First-Ever Global Cost of a Data Breach Study Shows Organisations Paid USD3.43 million per Breach in 2009
LONDON, April 28 /PRNewswire/ — InfoSecurity Europe, Earls Court — Privacy and information management research firm Ponemon Institute, together with PGP Corporation, a global leader in trusted data protection, today announced the results of the first-ever global study into the costs incurred by organisations after experiencing a data breach. The 2009 Annual Study: Global Cost of a Data Breach report, compiled by The Ponemon Institute and sponsored by PGP Corporation, assesses the actual cost of activities resulting from more than one hundred real life breach incidents, affecting organisations from 18 different industry sectors.
The research shows that the average cost of a data breach globally stood at USD3.43 million last year, the equivalent of USD142 per compromised customer record. However, costs varied dramatically between regions, from USD204 per lost record in the U.S., down to USD98 per record in the UK. A total of 133 organisations, located in five countries — Australia, France, Germany, UK and U.S. — participated in the research, which was undertaken during 2009. The average costs of a data breach in all five countries were as follow:
Av. Cost per record Av. Total cost of a breach Country (USD) (USD) Australia 114 1.83 million France 119 2.53 million Germany 177 3.44 million UK 98 2.57 million U.S. 204 6.75 million Average 142 3.43 million
Breach notification laws and regulations significantly increase costs
The report shows that costs incurred in countries with data breach notification laws were significantly higher than in countries where no such legislation exists. For example, in the U.S., where 46 states have now introduced laws forcing organisations to publicly disclose the details of breach incidents, the cost per lost record was 43 percent higher than the global average. In Germany, where equivalent laws were passed July 2009, costs were second highest; 25 percent above the worldwide average. In Australia, France and the UK, where data breach notification laws have not yet been introduced, costs were all below the average.
“The over-arching conclusion from this study is the staggering impact that regulation has on escalating the cost of a data breach,” said Dr. Larry Ponemon, chairman and founder of The Ponemon Institute. “The U.S. figures are testament to this and it’s clear that, as and when breach notification laws are introduced across the rest of the world, other countries will follow the same pattern and costs will rise.”
In the UK, where only public sector and financial organisations currently face regulatory pressure to disclose breaches, costs were lowest: 45% below the global average, and equating to less than half the expense incurred by U.S. firms.
“It’s perhaps no surprise that, in the U.S., where data protection laws are both stringent and mature, the financial fallout of a breach is at its most severe; however, the relatively low levels of expense incurred by British firms may raise a few eyebrows,” commented Jonathan Armstrong, technology lawyer at Duane Morris. “With the UK Information Commissioner’s Office toughening its stance on data protection, imposing hefty fines and scrutinising more and more organisations, it will be interesting to see how steeply UK costs rise in the future.”
Lost business due to reduced customer trust is the greatest contributor to costs
Almost half (44 percent) of the incurred data loss expenses related to the cost of lost business, reflecting the added expense of consumer churn and the increased difficulty of attracting new customers in the wake of negative publicity. Again, costs varied dramatically between countries and were highest in the U.S., where the cost of lost business was on average equivalent to 66 percent of overall expenses.
Country % cost caused by lost business Australia 33% France 30% Germany 34% UK 46% U.S. 66% Average 44%
“It doesn’t matter where they’re located, if a company gains a reputation for being careless with confidential data, the brand will suffer,” said Phillip Dunkelberger, president and CEO of PGP Corporation. “Data is currency, it needs to be protected. Data breach notification laws mean consumers are informed; more countries around the world are looking to tighten their data protection legislation as they realize lost data means an increase in customer turnover.”
Detection and escalation costs affected by compliance requirements
The cost of detecting and escalating a breach were particularly high in Germany (USD52 per lost record), reflecting the investment required in new technologies and processes in order to comply with the country’s recent notification legislation. In the U.S., where laws were first enforced in 2005, these costs were small by comparison (USD8) and have decreased over recent years, suggesting that American organisations have developed more efficient detection and escalation processes over time. French, Australian and UK firms should expect their costs to follow the same trend, initially rising in order to ensure compliance with emerging regulations and then declining once processes become more refined.
Cost of detection/escalation Country processes (USD) Australia 38 France 36 Germany 52 UK 18 U.S. 8 Average 31
Third party flubs and criminal attacks both drive up costs
When a third party was responsible for the data loss incident, costs rose in all countries, reflecting the additional forensics and investigations required to detect and remediate the breach. However, the financial impact of third party mistakes varied greatly across the world, causing costs to rise by just 12 percent in the U.S., up to a staggering 116 percent in France.
% of breaches caused by Country third party % increase in cost Australia 31 39 France 41 116 Germany 27 31 UK 36 31 U.S. 42 12
Organisations suffering a data loss incident as a result of malicious or criminal activities also incurred higher costs, with French companies once again experiencing the greatest negative impact. With malicious attacks on the rise across all countries, and accounting for between 24 and 54 percent of incidents, organisations should take a more proactive approach to protecting their data from theft in order to reduce costs.
% of breaches caused by Country criminal attack % increase in cost Australia 44 61 France 35 121 Germany 54 23 UK 24 25 U.S. 24 7
Strong CISO leadership helps costs fall
Where the organisation’s chief information security officer or equivalent took personal responsibility for managing the breach, costs fell in all five countries. However, CISO-managed events only occur in a minority of cases, with the majority of organisations either not employing a CISO, or not making them directly responsible for data breach incidents.
% of breaches managed by Country CISO % reduction in cost Australia 44 3 France 41 12 Germany 36 45 UK 39 12 U.S. 40 33
“The positive news from this research is that, no matter where a company is based, or the laws they must abide by, senior level involvement from a CISO is proven to drive down overall data breach costs,” continued Dunkelberger. “Going forward, organisations would be well advised to create such a role if they want to minimise the fallout from a data breach.”
A copy of the study, is available from PGP Corporation at: www.encryptionreports.com
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