Callcredit Blog

The threat of a data breach on business reputation

Fraud & Verification

Reputation_shutterstock_361657322

Of the many topics being hotly debated in executive board meetings at the moment, from the uncertainty around the pending EU referendum to the US elections, there’s one topic that is ever present, and increasingly becoming a lead agenda item: managing strategic risk and reputation.

40% of executives cite reputation as the number one boardroom risk*. It transcends an organisation, touching upon every aspect of its operation; from the treatment and behaviour of employees, brand, consumer relationships, and how issues are handled when a crisis happens.

According to recent research** conducted by YouGov on behalf of Noddle Protect, the loss of reputation is a bigger concern to business leaders in large businesses than a fall in share price. In the event of a data breach, 57% of businesses surveyed say their biggest concern would be damage to their reputation, compared to 7% who said fall in share price.

So what is the actual reputational cost of a data breach?

Well the first thing to say is that not all data breaches are the same. It is easy to see that a significant cyber security attack would have a considerably larger impact on a small or medium sized business who does not have the existing reputation to withstand it. Plus, the size of the data breach is undoubtedly important.

Having said that, the Ponemon Institute*** found that data breaches were up there with poor customer service and environmental disasters for impacting brand reputation. Also stating that that the average time it takes to restore an organisation’s reputation after a data breach is one year.

Perception is reality

Customers will vote with their feet and they won’t be afraid to shout about it either. With the amplification of social media, the power of the consumer is stronger than ever. In global research conducted by Forbes Insights****, a staggering 68% of global executives said they thought online presence drives reputation. Not only do businesses risk losing existing customers but, by not handling the situation in the right way, they can also lose potential future customers.

Modern business is fast paced, unforgiving and ruthless. Your competitors will pounce as soon as any data breach is well publicised and your customers are expressing dissatisfaction. The initial reaction a business has to a data breach is therefore key. Handling it is almost as important as solving the issue. This is why Noddle Protect a data breach solution from Callcredit Consumer Markets, which helps safeguard businesses from the reputational damage of a data breach and safeguard consumers’ digital identity, is so important.

Financial ramifications

Further Ponemon research also found that a data breach of more than 100,000 records that was well reported in the media would result in a 12% decrease in brand value. In addition, changes in EU legislation with the proposed General Data Protection Regulation (GDPR), mean that from mid-2018, if organisations fall victim to a serious data breach, they will have to inform their customers and could be fined up to a maximum of 4% of their global turnover. This, in addition, to the £2.37 million that an average data breach costs will have a considerable impact on a company’s bottom line.

Mitigating the potential impact can be achieved by reacting in the right way: communicating with customers promptly, offering them a way to protect their digital identity and making sure they are kept up to date with the development of the data breach. By being proactive and investing in safeguarding their consumers, via a data breach solution such as Noddle Protect businesses are not only acting responsibly, they are demonstrating a genuine investment in their consumer relationships, helping to build long term trust and loyalty.

Author: James Robinson

*2013 Exploring Strategic Risks Report, Deloitte & Forbes Insights

** Figures from YouGov Plc.  Total sample size was 281 decision makers in large businesses. Fieldwork was undertaken between 14-21 March 2016.  The survey was carried out online.

***2015 Cost of Data Breach Study, Ponemon Institute.

**** Socializing Your Brand, Weber Shandwick & Forbes Insights

Leave A Comment

Your email address will not be published. Required fields are marked *