10 Consequences of Data Loss for Businesses
Data loss can occur in many ways. Most commonly because of human error, though if your networks and systems are inadequately protected then your business is threatened by other data protection risks including hackers, malware and ransomware, natural disasters, etc.
Whatever the cause, the consequences of data loss for businesses can be severe. If more business owners and C-suite directors were aware of exactly how bad data loss could be for their companies, no company would be inadequately protected.
10 Consequences of data loss for businesses
Businesses use data for various purposes such as marketing, customer service, product development, and analytics. Depending upon the severity of the data loss, and the actions that you must take, any (or all) of the following 10 outcomes are possible.
Downtime and productivity disruption
Your data is lost or corrupted, meaning it cannot be used. In such a case, your whole company’s operations could be disrupted. Who knows how long for? Depending on the cause, a temporary closure may be mandated by regulations.
The longer your company’s operations are down, the higher the costs will be. According to Datto, each hour of downtime will cost a small business an average of $8,000.
Permanent data loss
Permanent data loss is when there is no way to recover the lost data because it has been permanently destroyed or corrupted. The most common form of permanent data loss is a hard drive crash. When this happens, the data cannot be retrieved or restored — it’s gone forever. The solution to this is to rebuild your data, a costly and time-consuming exercise.
Exposure of confidential information
Confidential data are the crown jewels of your business. Expose this to the world, and you could be screwed to the wall. Your business secrets, client list, pricing structure, and product innovations… all gone and potentially available for competitors or criminals to use.
Legal action, fines, and lawsuits
So, you’ve lost confidential data. What next? One thing that may be on the cards is a lawsuit. Or multiple suits. Or a class action. You may also be fined for failure to protect customer information. It’s going to be bad.
Just hope that the settlement won’t be as big as the $575 to $700 million that Equifax was required to pay to regulatory bodies in 2017.
When you suffer a data breach and subsequent data loss, your reputation will suffer a similar loss. Trust is damaged, among suppliers, stakeholders, and customers. You can expect it to be more difficult to win new customers. According to research by the Ponemon Institute, your stock price is likely to fall by around 5% (and that’s an average).
To put it simply, your brand is going to be hit, and hard. Indeed, 61% of CMOs believe the biggest cost of a security incident is the loss of brand value.
Loss of customer loyalty and trust
Staying with Ponemon’s Data Breach, Business & Financial Impact Report, you can also expect customer loyalty to take a tumble. When a business loses its customers’ data, 65% of customers lose trust in that business. More than a quarter will move their custom elsewhere.
A loss of reputation. A tarnished brand. Customer loyalty has fallen off a cliff. Your sales are going to tumble. Where would such an outcome leave your business?
Difficulty attracting new employees
A serious data loss will not only affect your reputation with customers. It will make it more difficult to attract talent to your team. Who wants to work for a company that can’t keep its data secure, is losing customers, and has a reputation one step away from the trash can?
We’ve touched on the financial implications of a data loss already. But how bad can it really get?
IBM’s ‘Cost of a Data Breach Report 2021’ provides all the data you need to know.
The average cost of a data breach for all firms globally is $3.84 million. This includes all direct and indirect costs. Around 40% of the costs relate to reputational damage and lost customers. Then there is the cost of downtime, fines, and technology remediation on top.
According to data and research collected by Unitrends, more than 9 in 10 companies that lost their data for 10 days or longer file for bankruptcy within a year. PricewaterhouseCoopers found that 70% of small businesses that suffer a major data loss close within a year.
Avoid all the consequences of data loss in your business
Should your business suffer a data loss, there will be consequences. At best, your business will be disrupted. At worst, it will be forced to close.
Don’t bury your head in the sand. Protect against and prevent data loss occurrences in your business by planning for all causes of data loss.
Is your business protected against data loss? Contact Millennium Tech today to learn the first, crucial step in preventing your company from suffering the consequences of data loss.