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The Intangible Costs of Data Breach and Data Loss

Posted June 2, 2016by Joseph Tavano

The monetary cost of a data breach or data loss, and all the concomitant penalties that arise with it, are substantial and well documented. A single data breach can cripple or close a small business. However, for the smaller percentage that manages to survive, there are also numerous issues to deal with following a data loss event that could lead to significant monetary loss.

Often unconsidered or un-quantifiable, these “intangible” losses can be just as deadly to a business’ bottom line. Let’s look at just a few of these intangible costs, and see how they can affect your MSP business.

Loss of vital data

When calculating the actual financial cost in a data breach, one thing that can easily be overlooked is the actual data that is compromised or lost. Perhaps this data is vital to performing daily operating functions, and create costly work stoppages until it can be restored (if at all). The results of data loss are long lasting, and until a full assessment is completed, it is hard to know just how much is lost and how long a business can be affected.

Loss of productivity

Those work stoppages mentioned earlier? Those result is a major productivity loss, which means any task that needs to be done takes more time and more resources. Productivity is also decreased due to shifting priorities—namely, recovery objectives—which can often push daily functions to the back burner until business continuity is restored. All of this boils down to a higher cost to do business, and costlier operating costs can destroy profit, cash flow, and overall business success for multiple business quarters.

Loss of clients

It may seem obvious to read it, but if a business suffers a data breach, it is virtually inevitable that some clients will be lost. Data loss and data breaches reflect poorly in the marketplace, no matter the circumstances, and a loss of clients will make business goals, operating expenses and overall business success just that more difficult to achieve.

Stunted business growth from downtime remediation

If businesses aren’t growing, they are stagnating or in decline. A data breach can stop growth dead in its tracks, and reverse the fortunes of a company that otherwise had a positive forecast ahead of itself. During and in the wake of a data breach, sales professionals will be hard pressed to make sure they are retaining as many clients as possible, let alone bring on new ones. It may take time to get growth projections back on track, which will reflect in more than a minor dip on the next chart.

Damage to reputation

This one is difficult. Your public reputation is something that is carefully guarded and respected; no one would ever want to do anything to damage the standing of their business in the marketplace, clients and prospects. However, in the result of a data breach or data loss, it’s something that can easily fall through your grasp. Unless proper steps are taken, the tarnish to reputation can eventually sink a business as much as any hefty fine.

Damage to business relationships (suppliers/vendors/investors)

Just as clients may be wary to continue working with a company that suffers a data breach, suppliers, vendors and even investors may be hesitant as well. These can cripple a business quickly; because as mentioned previously, if normal operating processes are suspended, it will be costlier to continue doing business—if not impossible.

SLA penalties

Consider that a business suffers a data breach or data loss, and manages to push through this difficult time. It pays any regulatory penalties, retains its clients and calms its investors and business partners. Things may seem good; however there is still the sticky point of service level agreements (SLAs)—those binding agreements that promise a consistent level of service delivered to their clients. These agreements can result in financial loss, an inability to generate revenue from existing clients, or cost a business their clients. Whether it’s fair or not, if a business has downtime as a result of a data breach or loss, it cannot fulfill its SLAs, which can be an unforeseen hit to profit.

Staffing and morale

It’s unfortunate, but losses in business continuity often lead to the exiting of employees should they be at fault. When a business suffers, employee morale will suffer as well, and this will result in poor performance and productivity—all of which is difficult to reverse. It may not be quantifiable in terms of dollars and cents, but poor employee morale in the aftermath of a data breach will ultimately cost a business more than what is on the bottom line.

This may sound terrifying, but there are options available to businesses, the first being to protect itself from a data breach and data loss with comprehensive backup and disaster recovery solutions that will ensure downtime is minimized or even mitigated. In today’s technological landscape, doing business without this sort of peace of mind can cost you more than can even be measured.

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Joseph Tavano is Senior Content Marketing Manager at Continuum, with more than 14 years of experience in content creation, content marketing, event marketing, marketing communications, demand generation and editorial across a range of industries. He is the author of several eBooks, blog posts, thought-leadership articles and other marketing and product collateral that enable Continuum partners and IT service providers in the channel to make their businesses stronger and grow their profits. In 2016, he launched the Continuum Podcast Network, which publishes multiple shows every week and reaches tens of thousands of IT professionals every year. A native of Boston, he holds bachelors in English and History from Suffolk University and resides in Salem, Massachusetts.

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