For organizations, the aftermath of a data breach can be highly devastating. In an interconnected world, a single data vulnerability can cascade into decades of irreversible loss – intellectual, monetary, and reputational. The consequences paralyze even the most established businesses, uprooting them from their foundation. 

A classic example is that of a Delaware corporation, Blackbaud, a cloud computing provider that faced multiple penalties on account of failure to implement data retention and disposal policies that led to the compromise of personally identifiable information (PII) of its customers. Blackbaud was fined up to $10 million: $3 million by the Securities Exchange Commission (SEC) and $6.75 million by the California Attorney General (in 2024). The fear of more penalties still lingers. 

There are multiple data breach episodes pertaining to data retention over and above the lawful period. The reports of data breaches seize the attention by dominating the headlines every other week. The recent Volkswagen data breach in December 2024 has again put the spotlight on the excessive collection and retention of data. The breach exposed sensitive consumer data from over 800,000 VW electric vehicle (EV) users, included name, birthdate, and email address. The breach violates both the EU-GDPR and the manufacturer’s own terms of service. The amount of penalty is still unknown and considering that Volkswagen is a global company, many global data protection laws may seem to have a play in imposing penalties. 

While the scrutiny around a data breach fades away soon, businesses have to deal with the aftereffects of data breaches for years, and the struggle sometimes continues for decades. 

How Do Data Breaches Affect a Business?

The severity of a data breach often depends on how long it goes undetected; however, identifying the breach is where the story actually begins. From containing the destruction and informing authorities to answering customers and paying for their damages, the road to business recovery is long and grueling. The repercussions of a data breach include:

• Monetary Burden: The 2024 Cost of a Data Breach report by IBM revealed that attacks involving compromised credentials were identified in 10 months. Often, businesses have to shut down their services to avoid more damage and then try to recover the system. This period of operational downtime creates monetary damage in terms of lost revenue, funds spent for system recovery, audit fees, employee overtime compensation, etc. In addition to the legal fees paid for fighting lawsuits, the employee efforts that could have been invested in the development of new products and services are redirected toward managing the repercussions of the breach. 
• Loss of Customer Trust: Organizations that have a stronger cybersecurity posture than their contemporaries have a competitive edge, but more than that, they gain customer trust. The CISCO 2024 Data Privacy Benchmark Study found out in their survey that 92% of organizations with comparatively more mature privacy programs have benefitted in areas of customer loyalty and trust. Data breach incidents significantly harm an organization’s relationship with customers, leading it to lose their trust and eventually their investment when they switch to the competitor. The 2024 Cisco Consumer Privacy Survey found that 75% of respondents avoid purchasing from companies they do not trust to protect their data.
• Compliance Penalties: Marriott International Inc. and its subsidiary, Starwood Hotels & Resorts Worldwide LLC, suffered its first infamous data breach in 2014. Having faced multiple class action lawsuits for their negligence in protecting customer data, the case reached a settlement of $52 million with the coalition of the Federal Trade Commission (FTC) and 49 states, a decade later. While a global multimillionaire company, Marriott is still standing, most SMEs will be forced to shut down after one breach incident. This penalty is over and above the fine of £18.4 million levied in 2020, by the United Kingdom’s Information Commissioner’s Office (ICO) for the same incident, involving customers from the U.K., in violation of Article 32 of GDPR.
• Reputational Damage: Many organizations face declines in their stock prices after data breaches similar to what the credit reporting agency Equifax faced in 2017. It exposed the PII of 143 million customers including names and social security numbers. The dent to their image resulted in the biggest one-day drop of 13% in the value of their shares. The total fines were estimated to be $1.3 billion, which includes a settlement with the FTC ranging between $575 million and $700 million.

How to Prevent Data Breaches and Protect Your Business

Governments around the globe have enacted data protection laws, such as CPRA in California, LFPDPPP in Mexico, and the Data Privacy and Security Act in Texas. Such laws mandate organizations to create and implement data management policies throughout the lifecycle of data from the creation to the destruction stage. Some recommendations are: 

• Implement Zero Trust Policy: The strength of a cybersecurity framework lies in protecting the business from all the kinds of threats – internal and external. While most organizations are cautious about the threats posed from outside, they are negligent about insider threats. Data and systems are at risk at all times whether it is a new intern, a veteran leader, a third party client, or a malicious external attacker. As per the zero-trust policy, every individual can be a potential threat to the security of the organization; thus, data controls must be implemented for all users.
• Classify Data: Data classification according to its sensitivity helps organizations prioritize security measures, ensuring the most business-critical sensitive information is properly safeguarded. The most common data type classification is into sensitive, confidential, internal, and public. By segregating confidential data and limiting user access to this data, security risks can be evaded to a great extent.  
• Create a Data Management Policy: Organizations must create, implement, and integrate a data management policy in their organizational setup that provides a robust framework for managing data throughout its entire lifecycle, from creation to disposal. This policy should also include a data destruction policy that specifies data destruction methods, data wiping tools, type of erasure verification, and records of data destruction. It should further cover media control and sanitization, incident reporting, the roles and responsibilities of the CIO, CISO, and privacy officer. Using a professional software-based data destruction tool erases data permanently from IT assets including laptops, PCs, and Mac devices. The certificate of destruction generated by the software helps comply with laws and regulations that necessitate secure data erasure. 
• Train Employees: Conducting training programs on a regular basis can guide employees on the significance of security controls and secure data management practices. According to the Verizon 2024 Data Breach Investigations Report, “the human element was a component in 68% of breaches.” The report emphasizes the exclusion of malicious insider attackers who misuse their legitimate privileges. The awareness of protecting data at rest and in transit, how to treat sensitive information with more caution, and erasing data at the end of its retention period safeguards customer privacy and organizations from becoming victims of data breaches. 

From disruption in airline services to breaking the record of the highest penalty in history, data breaches have been creating havoc across industries. As the threat landscape continues to evolve, and the data volume keeps exploding, it is crucial for businesses to adopt strategies that prioritize data security, implement proper policies for asset decommissioning, data destruction, and regular audits, in compliance with data protection regulations. By doing so, organizations can safeguard themselves against potential breaches, minimize risks, and continue to build the trust of their customers.