If you own a small business, you may not be a prime target for hackers. But much of what they do is automated, and hackers seek targets of opportunity. You must do your best to protect yourself from a data breach’s practical, financial, and legal repercussions. You have enough going on as a business litigation lawyer knows. You don’t have the time, energy, and possibly the money to put your operations back together after you’ve been hacked.
What Are The Costs Of A Cybersecurity Breach?
A hack will directly consume your resources, causing your cost of doing business to rise, according to a 2023 Harvard Business Review article. Expenses can include ransom payments, lost revenues caused by business downtime, remediating the situation, and legal and audit fees. Millions of lost dollars due to a security breach could bankrupt a small or medium-sized company.
You may need to pass costs onto your customers, limiting your ability to maintain your market share. Cyber risks can also cause a credit-rating downgrade, affecting your ability to secure financing and its cost.
Hacks often involve stealing personal and financial information from employees and customers. Putting your employees at risk for financial losses won’t help your relations with them, and customers may see you as incompetent and a risk to their bottom line.
How Do I Reduce The Risks Of A Hack?
Cybersecurity should be a company-wide priority because your employees are on the front line for mitigating your cybersecurity risks as our friends at Focus Law LA would advise. This requires training, and policies and procedures that are updated as threats evolve. Many hacks are due to simple mistakes, like e-mails or attachments that should never have been opened.
If you don’t have an in-house IT department, you need to work with a trusted IT contractor who will work with you to limit the risk of a hack as much as possible and train your employees. This will cost you money, but a hack may cost you far more.
Take Steps To Limit The Financial And Legal Impacts Of A Hack
You can try to prevent a breach through technology and training and purchase insurance to blunt the costs that would occur if one happens, according to the Federal Trade Commission (FTC). They have some considerations to think about, including the following:
- A policy should cover data breaches, breaches of your data held by a vendor or third party, and terrorist attacks
- Your policy should include a “duty to defend” you from lawsuits by those harmed by the breach and any government investigation into the event
- You should have “first-party” coverage for employee and customer information losses. This would include the cost of recovery and replacing lost data, lost income due to business interruption, public relations, cyber extortion, and the costs of investigating the breach
- “Third-party” coverage protects you against liability for claims brought by third parties against you. This includes payments to consumers and lawsuit settlements
You’ll need to pay premiums for this coverage, and your insurer may mandate that you take specific steps to keep your computer system secure.
You know how to run your business, but you need help from specialists to understand all the issues you face. Talk to your IT provider about security measures, discuss legal issues that may arise with a breach with your lawyer, and talk to your insurance agent about coverage that will protect your company.