Understanding Data Breaches: Protecting Your Customers

Data breaches occur when malicious actors expose sensitive customer information. This can be due to hacking, phishing, malware, or physical theft of laptops and hard drives. Malicious actors can use personal data like names, birthdates, addresses, phone numbers, and email addresses to commit fraud. This can be devastating for the people affected by the breach.

Identity Theft

After you provide companies and organizations with your name, address, phone number, credit card information, health history, Social Security number, or other personal data, you expect they will keep that information safe. This is why it can be so alarming to discover that they have been the victim of a data breach and that your personal information may now be in the hands of criminals. Among the most common consequences of data breach is identity theft, which can result in you having your identity stolen and used by fraudsters to make purchases, open lines of credit, or withdraw funds from bank accounts. This can damage your credit score and even ruin your life, as you are left to sort out the mess that is your tarnished credit report and find other ways to pay for things you need, like rent, utilities, or loans. The good news is that you can take steps to prevent identity theft, such as keeping your Social Security card in a secure place and using passwords or passphrases that are not easy to guess (like 123456789, qwerty, your mother’s maiden name, or your birthday). You should also only give out your personal information verbally in public places or relay it over the telephone if you are sure it cannot be overheard.

Fraud

Fraud, or criminal activity that exploits a victim’s personal information, is a common consequence of data breaches. Cybercriminals use the information they gain in a breach to commit crimes such as identity theft, account takeovers, or even ransomware. Depending on the size of a breach and the type of data stolen, it may be worth their while to sell the information on the dark web or other illicit marketplaces. Getting this information can be as easy as hacking into a company’s network. Bad actors can coax employees into sharing their credentials using phishing or other forms of social engineering. This can be an accident, but it is more commonly the result of a malicious employee who regularly accesses PHI and other confidential data. Criminals often comb through data breaches looking for financial information such as credit card numbers and personal bank accounts. Still, they also seek health insurance details for medical procedures or prescription drugs. Once fraudsters have a trove of this data, they can resell it for much more money than they paid to obtain it. If this data is used to tarnish an individual’s credit score, getting other financial services, such as loans or property rentals, can be nearly impossible. It can also damage their ability to apply for jobs, especially in law enforcement or healthcare.

Damage to Reputation

The damage to reputation resulting from a cyber incident is far-reaching and can be a long-term issue. Consumers want to conduct business with companies they trust, and this is especially important for organizations dealing in financial information, like banks, credit unions, and insurance agencies; health care providers; and intellectual property like formulas, patents, and technical manuals. Customers can take their business elsewhere when a company’s reputation is harmed due to a data breach. Even if the damage is minimal, it’s enough to cause financial loss and ruin a brand name. In fact, according to Security Intelligence, 60% of small and medium-sized businesses will close within six months following a data breach. Larger organizations might not shut down, but they can still suffer financially. While it’s true that many of these costs can be covered by cyber insurance, the premiums often need to be more affordable for smaller companies that may need more coverage. In addition, the cost of a data breach can include paying fines from regulators and revising internal security protocols to prevent future incidents. These expenses can drain a company’s budget, leaving them less money to spend on growth and customer acquisition.

Loss of Customer Trust

When customers give a company their personal information, they trust that the organization will keep it secure. Then, they discover that the company has suffered a data breach, exposing their data. This can be a very unsettling experience for customers. They may not only fear identity theft and fraud but must also consider that their data could be used for other malicious purposes. A data breach is expensive and can financially devastate a business. Some small businesses never recover from a cyber incident, and even large organizations can suffer significant financial loss. This is in addition to lost revenue, fines, and lawsuits. Ultimately, the most damaging consequence of a data breach is losing customer trust. Consumers no longer believe that companies can be trusted to protect their data and are willing to stop doing business with brands that misuse or sell their data. Keeping your customers’ trust is essential for building long-term relationships. It is also necessary to provide them with a tailored experience, which today’s consumers demand. You can’t provide a personalized experience without access to your customer’s data, but you must protect this information from being stolen or exploited by bad actors. This requires implementing a layered defense-in-depth approach to cybersecurity and strongly emphasizing preventing data breaches.