Magazine article Risk Management

Q&A: Information Malpractice: It Seems That a New Data Breach Incident Makes Headlines Every Day. What Are the Actual Costs Involved-Both for the Direct Bottom Line and for Years to Come and Do Companies Even Understand the Risk?

Magazine article Risk Management

Q&A: Information Malpractice: It Seems That a New Data Breach Incident Makes Headlines Every Day. What Are the Actual Costs Involved-Both for the Direct Bottom Line and for Years to Come and Do Companies Even Understand the Risk?

Article excerpt

How has data risk evolved?

There has been an explosion in the volume of data that companies can store in a cost-effective way. In 1999, the cost of one gigabyte of storage was roughly $1,000. So it was very expensive for a company to continually add data about their customers. In 2005, the cost actually went down below 99 cents. The obstacles to collecting unprecedented amounts of data are gone from a cost point of view.

How has this affected companies?

Companies like eBay and Amazon used to demand very broad cyber coverage and very broad intellectual property coverage because the bulk of their business risk was electronic. But in 2008 even something like a hospital, with its electronic medical records, has become a data warehouse to the extent that eBay or Amazon was back then. And the nature of the data for a hospital is so much more sensitive and potentially volatile if it were to go public than traditional industries, so it faces an even greater risk than your regular, poster-child tech companies.

What are the costs of a data breach?

It impacts the bottom line directly in terms of operational expenses. The latest Ponemon study found that on average it costs a company $108 per person for the expense of handling a privacy incident. This includes notification expenses and compliance expenses. You might have to hire a cyber investigation, cough up money for credit monitoring services for a year or two or establish a call center because you will be bombarded by questions. …

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