The Four Hidden Costs of a Hacker Attack to a Business

Depositphotos 86144478 s 2015

By Susan Finch

When news breaks about devastating cyberattacks, it's banks, major corporations, restaurants and hospitals that tend to make the biggest headlines. But that doesn't mean the construction industry is immune to such attacks.

In March 2016, Turner Construction fell victim to a spear phishing scheme when an unscrupulous employee sent tax information on current and former employees through a fraudulent email account, according to iSqFt. The act resulted in massive leaks of employees' Social Security numbers, places of residence, tax withholding information and first and last names, among other proprietary information.

However, the true costs involved with hacking go well beyond paying for damages and settling class action lawsuits to those impacted. Everything from insurance premiums to lost relationships can drain the profits of hacked companies in the construction industry and beyond. Here are some of the hidden costs of a hacker attack to businesses.

1. Insurance Premiums Go Up

Even well-insured companies can be left in a lurch after a cyber attack, despite believing their general liability insurance will cover them. In reality, though, general liability insurance doesn't cover hacking — and cyber insurance isn't always the ultimate safeguard. That's why companies’ profits dramatically suffer when insurance premiums skyrocket after a cyberattack.

According to Reuters, cyberattacks on U.S. companies have increased cyber premiums and limiting coverage to as little as $100 million, despite these hacks easily costing more than twice that figure. With a combination of high premiums and low coverage, companies are left paying out of pocket to clean up from the fallout after a hack.

2. Cyber Security Improvements Must be Eyed

Business owners often think of the investigative costs involved with a hack, but overlook the need to invest in proactive cyber security improvements. Typically, an overhaul of systems, computers, third-party data security and IT procedures are often required to combat future hacks.

But in the case of ransomware attacks, which allow hackers to encrypt data and hold it hostage, companies are often left paying big ransoms to hackers to get their data back. However, even small to midsize companies can use cloud storage services that offer military-grade encryption, including those sold by Mozy. Once any and all data is backed up, companies can simply wipe their hacked devices or purchase new ones altogether before restoring their safeguarded data.

3. Company PR Takes a Hit

Despite all best efforts to safeguard against an attack, companies that announce they've been hacked usually face deep public scrutiny over any real or perceived negligence. And it can cost your business big time. In 2014, Target reported a massive drop in profit — to the tune of $440 million — during its fiscal year fourth quarter as a direct result of a major credit card hack.

Experts say a company's best option is to get in front of the news immediately — don't sit around and wait in the hopes it will go away — in order to better control any potential fallout. Additionally, companies need to develop a focused PR strategy to help restore their public image. It can take years to restore a company’s once-sterling reputation, and it could require ongoing PR and crisis communication efforts to manage the process.

4. Business Relationships Can Unravel Quickly

Losing customers due to an unforeseen cyberattack can be devastating. But squandering relationships with longtime vendors and business partners can be even more calamitous. After all, it can be difficult for these vendors and partners to stay the course with a company whose data and sensitive information could once again become compromised. The recovery process can be slow, as businesses must typically wait three to five years to win over new and existing customers.

Despite taking any precautionary measures, businesses can't always prevent a hack from taking place. But there are ways to protect your business — and limit massive financial losses and PR hits — from the start. Create a culture devoted to security and focus on keeping your office devices and infrastructure safeguarded from any threats. In fact, your best bet may be to hold regular meetings on the topic and email employees about safeguarding their workspaces.

Susan Finch is a freelance writer living in Atlanta. She loves helping businesses improve their bottom line with compelling copy that sparks action. When she's not writing, she's traveling with her family and plotting her next creative pursuit.

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