Businesses of all sizes collect and store hordes of data including consumers’ banking credentials — data that can be stolen and used maliciously. There’s a long list of ways criminals can use stolen data. They can steal your identity, use your personal information to open bank accounts, apply for loans with no intention of paying them back, siphon funds, or make fraudulent purchases in your name. It’s the responsibility of each business to protect the sensitive information they’re entrusted with.
Why small businesses are vulnerable
Being a small business doesn’t protect you from certain vulnerabilities in the digital age. The difference between each organization is the level of sophistication with their cybersecurity practices. Many small businesses simply aren’t aware of the dangers their data and unprotected networks are in. Or, they don’t have the budget to deploy complex security protocols. Even with the heightened cybercrime activity since the pandemic erupted, a survey showed that only 45% of SMEs increased their cybersecurity efforts. In comparison, 80% of large businesses ramped up their practices in terms of ‘time, money, or human capital investments’.
There is a clear gap in knowledge and resources between small and large businesses, and it’s a vulnerability that cybercriminals have been trying to exploit. Many have been successful throughout the years. A report from 2019 revealed that small businesses represented the biggest share of all attacks recorded that year, with 43% aimed at them.
The devastating effects of a data breach on a small business
A data breach can be detrimental to the business in many ways. Obviously, there is a risk of damaging or losing sensitive information. Different types of malware like viruses can infect or delete files. They can also disable your network rendering it impossible to access and operate. This possibility can disrupt your operations which can mean losing business opportunities, customers, and income. There are also various costs that come with a data breach. You might have to rent equipment temporarily to keep the business running as you repair or replace damaged technology and retrieve or decrypt files.
Depending on your location, the business might also be required to conduct a forensic examination and notify affected third parties. The process of notification in each state varies but businesses are legally obligated to notify third parties whose personal information are compromised, lost, or stolen during a data breach. Notification costs typically range from $0.50 to $5 per notice but it still depends on the number of records and individuals affected. In a large-scale attack, these costs can quickly amount to thousands of dollars lost.
The risk of being faced with legal consequences is also high even if a company discloses its data breach. It is well within the right of consumers and third parties to sue your business if their privacy has been compromised due to the lack of security on your part. For example, customers could file a class-action lawsuit against your business for failing to keep their credentials secure. Settling each of those individual cases will eat into your finances and leave your company broke or in debt.
Extortion costs are something else to think about. Some hackers hold information hostage and promise to return it if you pay a price. These could be legally and financially devastating for the business. In fact, 60% of SMEs go out of business within six months of a cyber attack. Furthermore, a data breach will likely damage your reputation, which you might not be able to completely recover afterward.
How to start protecting your business from cybercrime
One of the most important steps for protecting a small business from the legal ramifications of a cyber attack is updating its business structure. If you’re still operating as a sole proprietorship or partnership, consider registering as a limited liability company (LLC). The biggest difference is that an LLC keeps business and personal assets separate. This means owners can protect themselves from financial damages in case of a lawsuit that would otherwise affect both entities.
With that in mind, small businesses that handle any amount of data should also start tightening up cybersecurity. Simple protocols such as multi-factor authentication, data back-ups, system updates, and continuous employee training can prevent hackers from exploiting your networks and data. Furthermore, Ette can help you create customized cybersecurity solutions to fit your business needs.
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