With the national inflation rate rising to 9.1% as of July 2022 and the global supply chain crisis with no foreseeable end, the United States and several other of its major counterparts finds themselves in the midst of a new economic recession. In July of 2021, the Biden Administration reassured American citizens that many of the price increases seen for common goods and services were only expected to be temporary. Unfortunately, with inflation figures steadily rising since the turn of the new year, this trend appears likely to continue impacting the vast majority of industries that contribute to the GDP as well as the pockets of the average citizen. As a result of scrambling to find potential solutions to these troublesome developments however, the United States government may have stumbled upon one rather unlikely contributing factor impacting rising costs – this time with respect to financial security and data protection.
While most would see no direct correlation between data breaches and national inflation, a recent annual study published by American multinational technology corporation IBM revealed several striking findings with respect to cybersecurity risks that may in fact be playing a larger role on economic stability than one might think. The report coined the “2022 Cost of a Data Breach Report” – the 17th iteration of its kind released by the firm – analyzed 550 organizations across 17 countries and operating in 17 varying industries that suffered a data breach between March 2021 and March 2022, including 13 companies that experienced data breaches involving the loss or theft of 1 million to 60 million records. The research, conducted by the Ponemon Institute and analyzed and subsequently published by IBM Security, aims to identify trends and determine the varying costs to organizations based on scale of business and the urgency placed on responding to the breach itself. The report indicates that with data breach costs increasing by over 13% between 2020 and 2022 alone, 60 percent of studied organizations raised their pricing on products or services because of a breach,1 which analysts believe could be contributing to current inflation trends given the high monetary figures associated with these transgressions.
According to IBM, the average cost of a data breach is $4.24 million, and with a greater number of companies succumbing to cyber-attacks and hacking exploits than ever before, these entities are essentially forced into raising prices to recoup their losses and invest in improving their respective cyber-safeguards. Unfortunately, the data also highlights that most of the companies falling victim to these exploits are not currently adequately equipped from a manpower or online infrastructure perspective to defend themselves against cyber crime. According to IBM, only 38 percent of the organizations that were studied have an adequately-staffed security team.1 IBM also states in their report that contrary to what many organizations that remain hesitant to turn to the adoption of artificial intelligence and automation may think, properly staffing your cybersecurity team and investing in comprehensive compliance solutions can actually save approximately $550,000 on average per year,2 far outweighing the costs of implementing staunch defenses. In fact, breaches at organizations with fully deployed security AI and automation cost USD 3.05 million less than breaches at organizations with no security AI and automation deployed – a 65% difference.1
The U.S. government could make an impact on this issue any number of ways by promoting awareness on the risks as well as the potential savings that companies could be enjoying by taking cybersecurity more seriously. Of course, more regulations with harsher penalties could, and likely will, be implemented—though there are plenty in place already across the financial industry. The Biden administration would have to focus on getting companies across the U.S. to be more cooperative because this unique aspect of inflation leaves them at the mercy of companies to do their due diligence. “Businesses need to put their security defenses on the offense and beat attackers to the punch,” said Charles Henderson, global head of IBM Security X-Force, in a press release announcing the aforementioned study. “It’s time to stop the adversary from achieving their objectives and start to minimize the impact of attacks.”2
- Cost of a Data Breach Report 2022. IBM Security, IBM. July 2022.
- Dale, Jeff. “IBM Report: Data Breach Costs up, Contributing to Inflation.” Compliance Week, Compliance Week, 4 Aug. 2022.