Breaches pose a growing risk for small businesses, costing up to 5% of annual revenue

Here’s how much a data breach now costs. Source: shutterstock.com

IBM Security today announced the results of its annual study examining the financial impact of data breaches on organizations. According to the report, the cost of a data breach has risen 12% over the past 5 years and now costs?$3.92 million?on average. These rising expenses are representative of the multiyear financial impact of breaches, increased regulation and the complex process of resolving criminal attacks.

The financial consequences of a data breach can be particularly acute for small and midsize businesses. In the study, companies with less than 500 employees suffered losses of more than?$2.5 million on average – a potentially crippling amount for small businesses, which typically earn?$50 million or less in annual revenue.

For the first time this year, the report also examined the longtail financial impact of a data breach, finding that the effects of a data breach are felt for years. While an average of 67% of data breach costs were realized within the first year after a breach, 22% accrued in the second year and another 11% accumulated more than two years after a breach. The longtail costs were higher in the second and third years for organizations in highly-regulated environments, such as healthcare, financial services, energy and pharmaceuticals.

Sponsored by IBM Security and conducted by the Ponemon Institute, the annual Cost of a Data Breach Report is based on in-depth interviews with more than 500 companies around the world that suffered a breach over the past year.

Malicious data breaches cost companies in the study?$4.45 million?on average?–?over?$1 million?more than those originating from accidental causes such as system glitch and human error. These breaches are a growing threat, as the percentage of malicious or criminal attacks as the root cause of data breaches in the report crept up from 42% to 51% over the past six years of the study (a 21% increase).

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