With the advent of big data, the need for privacy protection has ratcheted up. For enterprises, it is essential to acknowledge the importance of data protection. If companies could not develop strategies to mitigate the risks, they would suffer immeasurable consequences that can drastically damage their prestige and revenue.
Data privacy: the barriers to success & why it is crucial
To protect sensitive information
Securing data with proper protocols is a way to prevent confidential information from imminent breaches. These data might include companies' strategies, trade secrets, financial data, and supplier and customer information. In some cases, data can contain the intellectual property of the enterprises, which, if lost, may result in losing classified ideas. Some of these ideas are lucrative for companies, which may lead to competitive disadvantage, profit loss and companies would fall behind their competitors.
To protect from malicious intents
The need for data protection comes from enterprises prioritizing reinforcing their defenses against online threats, such as stolen information, ransomware, malware virus, fraud, hacking, insider attacks, or phishing attacks. Digital advancement creates a leeway for attackers to commit nefarious acts. Especially when data has become digitalized and accessible from anywhere, it is easier to access private information. These data could be the perfect target for attackers to infiltrate the companies' systems. Possible consequences are hackers could sell the company's confidential information to their competitors, stealing solicit personal and financial information from users to blackmail them, or commit identity theft to scam for money.
To ease customers' concerns
While companies are dealing with potential cybersecurity risks that could compromise sensitive data, customers are becoming more aware of how their data is tracked, used, and gathered. The scenarios where businesses fail to protect their data privacy or if it could fall into the hands of malicious third parties have been hassling customers. In 2019, Pew Research Center found that users in the US felt they had no control over how companies and the government used their personal information. While 79% of Americans raised questions about how enterprises collected their data, 81% felt they had no control over their data. Compared to 47% of the respondents indicated they were worried about the risk of their information being hacked, 51% were worried about their data being sold to third parties . If businesses cannot find solutions to safeguard their data with security measures, it could be detrimental to their brand image and revenue when a data breach occurs.
One of the most significant security breaches in the business world happened to the American retail giant, Target. In 2013, the hackers exploited the weaknesses in Target's system, gained access to a customer service database, and installed malware to retrieve customers' sensitive information. The breach heavily affected 41 million customer payment accounts and compromised 60 million customers' information. Consequently, the company lost $292 million, and its earnings fell a whopping 46% following the data breach . Not only did Target witness dwindling revenue in the following year, but it also lost its credibility and loyal customer base, which would require a lot of time, energy, and investment to recover.
The consequences are dire
There are several adverse outcomes when a data breach occurs for large enterprises, out of which the most significant consequences include financial and reputational damage.
- From high client turnover rates. Even the most loyal customers will start to doubt the companies if once concerns over data usage arise. The cost of acquiring a new customer can range from 5 to 25 times more expensive than retaining an existing one, depending on the industry. Thus, in the case of a PR crisis and lost reputation, enterprises will face serious customer retention challenges, as 87% of consumers are more likely to turn to competitors when a security breach occurs.
- From cleaning up the mess. Coupled with reduced customer traffic, the costs to recover and establish reserves against legal judgments are a heavy price. In the case of Target's security breach mentioned above, the retail enterprise's revenue dropped by $1.58 billion, from $5.52 billion the year before the attack to $3.94 billion the following year .
- Poor security means bad reputation. A good reputation is often a company's most valuable asset, as a business must constantly work to establish and maintain the integrity of its brand. Organizations are bound to lose their competitive edge if they are portrayed with a weak security posture, lacking incident response plans, and insufficient funding for security measures.
- Decline in brand power and value. According to research, large data breaches heavily affect brand power, especially for big businesses in the service industry. Forbes points out the most prominent data breaches result in a 5–9% decline in brand power. In a study by Infosys and Interbrand regarding value loss, the maximum risk adds up to 11% of the brand value. This figure is equivalent to more than 100% of net annual income, depending on different business sectors .
- Negative news coverage. News about data breaches will gain exponential traction in the public sphere. Since news is covered in multiple channels, companies would struggle to handle the PR crisis due to its amplified impact. In the long run, the news could stay on the Internet for an extended period, and the company's image would be associated with the data breach.
What could be done?
Cybercriminals will find more sophisticated ways to harm enterprises and compromise confidential data as technology advances. Privacy protection will become less hassle if companies prioritize cybersecurity top of their agenda. Even if policies do not require corporations to constantly step up their game in protection programs innovation, securing data to consumers gives companies more advantages over the competitors. Thus, in response to potential cyber threats, companies should reassess the current measures and establish awareness among their companies from all levels. Besides providing solid training and implementing credible software, companies must abide by rules and guidelines to protect clients' and companies' information.