How to Take Preventive Measures To Secure That Market Cap/Value During
A Cyber Security Breach
We analyse the results of the market cap or stock
market value for some companies that were affected by a data breach. The
results seem to indicate that there is a direct correlation between security
incidents and drop in share prices. Management is finally accepting that
data, and cyber breaches occur on a regular basis in almost every organisation.
There is a 26 percent probability that your company will experience one
or more data breaches within a 24-hour period while you are reading this
article
Our analysis indicates that if The Board
and Management take prudent action created a well-defined plan based on
multiple scenarios, they can reverse the potential stock price dive, due
to the data breach and help sustain the decline in the following months.
Such actions can result in the stock price being higher than before the
breach.
Fixing a data breach can be expensive, cumbersome, time-consuming, and
detrimental to company's reputation. Additional issues like lower stock
price, management blame game can add to the actions taken on costs, time
and the security issues to prevent it from happening again. Prudent management
philosophy always recommends prevention rather than detection; however,
when it comes to approving actions, allocating resources and taking decisions,
management is often not on the same page as the Chief Information Security
Officer (CISO).
Regardless of the many preventive measures, a company takes to secure
its market cap or value; it may ultimately take a serious dive if IT security
gaps are not quickly identified, addressed and remedied before a major
cyber security breach happens.
Evaluating the company's market cap after an incident
Global malware is growing to be more prevalent, with 600 million samples
in 2016. According to Gartner, the average cost of a data breach is estimated
to reach $4 million. The worldwide spending on information security is
as shocking as $75.4 billion in 2015.
Fixing a data breach has unbudgeted and quantifiable operating costs that
result in increased security budgets and investments in technologies of
safety and resources. We look at some examples of how much these breaches
can influence the company's market value.
The Target Data Breach
In late 2013, Target was the victim of a massive data breach, with the
loss of the personal information of almost 70 million individuals. The
extensive breach included the names, mailing addresses, phone numbers
and email addresses. Te data that was stolen, potentially exposed customers
to potential fraud.
Estimates on the costs of the data breach at Target reached $252 million,
excluding litigation fallout of the breach. The Target's stock prices
had a noticeable drop in share value, and the stocks started picking up
again in March 2014.
The Anthem Data Breach
One of the largest data breaches ever, occurred in February 2015, involved
Anthem. An initial 37.5 million records containing personally identifiable
information that was taken quickly escalated to 78.8 million.
The stock market performance for Anthem, Inc., starting with February
4th showed a slight drop in share price, but it only lasted a couple of
days. A sharp uptick followed in the months to come, with no severe drop
until late 2015.
Data Breach on Vtech Holdings
On November 2015, Vtech Holdings; a leading supplier of corded and cordless
phones and electronic learning toys, suffered a data breach that leads
to accounts of 4.9 million parents potentially being accessed by cyber
criminals, while profiles of 6.4 million children were also affected.
The financial impact of the data breach was not estimated. Initially,
the stocks plunged.
The Adobe Data Breach
An Adobe cyber/data breach resulted in 38 million customer accounts being
accessed. The customers’ personal information—names, encrypted debit and
credit card numbers, expiration dates and other sensitive data was exposed
to criminals. Therefore the avalanche of lawsuits that followed, Adobe
had to pay $1.1 million in attorneys' fees and expenses and an undisclosed
sum to affected users.
He shares prices for Adobe Systems Incorporated didn't shrink at all.
While there was the usual fluctuation, the ascending stock price curve
was sustained throughout 2016, in spite of the legal battles were settled
and customers compensated.
Cyber breaches are here to stay for a long time. More companies (59 percent)
are purchasing some additional security insurance to plug the adverse
effects of data breaches on the enterprise's value. However, this can
never be the right response as the insurance companies are not inclined
to back companies after they experience constant security breaches.
Therefore at our events we always focus on the measures a company can
take to secure its Intellectual property, reputation and stock market
value, to ensure that security gaps are quickly remedied and that data
breaches occur on a regular basis.
At the annual events on the 18th October in Mumbai http://www.copenhagencompliance.com/2016/mumbai/index.htm
and the 10-11th November in London http://www.grcassembly.com/index.htm
several sessions are dedicated to providing updated guidance on data and
IT and cyber security breaches.
Source for statistics and numbers: Yahoo Finance
