Sometimes, to truly understand the scale of an issue, you need to see it in numbers. Despite happening in the digital space, losing data can have serious real-world repercussions — the kind that cost productivity, money, reputation, or some combination of the three. The effects of data loss on a business can extend beyond the initial incident and its resolution, if it even gets resolved. There are drastic cases where losing data preludes the dissolution of a business.
Between November 2021 and October 2022, the global incidents of data loss resulting from data breaches alone was 5,199. Data loss can also occur because of hardware failures or disasters like fire or flooding. With so many ways for data to be lost, it’s imperative that your business understands the potential ramifications and creates a data loss prevention plan to mitigate the risks.
How does losing data impact businesses?
According to Cybercrime Magazine, 60% of companies that suffer a cyberattack or data breach go out of business within six months. Globally, the average cost of a single breach is $3.62 million. To better understand why losing data can have such effects, here are some statistics related to data loss and how it has impacted businesses:
Financial damage statistics
Financially, the average small business has to spend $690,000 to recover from a data breach. With ransomware attacks — when an attacker renders a victim’s data unreadable or inaccessible until a ransom has been met — the average ransom amount has risen to $1.54 million from $812,380 in 2022. The average recovery cost following a ransomware attack is $2.6 million if the ransom was paid and the data was returned, and $1.6 million if backups were used to restore the data.
Additionally, there is the financial impact of downtime. If a business is offline for an extended period, they can lose revenue and face expenses without any income to balance them out.
Then there are the financial costs that come from falling short of industry regulations, especially in the finance and healthcare sectors. If a business is found to be noncompliant with HIPAA or GDPR regulations after a data loss incident, a regulatory agency could fine it heavily. Depending on the extent of negligence, a HIPAA violation can result in fines ranging from $100 to $50,000 per lost or compromised record.
Even when data loss is accidental — the result of a disaster or hardware failure — it can negatively impact a company’s reputation and credibility among customers. This can lead to reduced profits due to changes in consumers’ perceptions following an issue.
Productivity damage statistics
A 2021 Coveware study found the average downtime following a ransomware attack to be 20 days. In 2023, Sophos reported that 24% of ransomware victims needed one to six months to recover from the attack. 45% of them were able to recover within a week because they had backups, and 39% paid the ransom.
When data loss occurs, it adversely impacts business productivity. Employees are hindered from accessing files and completing essential job responsibilities due to the lack of critical data or system interface.
Furthermore, data loss can bring revenue generation to a standstill, as the inability to access customer orders and transactions can prevent products and services from being delivered. Additionally, if ransomware is involved, it can encrypt an entire system, completely locking users out of the platform.
Data loss can also, depending on the industry, potentially disrupt production processes, resulting in reduced product availability for consumers. This can lead to significant financial losses.
Customer and investor damage statistics
A data breach doesn’t just affect the victim, it also has a knock-on effect on the victim’s customers and investors. The Ponemon Institute’s Cost of a Data Breach 2022 report found that 60% of businesses that suffered a data breach increased their prices in order to keep up with the costs of doing business. This increase in price is passed on to customers, who have to pay more for the same product or service they used to enjoy.
It’s also been found that businesses tend to underperform on the stock exchange following a data breach. According to an analysis of the closing share prices of companies on the New York Stock Exchange, within a year of the initial breach, the victim companies underperformed the NASDAQ by 8.6%. Two years after the initial breach, that decline has increased to 11.9% for the afflicted companies.
If you want to learn more about what you can do to prevent data loss, the IT experts at predictiveIT can help you determine what steps to take. Get in touch with us today.