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Data breaches have affected Canadian businesses across various sectors and industries. According to recent reports, Canadian companies are paying nearly CA$7 million in data breach costs, and the average cost of a data breach in Canada is $5.64 million, $1 million more than the global average. The financial sector is the most affected one, having the highest cost for data breaches in Canada, followed by technology companies and the services industry.
Some of the most common types of data breaches in Canada are phishing, stolen credentials, ransomware, password guessing, recording keystrokes, phishing, and malware or virus attacks.
What impacts the data breach cost?
The cost of a data breach can vary depending on several factors, including the size of the organization, the amount and value of data lost, and the impact of the breach on the business.
These factors highlight the importance of data security and the need for businesses to take proactive measures to prevent data breaches.
Incident type and severity
The type and severity of the data breach can significantly affect the cost of recovery. For example, a ransomware attack can be more costly than a phishing attack. That’s because ransomware encrypts critical data and it might need experts’ help to decrypt them.
Organizations that are subject to regulatory standards, such as HIPAA or GDPR, may face fines and penalties for non-compliance, which can increase the cost of a data breach.
The size of the organization can impact the cost of a data breach. Larger organizations may have more data to protect and may require more resources to recover from a breach.
The sector in which the organization operates can also impact the cost of a data breach. That’s because of the type and amount each industry has to store.
For example, the healthcare industry has the most expensive data breaches, while financial organizations have the second-highest costs.
Reputational damage is still one of the biggest costs of a data breach. A damaged reputation can lead to lost business and revenue, which can have long-lasting financial impacts.
Severe business downtime can cost organizations significant amounts of money, especially if they are unable to operate for an extended period of time.
Recoverability of the data
The cost of recovering lost data can also impact the overall cost of a data breach. In some cases, data may be irretrievable, which can lead to additional costs for the organization
Operational loss due to a data breach
The direct costs of a data breach can include detection and notification processes, hardening systems, forensic activities, and information security. However, there are also indirect costs that can impact the overall cost of a data breach, such as loss of existing customers, decrease in revenue due to a damaged reputation, hidden costs, staffing, training, and notification costs, and loss of customer trust.
In addition to these costs, a data breach can also result in operational losses. Operational risk is the risk of losses caused by disruptions to operations, and a data breach can be one of the reasons for operational losses. The effect of a data breach on operational losses is larger for breaches of financial information or malicious cyber-attacks and for firms with lower attention to risk management.
The granularity of the data set allows us to study the evolution of operational risks through time, compute an operational and cyber value-at-risk for financial intermediaries, document the time lag between occurrence, discovery and recognition of losses, and investigate the link between operational losses, macroeconomic conditions, and regulatory characteristics.
Examples of operational losses
1. Business disruption
A data breach can disrupt business operations, leading to a loss of productivity and revenue. Organizations will need to contain the data breach and conduct a thorough investigation into how it occurred and what systems were accessed. Operations may need to be completely shut down until investigators get all the answers they need.
2. Loss of critical business information
Certain types of data leakage may result in a loss of essential business information that forbids any operational processes. Companies that suffer from such data breaches may have to halt their operations until they can recover the lost data.
3. Compensation costs
A data breach can result in costs spent on compensating affected customers, such as providing credit monitoring services or reimbursing customers for fraudulent charges.
Recent data breaches in Canada
These are the biggest data breach cases of the last years that took place in Canadian businesses:
Scarborough Health Network Data Breach
In early 2022, Scarborough Health Network released a breach notice warning that a cyberattack might have exposed sensitive patient data and healthcare records.
Desjardins Group Credit Unions Data Breach
In June 2019, Desjardins Group announced that a former employee had stolen the personal information of 2.9 million members, including names, addresses, birth dates, social insurance numbers, email addresses, and transaction details.
Black & McDonald Ransomware Attack
In March 2023, Black & McDonald, a construction and facilities management company in Canada, was hit by a ransomware attack. The company’s work involves critical military, power, and transportation infrastructure across the country.
The direct and indirect costs of a data breach
When a data breach occurs, it can have significant financial implications for businesses. In addition to direct costs, such as detection and notification processes, hardening systems, forensic activities, and information security. These indirect costs can be significant and can have long-lasting effects on a business.
Detection and notification processes
The immediate monetary impact is usually on sales revenue, resulting in a significant reduction in income. This will affect operational activities and business productivity. The company’s share price will likely drop. Large payments to legal services may be required to control the fallout of litigation, and costs may surge if investigative consultancy firms are hired.
Forensic activities and information security
Direct costs are the expenses for dealing with a detected breach. This includes the costs of forensic activities and information security.
Loss of existing customers
A data breach can lead to a loss of existing customers, which can impact revenue and profits. Also, costs associated with system downtime, loss of work, costs associated with hiring professional services, the loss of cash due to theft and lost opportunity costs can contribute to the loss of existing customers in the long term as well as the increased difficulty in acquiring new clients.
Decrease in revenue due to a damaged reputation and downtime
The direct costs of a data breach can include detection and notification processes, hardening systems, forensic activities, and information security. However, the indirect costs can be even more significant, such as loss of existing customers, decrease in revenue due to a damaged reputation, hidden costs, staffing, training, and notification costs, and loss of customer trust. Downtime can have a major impact on businesses of all sizes, resulting in lost revenue and decreased productivity. For example, if it takes a business 24 hours to identify and contain a data breach, that is 24 hours of lost productivity.
What to do after a data breach
In case of data loss caused by a cyber attack, it is important to take immediate action to prevent further damage and salvage your business reputation. Contacting a company specialized in data breaches and cyber attacks, such as SalvageData, can significantly improve your cybersecurity and restore access to any lost data. Better yet, our incident response services are available 24/7/365, since cyber attacks are often unpredictable.