In the United States, businesses incurred average costs of $8.19 million per data breach in 2018. On average, businesses lose $150 per record – the average breach includes over 25,000 records. Financial institutions in particular store a lot of sensitive data about their clients. Breaches can be devastating – proactive protection is crucial.
Mega Data Breaches
A mega breach occurs when hackers steal more than 1 million records. Breaches of this scale are relatively rare, but the losses can be staggering. A breach of 50 million records may cost a business upwards of $388 million to resolve.
Mega breaches have doubled over the last five years, and they take longer to contain than smaller breaches do. On average, businesses need one year to deal with the primary repercussions of a mega breach.
The Cost of a Cyber Security Breach
Businesses in the financial industry face an average cost of $210 per breached record. This is the second highest amount of any industry besides healthcare. These costs include discovering the breach, stopping it, and cleaning up the aftermath. However, the biggest costs come from the loss of customers.
On average, businesses lose 3.9% of their customers after a cybersecurity breach. However, the loss may be more significant for financial institutions. Trust is critical for customer retention in this industry.
Factors That Increase the Cost of Cyber Security Breaches
The type of cyber security breach that occurs can affect the final cost. Malicious breaches cost 25% more than breaches caused by mistakes or glitches in a network. Unfortunately, malicious attacks are incredibly common. They account for over half of all breaches and have surged by 21% over the last five years.
Small businesses tend to suffer an unwieldly amount of losses. Businesses with fewer than 500 employees incur average costs of $2.5 million per data breach. As this number is roughly 5% of their annual average revenue, such a breach can be crippling. Most small and medium businesses close within six months after a cybersecurity breach.
Factors That Reduce Losses from Cybersecurity Breaches
The best way to reduce the cost of a cyber security breach is to prevent it from happening in the first place. You need high-quality cybersecurity tools, workflows, and policies to protect your financial institution’s databases. Employee education is also essential. Well-intentioned actions from uninformed employees can lead to breaches.
You also need a business continuity plan. It should outline how your financial institution will continue operations in the aftermath of a breach. An incident response team should carry out the elements. On average, an incident response team and a well-tested plan reduce the cost of a breach by 31%.
The time you take to discover a breach can also reduce the total cost. On average, businesses take 279 days to notice a breach. By identifying the cyber security breach within 200 days, you can save an average of $1.2 million. Using an artificial intelligence platform for data security also helps to reduce the total cost.
To reduce the risk of facing a cybersecurity attack and mitigate the effects of breach, you need to be proactive about cybersecurity. On average, financial institutions spend 6 to 14% of their IT budgets on cybersecurity. This number tends to be higher for small financial institutions than for large ones.
While small and midsize financial institutions spend $2,100 per employee, large institutions spend $2,700. A quick glance at your numbers can show you if your spending is in line with other businesses in the industry. However, you need to look past the dollar amount to see the full picture.
Your Approach Is More Important Than Your Budget
Rather than focusing on how much money your financial institution earmarks for cybersecurity expenses, you should look at your overall approach. If you’re taking a reactive approach, you respond to attacks after they occur. This potentially increases your risk of an attack and drives up costs in the aftermath of a security breach.
Instead of taking that route, your financial institution should embrace a proactive and adaptive approach to cybersecurity. An adaptive approach involves senior management and aligns your cybersecurity strategy with your key business objectives. It also continuously adapts your efforts to keep pace with ever-changing threats.
You may be surprised to learn that businesses with an adaptive approach do not spend more on average than other financial institutions. Because they take a more effective approach to cybersecurity, they face fewer attacks. This reduces their losses in the long run.
At SQN Banking Systems, we have the solutions you need to protect your financial institution from cyber security breaches and attacks. We know that a one-size-fits-all approach to cybersecurity doesn’t work. We customize solutions to meet our clients’ unique needs. To learn more, contact us today.