– why do data breaches cost millions of dollars?
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1) you need to fix the problem
2) you need to publicly announce the problem
3) you need to publicly contact the affected people
4) you lose customers because they can no longer trust you with their data
5) you lose investors because of the lost customer base
Customer information that is valuable are things like credit card information, social security information, name, date of birth, address. Credit card information can be used to make fake charges on your account. Things like social security information can be used for pure identity theft. Impersonating you, filing claims for fake medical procedures, or making multiple credit cards in your name.
The “fix” for these things is to offer some sort of credit card monitoring service for a few years.
fixing the original data breach isn’t necessarily a big deal, although it can be. It may involve encryption best practices, or alternately changing the way private data is handled. For example, Chase, a payment processor allows their clients to encrypt customer data without ever seeing it on their servers. Instead they get a token which can be used for transactions but is useless for anyone else or any other purpose.
losing customers is a huge issue. Company valuation will often include things like “good will” which are assigned a monetary value and figures into stock price. A breach of trust means not only that customers lose faith in the company but investors also. This causes stock price to drop.
Companies used to hide things like this when they could. Laws were passed however to protect consumers. you should know when your data has been stolen so you can protect yourself.
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