Magazine article Business Credit

Keeping Data Safe Takes Several Solutions: Data Management Requires a Multi-Tiered Approach to Keep Sensitive Information out of the Hands of Hackers

Magazine article Business Credit

Keeping Data Safe Takes Several Solutions: Data Management Requires a Multi-Tiered Approach to Keep Sensitive Information out of the Hands of Hackers

Article excerpt

Businesses have come to rely on information technology to make their organizations run smoother. Institutions run on networks connected to the Internet. This technology, however, comes with certain risks. Although it makes processes and procedures easier and more efficient, it opens companies up to potential exposure of sensitive data. "Data housed by credit folks is important," said Damion Walker, MBA, senior vice president of commercial lines for Hub International Limited. It often includes customer data, pricing and credit processing records. "If you have a computer system, if you're holding any kind of confidential data, you're subject to data risks," Walker said. "Information in the wrong hands could damage relationships with customers."

Companies must handle confidential data with care, said Mike Foster, CEO of The Foster Institute. A data breach can cause a firm a variety of problems for itself and its customers. The average total cost of data breaches for U.S. companies grew to $5.9 million in 2014--up from $5.4 million the previous year, according to a Ponemon Institute survey. The average cost for each stolen or lost record rose to $201. For companies with hundreds of records, that amount can add up fast.

The types of data breaches an organization can face are nearly endless and can come from anywhere, including external opportunists or company insiders. Regardless of whether assets such as customer lists or trade secrets are stolen, a data breach can interrupt business and damage a firm's reputation. And it doesn't matter what size the company is; each one is susceptible. The U.S. House Small Business Subcommittee on Health and Technology cited a study in 2013 that finds nearly 20% of all cyber attacks are against small businesses with 250 or fewer employees, and nearly 60% of small businesses close within six months of an attack.

While insurance could help cover the costs associated with a breach, policies won't protect what others think about you. In conjunction with an insurance policy, organizations can learn to understand and manage their risks to reduce the likelihood of a breach, Foster and Walker said. Although a company's IT department is responsible for protecting the firm, every employee should follow procedures to safeguard sensitive company information, Walker said. The best time to minimize risks and the best way to limit costs associated with a breach is to take measures before one happens. Managing risk requires a combination of tactics.

Data Breach Insurance

Most standard commercial insurance policies don't cover data breaches, as some companies have learned the hard way. Instead, businesses are turning to cyber insurance. Demand for cyber liability insurance coverage grew 21% from 2012 to 2013, according to the National Association of Insurance Commissioners' website.

Companies should consult a broker before purchasing insurance to make sure they get a policy that addresses their issues and then work with the insurer to get guidance and expertise, Walker said. "In general, most companies need some type of policy. The market is still relatively well priced. Make sure your company is working with a reputable carrier that understands potential risks." A variety of factors will determine the coverage a company needs. An insurer will consider the type of data at risk, the size and scope of the business, number of customers, presence on the Web and what security measures the company has in place, among other factors, Walker said. An average company has a $1 million limit, which costs about $10,000 a year, he noted. "But it really depends on the data it's holding." Costs related to a breach, including legal fees, can cost much more, however.

The policies are often expanded to cover other data breaches. Most common breaches occur from the loss of a laptop computer, flash drive, smartphone or hard copy of a file, Walker said. "Data breaches can come from all different directions. …

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