Today, organizations are more reliant on information technology than ever before. Nearly every aspect of modern business is digitized, from customer interactions to enterprise management. Digitization is not necessarily bad, except that criminals have found ingenious ways to weaponize IT against businesses.
Cybercrime is the single greatest threat facing businesses worldwide — not just in terms of security but also in overall business survival. Cyberattacks have forced many organizations to shut down due to the ensuing damages, while countless others are left nursing injuries long after a cyber incident.
The hardest impact of data breaches
According to IBM’s Cost of Data Breach Report 2021, the average cost of a data breach is nearly USD 4.2 million. This is the highest average data breach cost in 17 years, largely due to an increased attack surface presented by the COVID-19 pandemic. A combination of remote work, rapid digital transformations, and the pandemic itself has created a thriving environment for cybercrime activities. Concerned institutions, including Google and Interpol, have reported increased malware, phishing, ransomware, and scamming incidents amid the pandemic.
IBM found that these financial losses have far-reaching effects on the future of an organization. Monetary damages from a successful data breach have a huge impact on the victims. So, naturally, this is often seen as the most devastating consequence of cyberattacks. Except it’s not. The hardest blow comes from the loss of customer trust.
Customer trust from a cybersecurity perspective
The meaning of customer trust depends on who you ask. For instance, to a managed IT company, customer trust means surrendering corporate IT support to their care, while to an online retailer, it’s the customer’s expectation of delivery. But trust boils down to the belief that customers have in your brand. It might take years of building and nurturing customer relationships to earn enough customer trust to run a successful enterprise.
The e-commerce world is built on trust. Since there is so much sensitive customer data involved in modern trade, part of that trust means guaranteeing data safety. In fact, several data protection laws are in place to ensure that institutions preserve this trust.
The reason for this strong emphasis on data protection is that losing data could expose innocent customers to more targeted cyberattacks. For instance, losing customers’ personal information can result in identity theft and financial fraud. A successful attack on a B2B business could be even more severe on its customers. A good example of this is the recent Kaseya ransomware attack that affected over 1,500 downstream companies.
What does it mean to lose customer trust ?
Trust is a vital currency in the modern business landscape. Although it’s easy to see how a data breach could break customer trust, many entrepreneurs underestimate the implications of losing this trust. In fact, a survey found that most organizations overestimate how much customers trust their brands.
Let’s discuss three main ways that loss of customer trust after a cyber incident affects a business:
Loss of business
Trust and loyalty go hand in hand in any relationship. Once customers lose trust in your business, their loyalty goes away as well. A survey shows that most customers will only buy from brands they can trust. After a data breach, even the most loyal customers will second-guess doing business with you.
As a result, your customer base may start to shrink; this is known as customer turnover or churn. A high churn rate destabilizes business output, making it difficult to plan and project growth.
Damaged brand reputation
A successful data breach involving the loss of customer data could put your brand’s reputation on the line. Breach victims can easily share their experiences over social media and news outlets, resulting in a PR nightmare.
Data breaches get a lot of press — usually bad press, sometimes full of misinformation and exaggerations. Unfortunately, many SMBs don’t have a large or strong enough customer base to withstand such a severe blow to their reputation.
Loss of customer trust adds to the overall financial implications of a data breach. For instance, high turnover rates and damaged reputation mean lost business opportunities and unrealized revenue. A cyberattack can also drop stock prices and lower your company’s value. On top of that, cleaning up the PR mess to regain customer trust is an expensive affair.
Ponemon’s Data Breach Impact Study shows that companies that experienced a 2 percent customer churn rate averaged about $2.6 million in revenue losses. Those that lost 5 percent of their customers had an average revenue loss of nearly $4 million.
Restoring customer trust after a data breach
You can minimize loss of customer trust and even salvage broken trust after a data breach, although neither is easy. Retaining customers after a cyber incident will largely depend on how you respond to the situation. Here’s how you can do this:
Be transparent and timely
Assemble a team immediately after the breach to plan what to say and do before any information leaks out to the press or social media. Keep in mind that most data protection regulations require compliant organizations to report cyber incidents involving personal information. The key to doing this is being cautiously honest. Give the attack’s account from the company’s perspective and clearly demonstrate its scope and nature.
Communicate with your customers
Contact the affected customers and candidly explain exactly which records were exposed and how the breach could affect their personal safety. Take full responsibility for the data breach and offer reassurances that your company is willing to help in every way possible. Remember to keep all your communications lines open and respond to customer concerns and questions promptly. Doing this will show that you genuinely care about your customer’s welfare and prevent confusion and wild speculations.
Improve your cybersecurity
Convince your customers on how you plan to prevent a similar cyber incident from recurring in the future. It could be moving corporate data to a more secure platform, hiring more security experts, using a new website, and so on. You don’t have to go into the details; just make it clear that the company will come out of the situation stronger and safer than before.
Give your customers more control over their data
After a data breach, most customers will feel vulnerable when interacting with your business and will probably be reluctant to share sensitive information. So, make a few compromises to make them feel safe. Give them more control over the kind of data they can share with your company.
Loss of customer trust is by far the most devastating consequence of a data breach because it directly threatens long-term business survival. It’s scary just thinking about how damaging a single breach incident can be.
Although it’s possible to fully recover from an attack, the best solution is always preventing the attack in the first place. One of the easiest ways to do that is to partner with a professional cybersecurity expert. As an IBM Platinum Partner, we can help protect your business from cybercriminals through IBM’s robust security solutions such as SOAR, Zero Trust, Cloud Security, QRadar, and more.