personal information such as social security numbers, dates of birth, member identification numbers and email addresses. (See last week’s blog post here.)
There’s no question, these high-profile breaches can cost companies affected upwards of hundreds of millions of dollars. This overbearing threat of cyber-attacks underscores the importance of involvement from the top—that is, the role a company’s officers and board members play in protecting its data.
Last month, Quarles & Brady hosted a panel called: “Counseling Your Board of Directors and Officers on Cyber Security and Data Breach Risks.” During the presentation, we offered senior in-house counsel advice about how to ensure their companies’ officers and boards clearly understand their obligations with regard to data privacy and protection. We also explored the devastating financial implications that come along with a data breach.
The biggest cost a company will experience after a breach involves digital forensics. The organization often must hire an army of technology professionals to investigate the breach and re-mediate the problem. Additionally, fees from credit card companies affected by the breach can be exorbitant—with some companies charging $5,000 per credit card affected. The loss of intellectual property, such as trade secrets, also threaten an enormous financial loss and, in some cases, can mean the demise of a business if trade secrets end up in the wrong hands.
While these are some of the major financial implications to consider, there are many more. Using an outside forensic account firm, companies are able to map out potential financial implications their companies will experience in the event of a major data breach—and that’s where support from officers and the board come in. With support from the top—both in culture and in budget—companies can procure the critical information they need to plan ahead and safeguard themselves against such attacks, mitigating the risks.
When officers and boards accept the idea that cyber security is a top priority and take the steps to ensure their companies’ safety, progress can be made in minimizing the consequences of these financially devastating attacks.