This year’s Cost of a Data Breach Report explores several new avenues for understanding the causes and consequences of data reaches. For the first time, this year’s report details the “long tail” of a data breach, demonstrating that the costs of a data breach will be felt for years after the incident. The report also examines new organizational and security characteristics that impact the cost of a data breach, including: the complexity of security environments; operational technology (OT) environments; extensive testing of incident response plans; and the process of closely coordinating development, security, and IT operations functions (DevSecOps). Continuing to build on previous research, the 2019 report examines trends in the root causes of data breaches and the length of time to identify and contain breaches (the breach lifecycle), plus the relationship of those factors to the overall cost of a data breach. Following the 2018 report’s initial examination of “mega breaches” of greater than 1 million lost or stolen records, we continue this research with comparative data for 2019. And for the second year, we examined the cost impacts of security automation, and the state of security automation within different industries and regions.
Lost business is the biggest contributor to data breach costs*
The loss of customer trust has serious financial consequences, and lost business is the largest of four major cost categories contributing to the total cost of a data breach. The average cost of lost business for organizations in the 2019 study was $1.42 million, which represents 36 percent of the total average cost of $3.92 million.** The study found that breaches caused abnormal customer turnover of 3.9 percent in 2019. Whereas organizations that lost less than one percent of their customers due to a data breach experienced an average total cost of $2.8 million, organizations with customer turnover of 4 percent or more averaged a total cost of $5.7 million – 45 percent greater than the average total cost of a data breach.
Data breach costs impact organization for years
About one-third of data breach costs occured more than one year after a data breach incident in the 86 companies we were able to study over multiple years. While an average of 67 percent of breach costs come in the first year, 22 percent accrue in the second year after a breach, and 11 percent of costs occur more than two years after a breach. The long-tail costs of a breach were higher in the second and third years for organizations in highly regulated environments, such as the healthcare and finance industries. Organizations in a high data protection regulatory environment saw 53 percent of breach costs in the first year, 32 percent in the second year and 16 percent more than two years after a breach.
* The research in the Cost of a Data Breach Report is based on a non-scientific sample of 507 companies. The key findings are based on IBM and Ponemon analysis of the data and do not necessarily apply to organizations outside of the group that was studied.
** Local currencies were converted to U.S. dollars.