NEW PONEMON STUDY SHOWS DATA BREACH COSTS UP 9 PERCENT FROM 2006
Results of the 2007 Annual Study: Cost of a Data Breach released this week concluded the total average cost of a data breach grew to $198 per compromised record, up from $182 in 2006 — an increase of 9 percent.

According to the study conducted by the Ponemon Institute, an independent privacy and information management research firm, lost business continues to dominate the cost of a data breach growing more than 30 percent since 2006 to $128 per record. Greater customer turnover and higher costs of new customer acquisition, due to increased marketing to recover lost customer business, now accounts for 65% of data breach costs. It demonstrates that consumers are fed up with companies that fail to secure their personal information and have no problem taking their business elsewhere. It also shows they have not become desensitized by the frequent reporting of data breach incidents like many companies have.

Another area that has shown an increase in cost was legal defense and public relations, up 11% jointly. Again, continued growing dissatisfaction by consumers and action required to soothe over a data breach added to increased costs. These areas carry a higher toll when the organization has built their brand on trust since they generally have more to lose. This is demonstrated by higher per record costs of $239 or an increase of 21 percent for financial services compared to an average breach.

The survey also reports that breaches where a third-party was responsible, such as an outsourcer or consultant, increased from 21 percent in 2005 to 40 percent in 2007. These breaches were also more costly than those incurred by the organization itself.

The cost difference between in-house and third-party breaches went from $12 to $67 per record. That's a 450 percent increase since 2005. This indicates that organizations need to do a better job in evaluating the systems and protection policies of outside resources when handing over their critical data.

The good news is that other costs associated with a data breach decreased 15 percent from 2006. These cost areas include investigations, notification of impacted individuals, and services such as offering free credit monitoring. The report contributes this downward trend to companies that have learned how to respond to a breach more cost-effectively. By learning from past breach responses, they are realizing the benefits of being proactive in executing enterprise data protection to secure data wherever it is stored or used.

The study identified four core process-related activities associated with a company's detection of and response to a data breach:

COSTS BY COST CENTER ON A PER RECORD BASIS

It is obvious that the cost of prevention far outweighs the cost of a breach. Companies should be very cautious to take chances in not protecting entrusted personal data. The Ponemon study helps companies obtain guidance to support ongoing risk measures taken. Results from the survey indicate that a security breach can cost between $70 (not including lost business) and $198 per record. A company could calculate that if 1,000 records were compromised, it could cost between $70,000 and $198,000. By using this as a guide, you can estimate your company's potential cost of a breach.

A copy of the 2007 Annual Study: Cost of a Data Breach is available for download. For information on conducting a Risk Assesment for your company, please contact us at
888-448-5451 or request a representative to call you.

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