The cost of a data breach has jumped 23 per cent in two years

Affected organisations today pay 23 per cent more than they would have in 2013

Amit Yoran, president of RSA, speaks at the RSA Conference in San Francisco on April 21, 2015.

Amit Yoran, president of RSA, speaks at the RSA Conference in San Francisco on April 21, 2015.

Data breaches like the one just disclosed by the IRS aren't something any organisation wishes for, but there's now even bigger financial incentive to avoid them than in the past.

The average cost of a data breach has increased by 23 per cent over the past two years to $US3.79 million, according to a report Wednesday from IBM and the Ponemon Institute. And the average cost for each lost of stolen record containing sensitive information increased 6 per cent over just the past year, from $US145 to $US154.

Ponemon surveyed 350 companies in 11 countries for the survey, which was sponsored by IBM. All the respondents had experienced a data breach at some point, involving anything from 2200 to more than 100,000 compromised records.

Data is the new digital currency," said Ken Westin, a senior security analyst with Tripwire, which was not involved in the study. "As businesses and government rush to mine and harvest consumer data for marketing insights, personalisation, increased productivity and general business, criminals are increasingly finding ways to steal the data and monetise it for their own ends."

Three main factors contributed to the increased cost of data breaches in recent years, according to the report, including the increased incidence of cyber-attacks and the growth in the lost business that can result.

The cost associated with that lost business increased from an average of $US1.33 million last year to $US1.57 million in 2015. Included in the figures are unusually high customer turnover, the need for increased customer-acquisition activities, reputation losses and diminished goodwill.

The third factor is the increased costs associated with data-breach detection and escalation, including forensic and investigative activities, assessment and audit services, crisis-team management and communications. On average, those costs increased from $US0.76 million last year to $US0.99 million in this years report.

The Ponemon study also looked at data breaches by country, and concluded that organizations in Brazil and France are most likely to have a data breach involving at least 10,000 records, while those in Canada and Germany are least likely to do so. It didn't explain that finding.

The costs of breaches tend to be highest in the US and Germany and lowest in Brazil and India.

By industry, not surprisingly, costs are usually higher for healthcare companies, as much as $US363 per lost record, but as low as $US68 per record in the public sector. That could provide some solace to the U.S. Internal Revenue Service, at least, if not the 100,000 taxpayers affected by a recent breach of its systems.

The report identified two factors that can help mitigate the cost of data breaches: involvement of the company's board of directors -- which can reduce the cost by $US5.50 per record, the report found -- and the purchase of insurance protection, which can drop that cost by $US4.40 per record, it said.

"The cost of data breaches will only increase until the market for the stolen data shrinks, which does not seem likely in the foreseeable future," Tripwire's Westin said. "Organisations need to deploy multiple layers of security controls to better protect their data.

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Katherine Noyes

IDG News Service
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