FTAdviser.com

Advertising

A spotlight has been thrown on the business impact of data breaches with the release of a new study which has found that lost business accounts for 36 per cent of the costs for UK firms, according the Ponemon Institute.

The research, sponsored by Symantec and PGP Corporation, revealed that the costs incurred by UK businesses after experiencing a data breach cost on average more than £1.4m.

The 2007 Annual Study: UK Cost of Data Breach, also showed that the financial impact of lost business due to reduced consumer trust was the most significant component of data breach costs.

Breaches included in the survey ranged from 2500 to more than 125,000 records from 21 UK businesses spanning eight different industry sectors.

Among the key findings, the survey highlighted that the average total cost of a data breach ranged from £84,000 to almost £3.8m, with an average of £47 for each record compromised.

Over one-third of reported costs were due to lost business, with an abnormal customer churn rate of 2.5 per cent after breach and 38 per cent of respondents reported breaches by third party organisations such as outsourcers, consultants and business partners, at a significantly higher cost a record compromised.

Survey respondents identified encryption and data loss prevention solutions as the top two technology responses following data breach, indicating that UK organisations increasingly understand the benefits of deploying enterprise data protection to defend data against future breaches.

Larry Ponemon, chairman and founder of the Ponemon Institute, said: "This study establishes a first of its kind benchmark for organisations in the UK to calculate the risk and potential monetary consequences of a data breach."

He added: "Businesses and government in the UK are just now coming to realise the impact data breach can have on an organisation and its customers, similar to developments in the US five years ago when data breaches first became headline news."