Global Cost of Data Breach Increases by 15% in 2014

Ponemon Institute, LLC released its ninth annual Cost of Data Breach Study: Global Study, sponsored by IBM Corp.

According to the study of 314 companies spanning 10 countries, the average total cost of a data breach increased 15% in the last year to $3.5 million local currencies were converted to U.S. dollars for comparison purposes.

The study also found that the cost incurred for each lost or stolen record containing sensitive and confidential information increased more than 9% to $145.

The study involved the collection of detailed information about the financial consequences of a data breach. For purposes of this research, a data breach occurs when sensitive, protected or confidential data is lost or stolen and put at risk.

Ponemon Institute conducted 1,690 interviews with IT, compliance and information security practitioners representing 314 organizations in the following 10 countries: USA, UK, Germany, Australia, France, Brazil, Japan, Italy, India and, for the first time, the Arabian region (a consolidation of organizations in the United Arab Emirates and Saudi Arabia).

“The goal of this research is to not just help companies understand the types of data breaches that could impact their business, but also the potential costs and how best to allocate resources to the prevention, detection and resolution of such an incident,” said Dr. Larry Ponemon, chairman and founder, Ponemon. “This year’s Cost of Data Breach Study also provides guidance on the likelihood an organization will have a data breach and what can be done to reduce the financial consequences.”

All those interviewed are knowledgeable about their organization’s data breach and the costs associated with resolving the breach. All participating organizations experienced a data breach ranging from a low of approximately 2,400 to slightly more than 100,000 compromised records, which identifies the individual whose information has been lost or stolen in a data breach.

“Clearly, cybersecurity threats are a growing concern for businesses, especially when we consider how persistent data has become in the age of cloud and mobility,” said Kris Lovejoy, GM, IBM security services division. “A data breach can result in enormous damage to a business that goes way beyond the financials. At stake is customer loyalty and brand reputation.”

The following are key takeaways from Global Cost of Data Breach Study:

• The most costly breaches occurred in the U.S. and Germany at $201 and $195 per compromised record, respectively. The least expensive data breaches were in India and Brazil at $51 and $70, respectively.
• Root causes of data breaches differ among countries and affect the cost of the breach. Countries in the Arabian region and Germany had more data breaches caused by malicious or criminal attacks. India had the most data breaches caused by a system glitch or business process failure. Human error was most often the cause in the UK and Brazil. The most costly data breaches were those caused by malicious and criminal attacks. The U.S. and Germany paid the most at $246 and $215 per compromised record, respectively. These types of data breaches were least costly for companies in India and Brazil at $60 and $77 per compromised record, respectively.
• A strong security posture was critical to decreasing the cost of data breach. On average, companies that self-reported they had a strong security posture were able to reduce the cost by as much as $14 per record.
• The involvement of BC management reduced the cost of data breach by an average of almost $9 per record.
• The appointment of a Chief Information Security Officer (CISO) to lead the data breach incident response team reduced the cost of a breach by more than $6.
• Countries that lost the most customers following a data breach were France and Italy. Companies in the Arabian region and Brazil experienced the lowest loss of customers.
• The probability of a company having a data breach involving 10,000 or more confidential records is 22% over a two-year period. Countries most likely to experience a data breach include India, Brazil and France.

Consistent with previous Cost of Data Breach studies, the most common cause of a data breach is a malicious insider or criminal attack.

In this year’s study, companies represented in this research were asked what worries them most about security incidents, what investments they are making in security and the existence of a security strategy.

Following are some of the key findings:

• The greatest threats to the companies in this study are malicious code and sustained probes. According to threats increased.
• Only 38% of companies have a security strategy to protect its IT infrastructure. A higher percentage (45%) has a strategy to protect their information assets.
• Malicious code and sustained probes have increased the most. Companies estimate that they will be dealing with an average of 17 malicious codes each month and 12 sustained probes each month. Unauthorized access incidents have mainly stayed the same and companies estimate they will be dealing with an average of 10 such incidents each month.
• The majority of companies (50%) have low or no confidence that they are making the right investments in people, process and technologies to address potential and actual threats.
• Ideally companies would like to invest $14 million over the next 12 months to execute their organization’s security strategy. However, in the next 12-month period, companies anticipate having an average of about half that amount, or $7 million, to invest in their security strategy.

The State of Advanced Persistent Threats study
Ponemon also released The Economic Consequences of an APT Attack study sponsored by Trusteer, an IBM company.This newly released report is part of a larger research study entitled, The State of Advanced Persistent Threats, published in December 2013. This original research of 755 U.S. IT security practitioners supports the findings of The Cost of Data Breach study, wherein targeted criminal attacks are considered by a majority of respondents to be their organizations’ greatest threat. Another corroborating fact is a finding that reputation damages represent the most costly component or consequence of criminal attacks, and especially those involving the theft or misuse of information assets. Respondents in this study estimate an average cost to restore reputation as much as $9.4 million.