In USA, Average Organizational Cost of Data Breach Increased to $7.2 Million in 2010

Symantec Corp. and the Ponemon Institute released the findings of the 2010 Annual Study: U.S. Cost of a Data Breach, which reveals data breaches grew more costly for the fifth year in a row.

The average organizational cost of a data breach increased to $7.2 million and cost companies an average of $214 per compromised record, markedly higher when compared to $204 in 2009. The study also found that for the second straight year organizations’ need to respond rapidly to data breaches drove the associated costs higher. The sixth annual Ponemon Cost of a Data Breach report is based on the actual data breach experiences of 51 U.S. companies from 15 different industry sectors.

Key findings from the study include:

• Rapid response to data breaches is costing companies 54 percent more per record than companies that moved more slowly. Forty-three percent of companies notified victims within one month of discovering the breach, up seven points from 2009. In 2010, these quick responders had a per-record cost of $268, up 22 percent from 2009; companies that took longer paid $174 per record, down 11 percent.
• Malicious or criminal attacks are the most expensive and are on the rise. In this year’s study, 31 percent of all cases involved a malicious or criminal act, up seven points from 2009, and averaged $318 per record, up 43 percent from 2009.
• Negligence remains the most common threat. The number of breaches caused by negligence edged up one point to 41 percent and averaged $196 per record, up 27 percent from 2009. This steady trend reflects the ongoing challenge of ensuring employee and partner compliance with security policies.
• Companies are more vigilant about preventing system failures. System failure dropped nine points to 27 percent in 2010. This trend indicates organizations may be more conscientious in ensuring their systems can prevent and mitigate breaches through new security technologies and compliance with security policies and regulations.
• Data breach costs have continued to rise. The average organizational cost of a data breach this year increased to $7.2 million, up seven percent from $6.8 million in 2009. Total breach costs have grown every year since 2006. Data breaches in 2010 cost companies an average of $214 per compromised record, up $10 (5 percent) from last year.
• Encryption and other technologies are gaining ground as post-breach remedies, but training and awareness programs remain the most popular. Sixty-three percent of respondents use training and awareness programs after data breaches, down four points from 2009. Encryption is the second most implemented preventive measure as a result of a data breach, with 61 percent. Both encryption and data loss prevention (DLP) solutions have increased 17 percent since 2008.

Symantec recommends organizations implement the following best practices, whether or not they have suffered a data breach:

1. Assess risks by identifying and classifying confidential information
2. Educate employees on information protection policies and procedures, then hold them accountable
3. Deploy data loss prevention technologies which enable policy compliance and enforcement
4. Proactively encrypt laptops to minimize consequences of a lost device
5. Integrate information protection practices into businesses processes

The study, sponsored by Symantec and independently conducted by the Ponemon Institute, takes into account a range of business costs, including expense outlays for detection, escalation, notification, and after-the-fact (ex-post) response. The study also analyzes the economic impact of lost or diminished customer trust and confidence as measured by customer churn or turnover rates.

The U.S. Cost of a Data Breach Study was derived from a detailed analysis of 51 data breach cases with a range of nearly 4,200 to 105,000 affected records. The study found there is a positive correlation between the number of records lost and the cost of an incident. Companies analyzed were from 15 different industries, including finance, retail, healthcare, services, education, technology, manufacturing, research, transportation, consumer, hotels and leisure, media, pharmaceutical, communications and energy.

Companies can analyze their own risk by visiting Symantec’s Data Breach Risk Calculator. Based on six years of trend data, the calculator takes into account an organization’s size, industry, location and security practices to estimate how much a data breach would cost on both a per record and organizational basis.

"We continue to see an increase in the costs to businesses suffering a data breach," said Dr. Larry Ponemon, chairman and founder of the Ponemon Institute. "Regulators are cracking down to ensure organizations implement required data security controls or face harsher penalties. Confronted with both malicious and non-malicious threats from inside and outside the organization, companies must proactively implement policies and technologies to mitigate the risk of costly breaches."

"Securing information continues to challenge organizations at all levels, but the vast majority of these breaches are preventable," said Francis deSouza, senior vice president, Enterprise Security Group, Symantec. "Organizations must not only protect the data itself wherever it is stored or used, but also create a culture of security including training, policies and actions. The results of this study show that companies with information protection best practices in place can greatly lower their potential data breach costs."