Cost of Data Breaches Rises Sharply

Leaks of sensitive customer information and other corporate data are costing companies in the United States substantially more in related financial and business losses in 2006, according to a new study published by the Ponemon Institute.

Based on the findings of the Ponemon Data Breach Study, to be published on Oct. 23, information losses cost U.S. companies an average of $182 per compromised record in 2006, compared to an average loss of $138 per record in 2005, for an increase of about 31 percent.

The report, which is based on interviews held with 56 individual companies known to have experienced a data loss in the last year, maintains that roughly $128 of the 2006 figure is related to indirect fallout from information leaks, such as higher-than-normal customer turnover.

Other associated costs spurred by data mishandlings or thefts were an average price tag of $660,000 per company in expenses related to notifying customers, business partners and regulators about data leaks.

Ponemon contends that each company surveyed sacrificed roughly $2.5 million in lost business, based on their incidents.

To arrive at the figure, researchers combined costs from legal, investigative and administrative expenses with information related to affected companies’ stock performance and customer defections, among other indicators.

Each company interviewed has parted with an average of $4.7 million in payouts and lost business in total, related to the incidents.

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