[BreachExchange] The Reputation Impact of Data Breach.

[Audrey McNeil]

http://www.4hoteliers.com/features/article/10351

Data breaches happen alarmingly frequently these days for a lot of reasons
and some companies are not willing to invest in the infrastructure that
would make data breaches less likely to happen.

There is also the fact that technology moves so quickly these days that
even the most highly priced and sophisticated technical departments can’t
always avoid data breaches. Some people however argue that data breaches
are inevitable.

One way or another, it’s important for businesses to keep in mind how data
breaches will affect them at the end of the day. Company security is no
doubt important. A data breach involving company data can be disastrous.
However, there is some genuine disagreement about how much an accident like
this can affect a company in the long run.

The Consequences of Data Breaches

It should be noted that a lot of large and very popular companies have
experienced data breaches in recent years. Sears, Target, Sony Pictures
Entertainment, and a lot of other companies have had huge data breaches.
These companies are still very popular and they’re still very much in
business. A huge data breach is certainly not a guarantee that the
customers are going to abandon a company in droves or that a company is
going to suffer a blow to its reputation that is guaranteed to close it
down.

There is also the fact that some of the consequences of a data breach
appear to be temporary. It is true that data breaches can make the prices
of stocks go down. However, the stock market does have a tendency to
recover in many cases. This is a universal with the stock market. A lot of
people will panic when a stock goes down, trying to sell their stocks in
the process. However, these same people will usually be all right in the
long run if they just wait patiently for the stock market to recover. The
stocks associated with some of the largest and most popular companies in
the world are rarely in any trouble.

It is true that customers do demonstrably care about the data breaches of a
company. Customers have said repeatedly on opinion polls that they are very
interested in whether or not a company has experienced a security breach on
that level. They will usually talk about the fact that they will no longer
trust a company as a result of a data breach on that scale. Some customers
will break off their loyalty to a particular brand after something like
that has happened.

Then again, large companies do often have the cultural penetration and the
capital to be able to withstand something on that level. The smaller
companies that experience even minor data breaches might not be as lucky.
There are different ways of assessing the situation in order to figure out
if a company is ultimately going to suffer as a result of a data breach.
The larger and older the company is, the more likely it is that they can
bounce back from something on that scale. However, larger and older
companies should not feel as if they’re in a situation where nothing can
happen to them.

The news of a data breach will travel quickly today as a result of social
media. Many customers will hear about it and many of them will panic as a
result. Some of them will automatically withdraw support for a company as a
result. Security standards for companies may have gone up, but in many
ways, all companies are going to be more exposed than ever in the
Information Age.

Conclusion

A security problem involving the loss of company data can be hugely
problematic. Some customers will turn away from a company. A company will
lose money in the short term and their stock prices will go down in almost
all cases. The question of whether or not that same company can recover is
harder. Some companies do demonstrably recover in the wake of a data breach.

Others never recover after the data breach happens. The damage to a
company’s reputation is very difficult to predict, but there is certainly a
chance that a company will be associated with a data breach forever. No
company should take that risk.
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