Without data, your business would not be able to make informed decisions, develop effective strategies, or measure its success. Unfortunately, data can be extremely vulnerable, and when it is lost or compromised, your bottom line takes a huge hit. Let’s take a closer look at how much damage data loss can cause when you’re unprepared.
What types of data can businesses lose?
Different companies will have various data types that they rely on for their daily operations. For example, a retail business may regularly handle customer data such as purchase history, contact information, and payment details. A manufacturing company, on the other hand, may focus heavily on product design files, inventory records, and supplier information. Losing any of this data, especially if it’s sensitive or confidential, can cause major productivity disruptions.
How does data loss occur?
There are many ways businesses can lose their data. It can be as harmless as accidentally deleting a file, or it can be caused by a catastrophic event, such as a natural disaster that damages physical devices containing data. Hardware failures and software glitches can also lead to data loss.
Another major source of data loss is cyberattacks. Hackers may employ various techniques such as malware attacks and phishing to infiltrate a company’s systems and steal or delete data.
How much does data loss cost?
When data is lost or inaccessible, there are several costs that businesses may incur:
- Downtime – If critical business operations depend on data, then downtime is a likely possibility after a data loss incident. This means for every minute employees can’t work because the necessary data is unavailable, revenue is lost. Downtime will typically cost businesses between $400 and $9,000 per minute, depending on the industry and company size.
- Repairs and replacements – If on-premises data storage systems are compromised, there will be costs associated with repairing or replacing hardware. For reference, business-grade server racks can cost anywhere between $1,000 to over $5,000, not including installation and setup fees.
- Legal disputes and noncompliance penalties – Data loss can lead to legal consequences if sensitive or confidential information is compromised. Businesses may also have to pay fines for noncompliance with data protection regulations like HIPAA, PCI DSS, or GDPR. HIPAA noncompliance, for example, can result in fines of $70,000 per violation, with the most serious offenses costing maximum annual penalties of $1.5 million.
- Reputational damage – A data loss incident can cause customers to lose faith in a company’s ability to protect their information. This bad reputation can bleed into your business and result in lost sales, decreased customer retention, and difficulty attracting new customers.
What factors influence the cost of a data loss incident?
The cost of a data loss incident can be impacted by several factors, including:
- The amount and type of data lost
- The value and sensitivity of the lost or compromised data
- The size and complexity of the IT infrastructure used to store and protect data
- The regulatory environment for data protection in the industry
- The time it takes to discover and respond to the data loss incident
- The effectiveness of existing data backup and disaster recovery plans
- The reputation and brand image of the company
Naturally, larger businesses that fall victim to a data loss will likely experience higher costs due to the scale of their operations and the data involved. Their well-established reputation may also lead to more significant financial losses and damages from a data breach.
On the other hand, smaller businesses may also suffer significant losses if they don’t have appropriate data backup and recovery measures in place.
Which industries are most affected by data loss?
While all industries can be affected by data loss, certain sectors are more prone to it than others. These include healthcare, finance, and technology. In fact, the healthcare industry reported the highest average cost of a data breach at $11 million in 2023, while the financial services industry reported $5.9 million. This is because these sectors store large volumes of sensitive information, which means they have more to lose if data is compromised. It also doesn’t help that cybercriminals find these industries to be lucrative targets.
How to avoid the cost of data loss
The surefire way to avoid the cost of data loss is to prevent it from happening in the first place through regular and effective data backup and disaster recovery measures. If your business needs help with data backup and recovery, contact Varsity Tech. We’ll not only help you protect your data but also ensure that in case of a data loss incident, you can recover quickly and minimize the financial impact on your business.
