As businesses increasingly store their data and customer information online, they face heightened risks from cybercriminals. These threats significantly raise the cost of cybersecurity, and businesses often pass these expenses onto customers in the form of higher prices. In 2019 alone, businesses suffered losses totaling $1.8 billion due to cybercrime, according to data from business insurer Hiscox. Below are six critical ways cybercrime affects businesses today.
Stolen Intellectual Property
For many companies, intellectual property such as product designs, proprietary technologies, and marketing strategies represents their most valuable assets. According to Ocean Tomo, intangible assets accounted for 87% of the total value of S&P 500 companies in 2015. Unfortunately, storing these assets in the cloud makes them a prime target for cybercriminals.
A significant number of U.S. companies have reported instances of intellectual property theft. Amid discussions about cybersecurity, it’s worth noting how Americans engage with online platforms, particularly in leisure activities. For example, many people now play free casino games as a popular pastime. These platforms allow Americans to enjoy their favorite games without financial risk, serving as a fun and secure way to unwind. However, the safety of such platforms depends on robust cybersecurity measures, further emphasizing the importance of protecting online systems.
Rising Expenses
To safeguard against cyber threats, businesses must allocate substantial funds to cybersecurity measures. These expenses can include acquiring advanced cybersecurity technology, hiring experts, notifying affected parties after a breach, and increasing insurance premiums. Companies also need to invest in public relations strategies to mitigate the damage caused by cyberattacks.
Ransomware attacks present an additional financial burden. These attacks, which block access to IT systems until a ransom is paid, have become increasingly common. “In 2019, about 6% of surveyed companies paid ransoms, leading to $381 million in losses. Additionally, compliance with cybersecurity regulations often necessitates legal and expert consultations. Companies targeted by hackers may also face lawsuits and be required to pay damages, as was the case with Equifax. Following a 2017 data breach affecting 147 million customers, Equifax settled litigation by agreeing to pay up to $425 million to assist affected individuals.
Disrupted Operations
Beyond financial costs, cyberattacks can cause significant operational disruptions. Malware attacks may destroy critical data, while malicious software installed on servers can block access to company websites. These interruptions lead to revenue losses and disrupt the normal flow of business activities.
Hacktivists, individuals who conduct cyberattacks to promote social or political causes, often use disruption as their primary weapon. For example, in 2010, hackers supporting WikiLeaks launched attacks against Mastercard and Visa, temporarily crashing their websites. Such incidents highlight how cybercrime can cripple even the most robust organizations.
Changed Business Practices
Cyber threats force companies to reevaluate how they collect, store, and protect sensitive data. To mitigate risks, many businesses have ceased storing customers’ financial details, such as credit card information and Social Security numbers. Others have opted to shut down online services entirely, citing concerns about their ability to defend against cyberattacks.
Customers are increasingly aware of security issues, and they gravitate toward companies that are transparent about their cybersecurity measures. This shift in consumer behavior compels businesses to prioritize and openly communicate their data protection efforts.
Damaged Reputation
Cyberattacks can severely damage a company’s reputation, even if the financial impact is difficult to quantify. When businesses suffer data breaches, customers and partners may lose confidence in their ability to safeguard sensitive information. For example, Target experienced a significant reputational hit following a 2013 data breach that exposed the credit card information of over 40 million customers. Similarly, a 2014 attack on JPMorgan Chase compromised the data of 76 million household accounts and seven million small businesses.
In addition to eroding trust, such incidents can negatively affect market performance. A study by Comparitech found that the stock prices of companies hit by data breaches dropped by an average of 3.5%, underperforming the Nasdaq index by the same margin. This underscores how reputational damage can have long-term consequences for publicly traded companies.
Reduced Revenue
A drop in revenue is one of the most immediate consequences of a cyberattack. Concerned customers often shift their business to competitors they perceive as more secure. Cybercriminals also use extortion tactics to exploit their victims financially.
A notable example is the 2014 cyberattack on Sony Pictures, which coincided with the release of the film “The Interview.” Hackers stole sensitive internal information, including private emails and employee evaluations. Although North Korea denied involvement, it was widely suspected to be behind the attack. To mitigate further damage, Sony opted for an online release of the film instead of traditional theater screenings, resulting in a $30 million loss.