The latest global study by IBM Security and Ponemon Institute found that the average total cost of a data breach is up 6.4 over the previous year and now costs businesses an average of $3.86 million each.
The average cost for each lost or stolen record containing sensitive and confidential information also increased by 4.8 percent year over year to $148.
The study was as a result of interviews conducted with more than 2,200 IT, data protection, and compliance professionals from 477 companies that have experienced a data breach over the past 12 months. According to their findings, data breaches continue to be costlier and result in more consumer records being lost or stolen, year after year.
Cost of a Data Breach – Increased Beyond 2017 Averages
The global study found that the average total cost of a data breach, the average cost for each lost or stolen record (per capita cost), and the average size of data breaches have all increased beyond the 2017 report averages:
• The average total cost rose from $3.62 to $3.86 million, an increase of 6.4 percent
• The average cost for each lost record rose from $141 to $148, an increase of 4.8 percent
• The average size of the data breaches in this research increased by 2.2 percent
How Likely Is It For An Organisation To Have Another Data Breach?
Apart from presenting trends in the various components of the cost of a data breach, the global study also determined the likelihood of an organization having one or more data breaches in the next two years.
Two factors were used to determine the probability of a future data breach: the size of the data breach reported in this year’s research and where the organization is located.
• The average global probability of a material breach in the next 24 months is 27.9 percent, an increase over last year’s 27.7 percent
• South Africa has the highest probability of experiencing a data breach at 43 percent
• Germany has the lowest probability of having a future data breach at 14.3 percent
How Quickly Can An Organisation Identify and Contain Data Breaches?
The 2018 Cost of a Data Breach Study also reported on the relationship between how quickly an organization can identify and contain data breach incidents and the financial consequences.
• The mean time to identify (MTTI) was 197 days
• The mean time to contain (MTTC) was 69 days
• Companies that contained a breach in less than 30 days saved over $1 million vs. those that took more than 30 days to resolve
A mega breach of 1 million records yields an average total cost of $40 million and a mega breach of 50 million records yields an average total cost of $350 million.
Influence of New Cost Factors
For the first time this year, IBM Security and Ponemon Institute researched the influence of two new cost factors: security automation and the extensive use of Internet of Things (IoT) devices. Also for the first time they measured the cost of a data breach involving more than
one million compromised records, or what they refer to as a mega breach.
• The average cost of a breach for organizations that fully deploy security automation is $2.88 million
• Without automation, estimated cost is $4.43 million, a $1.55 million net cost difference
• The extensive use of IoT devices increased cost by $5 per compromised record
• A mega breach of 1 million records yields an average total cost of $40 million
• A mega breach of 50 million records yields an average total cost of $350 million
Key Factors That Affect the Cost of a Data Breach
1) The unexpected loss of customers following a data breach
2) The size of the breach or the number of records lost or stolen
3) The time it takes to identify and contain a data breach
4) Effective management of detection and escalation costs
5) Effective management of post data breach costs
“Each year we anticipate the latest cost of data breach study because it has truly helped to show our management the value of good data protection practices. We especially like the various factors that can increase or decrease costs and have used them to justify investments.” — CISO/US/Financial Services
10 Key Takeaways From 2018 Cost of Data Breach Study
1) The global cost of data breach increased.
The average total cost of data breach increased by 6.4 percent and the per capita cost increased by 4.8 percent. The average size of a data breach (number of records lost or stolen) also increased by 2.2 percent.
2) Data breaches are the most costly in the United States and the Middle East and least costly in Brazil and India.
The average total cost in the United States was $7.91 million and $5.31 million in the Middle East. The lowest average total cost was $1.24 million in Brazil and $1.77 million in India. The highest average per capita costs were $233 in the United States and $202 in Canada.
3) Notification costs are the highest in the United States.
These costs include the creation of contact databases, determination of all regulatory requirements, engagement of outside experts, postal expenditures, email bounce-backs and inbound communication setups. Notification costs for organizations in the United States were the highest at $740,00 whereas India had the lowest at $20,000.
4) The United States and the Middle East spend the most on post data breach response.
Post data breach response activities include help desk activities, inbound communications, special investigative activities, remediation, legal expenditures, product discounts, identity protection services and regulatory interventions. In the United States, these costs were $1.76 million and $1.47 million in the Middle East.
5) Canada has the highest direct costs and the United States has the highest indirect costs.
Canada had the highest direct cost at $81 per compromised record. Direct costs refer to the expense outlay to accomplish a given activity such as engaging forensic experts, hiring a law firm, or offering victims identity protection services. The United States had the highest indirect per capita cost at $152. Indirect costs include employees’ time, effort, and other organizational resources spent notifying victims and investigating the incident, as well as the loss of goodwill and customer churn.
6) The faster a data breach can be identified and contained, the lower the costs.
From their consolidated sample of 477 companies, the mean time to identify (MTTI) was 197 days, and the mean time to contain (MTTC) was 69 days. Both the time to identify and the time to contain were highest for malicious and criminal attacks and much lower for data breaches caused by human error. Companies that identified a breach in less than 100 days saved more than $1 million as compared to those that took more than 100 days. Similarly, companies that contained a breach in less than 30 days saved over $1 million as compared to those that took more than 30 days to resolve.
7) Hackers and criminal insiders cause the most data breaches.
48 percent of all breaches in this year’s study were caused by malicious or criminal attacks. The average cost per record to resolve such an attack was $157. In contrast, system glitches cost $131 per record and human error or negligence is $128 per record. Companies in the United States and Canada spent the most to resolve a malicious or criminal attack ($258 and $213 per record, respectively). Brazil and India spent far less ($73 and $76 per record, respectively).
8) Incident response teams and the extensive use of encryption reduce costs.
In this year’s research, an incident response (IR) team reduced the cost by as much as $14 per compromised record. Hence, companies with a strong IR capability could anticipate an adjusted cost of $134, down from $148 per record. Similarly, the extensive use of encryption reduced cost by $13 per capita, for an adjusted average cost of $135, down from $148 per record.
9) Third party involvement in a breach and extensive cloud migration at the time of the breach increases the cost.
If a third party caused the data breach, the cost increased by more than $13 per compromised record for an adjusted average cost of $161, up from $148 per record. Organizations undergoing a major cloud migration at the time of the breach saw the cost increase to per capita cost by $12, for an adjusted average cost of $160, up from $148 per record.
10) The loss of customer trust has serious financial consequences.
Organizations that lost less than one percent of their customers due to a data breach resulted in an average total cost of $2.8 million. If four percent or more was lost, the average total cost was $6 million, a difference of $3.2 million.
There are three responses to a Data Breach –
3. Can’t let this happen again!
Third response is the one to aim for. How? – Call in the experts.
If you’re a business who realizes this need and wants to act responsibly, we’re happy to help. Get in touch with Appknox to learn more and we’d love to help you set up a cybersecurity strategy that will be sustainable and ensure you are protected from the worst outcomes an attack could possibly bring to you.