No Business is Safe from Lingering Costs of Data Breach

It’s no secret that a data breach hurts a business in numerous ways. When a breach occurs, organizations of all sizes face both overt and hidden costs that can have far-reaching consequences. Recent incidents at larger companies demonstrate that even big businesses are far from safe regarding cybersecurity issues impacting the bottom line. And a minor breach at a small company can quickly sink the ship if a plan is not in place to help deal with such problems. Exploring the various dimensions of the costs businesses face when dealing with a data breach can help highlight how concerning the lingering effects truly are.

Clorox Cyberattack Leaves Dirty Dilemma

A recent cyberattack on Clorox is a prime example of how damaging data breach costs can be, even for established corporations with seemingly endless capital and resources. In an announcement related to its preliminary financials for 2024, Clorox Co expects a decrease in net sales upwards of $593 million, largely due to an expansive cyberattack the company experienced earlier in 2023. That’s a massive hit, even for such a large business, and the fact much of this is a direct or indirect result of cybersecurity issues demonstrates how those costs stack up in a hurry.

Clorox disclosed details of this cyberattack in August of this year, and its effects were virtually immediate. The attack caused widespread product outages and delays, which are still in play months after the initial breach. Operational systems were directly impacted, and Clorox had to revert to manual procedures, setting fulfillment back immensely. The company says the threat has been contained, but even so, that lasting financial impact should serve as a good warning.

Severe Impacts on Smaller Businesses

Smaller businesses are far from immune to data breaches, and although these might not face as significant of costs on paper, the hit can be proportionally worse. IBM’s Cost of a Data Breach Report for 2023 shows that the average impact of a data breach on organizations with less than 500 employees is $3.31 million. And the average cost per breached record is $164. So, even if you are a small mom-and-pop shop with an email list of 1,000 customers, a single breach could easily have a six-figure impact.

With small and medium-sized businesses squarely in the crosshairs of cybercriminals but still often underprepared for breaches, hacks, and other incidents, it’s easy to see how devastating the initial financial impact can be. But as the lingering effects take hold, smaller businesses face a real possibility of being unable to survive the stranglehold these consequences pose.

Direct Financial Costs Related to Data Breach

Here are some direct costs businesses of all sizes can expect relating to a data breach incident. Many of these can be reduced or mitigated by having a pre-breach response plan in place.

  • Data Recovery and Investigation: An initial cost incurred by businesses when a data breach occurs is the need to investigate the breach and recover compromised data. This can involve hiring cybersecurity experts, forensic analysts, and legal counsel to determine the extent of the breach and how it occurred.
  • Regulatory Penalties: If a business fails to adequately protect sensitive information as data protection laws require, it can lead to regulatory fines and penalties. These can be substantial, sometimes running into millions of dollars.
  • Legal: Businesses may also face lawsuits from affected individuals or regulatory bodies. The costs of defending against these legal actions, settling, or paying damages can be substantial.
  • Notification: In many jurisdictions, businesses are legally required to notify affected individuals about the breach. This often entails mailing notices, setting up call centers, or offering other supportive services, which can come with a hefty price tag. A pre-breach response plan can provide these services at a fraction of the price compared to post-incident clean-up.

Hidden Costs Related to Data Breach

The hidden costs of a data breach are not as apparent or immediately impactful, but they can all lead to ongoing issues that affect a business’s bottom line. Here are a few of the primary under-the-radar concerns to be aware of:

  • Loss of Productivity and Downtime: Businesses often need more time as they work to resolve a data breach. This can result in lost productivity and revenue. Employees may be diverted from their usual tasks to address the breach, and systems may temporarily shut down.
  • Customer Churn: A breach can erode customer trust and confidence in a business. Customers who lose faith in a company’s ability to protect their data are more likely to take their business elsewhere.
  • Reputation Damage: The damage to a business’s reputation can be one of the most significant hidden costs of a data breach. Once the breach is publicized, it can be challenging to regain the trust of customers, partners, or investors. Negative headlines and social media backlash can linger long after the breach is resolved.
  • Lost Intellectual Property: Valuable intellectual property and trade secrets can also be lost during a breach. These assets may be difficult, if possible, to replace. This can impact organizational competitiveness and revenue for years after an incident.
  • Stock Price Decline: Publicly traded companies may see a drop in their stock price following a data breach. Investors tend to react negatively to cybersecurity incidents, causing a decline in the company’s market value.

The hard reality with all these costs is that there isn’t a way to prevent data breaches and other security incidents outright. That’s why proper preparation and planning are critical for every business to ensure the best help and guidance is in place when a cybersecurity situation takes shape.


LibertyID Business Solutions provides Business fraud remediation, full pre-breach preparation with custom WISP protocols, post-breach regulatory response, customer and employee identity fraud restoration management, advanced employee training, and third-party vendor management tools.