How Data Breaches Impact Brand Value

The fallout suffered by companies that experience data breaches is expansive, but one of the largest areas of impact is customer trust. Brand value is greatly lowered in the event of a security breach — even when decisive action is taken to shut down the fraudulent activity and minimize the damage as quickly as possible. And while brand value can be difficult to quantify, several studies have revealed the effects of data breaches on consumer trust — a key indicator of a brand's strength.

We have combed through the available data and compiled relevant research on the subject. Below find a brief synopsis of three studies and their findings:

"Fallout: The Reputational Impact of IT Risk" — Report by Forbes Insights

• 46 percent of organizations surveyed had suffered damage to their reputations and brand value as a result of a breach.
• 19 percent of organizations suffered reputational and brand damage as a result of a third-party security breach or IT system failure.

"The Impact of a Data Breach on Reputation and Share Values" — Study Commissioned by Centrify and Conducted by Ponemon Institution

• The stock value index of 113 companies surveyed declined an average of 5 percent the day the breach was disclosed.
• Companies with a poor security posture were found to experience stock prices drop as much as 7 percent.
• Additionally, 120 days post-breach, these company did not fully recover the pre-breach share price. Companies with poor security posture also experienced
• Conversely, companies with a
• 31 percent of all surveyed consumers impacted by a breach stated they discontinued their relationship with an organization that experienced a data breach, and 65 percent lost trust in that organization.

Survey Commissioned by Semafone and Conducted by OnePoll

• 86 percent of a 2,000 person survey stated that they were “not at all likely” or “not very likely” to do business with an organization that had suffered a data breach involving credit or debit card details.
• When the results were broken out by gender, 91 percent of women expressed this view, compared to 81 percent of men.

Another interesting finding in relation to brand value in the event of a data breach is that it may not be top-of-mind for c-level executives. The Ponemon study found that 5 percent of IT practitioners and 42 percent of CMOs don’t believe that brand protection is taken seriously in the c-suite. The same study found that breaches rank in the top-three most negative impacts to brand reputation. The top two are, respectively, bad customer service and environmental disaster.

As illustrated above, the less tangible effects of fraud (such as a negative shift in consumers' feelings about a brand) are very real. While creating a security breach action plan, it's critical to factor in an effective PR strategy in an effort to rebuild customer trust as quickly as possible post-breach in order to successfully retain as many customers as possible.