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Data Breach Definition, Overview, And How To Prevent

July 5, 2022

Sometimes, a quick and unexpected event can completely change the course of your entire company. 

Whether it's an accidental data breach or a malicious cyber-attack, businesses, governments, and individuals can experience huge complications from having their sensitive information exposed. 

And without proper attention to detail or a prevention plan, a data breach can be devastating.

An incident involving a data breach can have far more effects than a temporary terror. 

When sensitive information is exposed, it can cause major problems for businesses, governments, and individuals alike. Hackers can access your data whether you are offline or online by using the internet, Bluetooth, text messages, or the online services you use.

If you think you’re safe from data breaches just because one hasn’t happened to you yet, think again.

According to CNET, the number of data breaches jumped 68% from last year to the highest total ever. And while there are many factors behind this (such as the size of your company and information type), on average, the total cost of a ransomware breach can reach up to millions.

So, prevention is better than cure.

In this article, we’ll cover how a data breach actually works, how it can impact you, and some tips and tricks to prevent them completely.

Here’s what you’ll learn:

  • What Is A Data Breach And How Does It Work?
  • 5 Most Damaging Consequences Of Data Breaches
  • What Should You Do If A Data Breach Has Occurred?
  • How To Prevent Data Breaches: 4 Best Practices

What Is A Data Breach And How Does It Work?

A data breach is a cyber-attack in which sensitive, confidential, or otherwise protected data is improperly accessed and/or disclosed.

Data breaches can happen in any size organization, from small businesses to multinational corporations. And often times, the type of data that gets leaked includes personal health information (PHI), personally identifiable information (PII), trade secrets, and other confidential information.

What’s the difference between each of these sensitive information types?

  • PHI - Information, including demographic data, that relates to an individual's past, present, or future physical or mental health or condition
  • PII - Information that permits the identity of an individual to whom the information applies can be inferred through direct or indirect means. For example, their passport number, social security number, driver's license number, and so on.
  • Trade Secrets - Any business information that has commercial value, derived from its secrecy. For example, new tech you use, how you designed original products, your "secret recipe", and so on.
  • Confidential information - Anything that is generally not known to the public and encompasses more than just trade secrets. For example, an individual's personal information (age, date of birth, sex, address), bank information, contact details, personal goals or reports, and so on.

When someone who is not authorized to view or steal personal data do so, the organization in charge of protecting that information suffers from a data breach.

If a data breach leads to identity theft and/or a violation of government or industry compliance mandates, the offending organization may face fines, litigation, reputational damage, and even the loss of the right to operate the business.

For example, in the healthcare industry, HIPAA fines reach up to $50,000 per violation caused by insecure records, human negligence, and malicious intent. Though, it's not rare for health organizations to be fined in the millions because of data breaches.

Meanwhile, GDPR fines reach up to $100,000 for an organization and $10,000 for an individual. Though, some corporations have had to pay up to $100M because of data breaches.

Another difference you should know at this stage has to do with data breaches and data loss.

Here’s what you need to know.

What’s the difference between a data breach and data loss?

Data loss is typically caused by organizations inadvertently exposing sensitive data via security flaws. Such incidents are not the result of cyberattacks. 

In contrast, data breaches are usually a consequence of a cybercriminal's persistence in compromising sensitive resources.

However, a data loss could lead to a data breach. 

If cyber criminals discover a data loss, it may provide them with the necessary intelligence to carry out a successful data breach.

Another distinction between these two occurrences is the confidence in public exposure. 

When sensitive data is stolen in a data breach, it is typically dumped on the dark web, indicating that it has reached the public.

Data loss, on the other hand, can be exposed for an extended period of time with no knowledge of who accessed it or whether it was made public.

Now, before we cover the consequences of data breaches, one last thing you should know is how data breaches happen.

How do data breaches happen? 

According to UpGuard, the 6 most common causes of data leaks and breaches include:

  • Misconfigured software settings.
  • Social engineering or human negligence.
  • Recycled passwords.
  • Physical theft of sensitive devices.
  • Software vulneribilities.
  • Use of default passwords.
graphic representing data breaches

Below, we’ll cover how to prevent data breaches, so, keep on reading.

5 Most Damaging Consequences Of Data Breaches

Despite increased emphasis on data security, cybercriminals are constantly devising new methods to circumvent defenses and gain access to valuable corporate data. 

According to Comparitech, 45% of US companies have experienced a data breach and the number of data breaches soared in 2021 - with over 292+ million individuals being impacted by data breaches.

And it's not just the corporations that are affected by data breaches. 28% of data breaches affected small business victims.

If organizations want to mitigate risk and defend against attack, they must fully understand the far-reaching implications that a data breach could have on their business.

Some of the more serious consequences of a data breach are as follows:

1. Financial implications

The financial impact of a data breach is without a doubt one of the most immediate and severe consequences that organizations will face.

Costs of data breaches include:

  • Compensating affected customers.
  • Setting up incident response efforts.
  • Costs of investigating the breach.
  • Investment in new security measures to avoid data breaches.
  • Legal fees, not to mention the eye-watering regulatory penalties that can be imposed for non-compliance with the GDPR (General Data Protection Regulation).  
  • Company's share price and valuation.
  • And more.

2. Reputational damage

A data breach also has devastating consequences for a company's reputation.

It is critical for a large-scale company to operationalize data protection by keeping data secure and implementing data privacy processes.

Customer data security, rights fulfillment, and trust-building are all intertwined here. 

When it comes to avoiding reputation damage from data breaches, you should look into:

  • Creating a privacy policy and sticking to it.
  • Explain to customers why you are asking for their data, how it will be used, and who is going to process it.
  • Respect the deadlines for resolving customer requests and enable customers to exercise their GDPR rights.
  • Explaining how the collected data is going to provide them with useful information or a better customer experience.
  • Protecting their data by any means available and adjusting the level of data security to the sensitivity of their data.

For more information on getting the most out of your customer information, see our guide on data security standards.

3. Operational downtime

A data breach can lead to severe disruptions in business operations

Organizations must contain the breach and conduct an extensive investigation into how it occurred and what systems were accessed. 

It is possible that operations will have to be completely shut down until investigators have gotten all of the answers they’re looking for. In extreme cases, this process can take weeks. 

This can have a huge knock-on effect on revenue and an organization’s ability to recover.

4. Legal action

Organizations are legally required to demonstrate that they have taken all necessary steps to protect personal data under data protection regulations. 

Individuals can seek legal action to seek compensation if this data is compromised, whether intentionally or unintentionally.

As the number and severity of breaches ramp up, we can expect to see more of these group cases brought to court.

5. Loss of Sensitive Data

If sensitive personal data is lost as a result of a data breach, the consequences can be disastrous. 

Personal data is any information that can be used to identify an individual, either directly or indirectly. Everything from a name to an email address, IP address, and images will be included. It also includes sensitive personal data, such as biometric or genetic information, which could be used to identify a person.

You must have a well-coordinated security strategy in place that protects sensitive data, reduces threats, and protects the reputation of your brand.

Because data breaches are becoming more common, how you respond to one can go a long way toward preserving your company's reputation and preventing you from losing your customers' trust.

Prevention is better than cure. 

But what do you do if your company was hit by a data breach?

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What Should You Do If A Data Breach Has Occurred?

Hindsight is always 20/20.

But sometimes unexpected emergencies happen.

So, if you’re wondering what you should do if a data breach happens, you should consider the following actionable steps:

1. Contact IT professionals immediately if you have knowledge or suspicion that an attack on your data systems has occurred. Next, contact other members of your data breach response team, such as communications experts, outside IT security forensic teams, and breach support vendors you've chosen.

2. Identify the threat and collaborate with internal IT professionals to isolate compromised systems from other internal databases and servers. Your goal at this point is to limit the damage and prevent further data breaches. Internal IT professionals should examine network logs and access reports to assist in identifying intrusion points and locating and disabling installed viruses or malware programs.

3. Engage outside IT forensic experts to handle the ongoing investigation. This is a critical component of establishing credibility with customers, vendors, and investors. Internal IT experts may have the knowledge to complete this task, but the media and affected parties are likely to perceive an internal investigation as biased.

4. Bring together all relevant executives and public relations teams to draught the company's response to the data breach. This should include enlisting the assistance of a third-party vendor who specializes in dealing with security breaches. Breach support vendors can handle incoming calls on behalf of concerned parties, distribute email communication, provide access to credit reports, and provide counselors to those affected by the security breach.

5. Notify the appropriate parties as soon as possible. Notifying affected parties, both consumers and business partners, as well as law enforcement, is part of this process. A majority of states have laws in place that address how to handle security breaches, including laws that establish the required timetable for informing victims and other parties of a security breach. The National Conference of State Legislatures maintains a list of states that have security breach notification laws in place, as well as links to those statutes.

6. Avoid making damaging or deceptive statements. Maintain a straightforward, honest, and succinct message. As needed, provide key details and accept responsibility for the problem. Demonstrate a willingness to make things right and a determination to avoid trouble in the future.

Now, let’s cover how to prevent data breaches to avoid the above-mentioned consequences.

How To Prevent Data Breaches: 4 Best Practices

Because data breaches can take many different forms and occur in a variety of ways, you must be vigilant — and employ a variety of different strategies to protect yourself.

Everyone at all levels, from end-users to IT personnel, and everyone in between, must be involved in data breach prevention.

When it comes to preventing data breaches or leaks, security is only as strong as the weakest link. Every person who interacts with a system has the potential to be a vulnerability.

Here are a few best practices to avoid a data breach

1. Restrict access

Each person with access to data or potential access to data represents another vulnerability. 

Whenever 1,000 people log in to a system that contains personal information, there are 1,000 vulnerabilities. Any one of them could be the faulty link. By limiting access to that information to 10 people, you will reduce those vulnerabilities by 99.999%.

There are many ways to limit access to data. 

For example, you can avoid storing certain types of data (like credit card numbers) entirely, and you can set up different user roles with different levels of access for your internal systems. 

This way, only specific people will be able to access confidential and sensitive information, such as customer PII.

Learn more about setting up user role management and permission settings here.

2. Improve general security

Improving your overall security is also a critical step. 

This is a vast and multifaceted subject, so it's impossible to be exhaustive here. Tut methods such as better architecture, firewalls, VPNs, traffic monitoring and restriction, and even routine updates can make a significant difference. 

While you're at it, make sure to carefully evaluate and assess your third-party relationships.  Even a passing link to an unsecured organization can pose a risk to your company.

3. Train your employees for the best data breach prevention practices

Would you believe that the majority of data breaches aren't the result of a determined hacker brute-forcing their way past your best defenses? 

Instead, approximately 88% of breaches are the result of human error. Errors that are frequently made by employees. Getting access to your entire system takes just a single successful phishing email or social engineering ploy.

As a result, you must train your employees on data security best practices — and educate them thoroughly. That is to say:

  • Instructing employees on best practices: Simple best practices can be an effective deterrent to data breaches. It's simple to teach your employees to use strong passwords and never give them out to anyone, but it's a step that far too many businesses skip.
  • Setting up protocols and hierarchies: Similarly, security protocols and hierarchies must be established. What steps must each person who works for you take? Who is accountable to whom?
  • Educating employees on common threats: It is also beneficial to educate employees on common cybersecurity threats that could result in a breach and how to avoid them.

4. Audit and reevaluate

There is no such thing as a one-size-fits-all data security strategy that will keep you safe from all threats indefinitely. 

This is due to the fact that everything is constantly changing

You're hiring new employees, your company is expanding, you're dealing with new and different types of data, And you're implementing new systems for your operations.

Best practices from the past are becoming obsolete. Most importantly, motivated hackers and cybercriminals are developing new techniques and approaches to exploit vulnerable systems.

If you want to keep preventing data breaches, you'll need to audit and reevaluate your efforts on a regular basis. 

Are there any new security procedures that you must follow? Have your employees deviated from protocol? 

Regularly audit your processes and look into how you can streamline your business operations with safety in mind.

Data breaches can be costly, time-consuming, and leave a permanent stain on your company's reputation. 

However, the vast majority of data breaches are avoidable

You have the best chance of avoiding most data breaches if you work proactively and train your team well — and you also set yourself up for a better defense if one occurs.

Conclusion

These basic precautions can be a great place to start when it comes to avoiding data breaches.

However, each of them necessitates careful examination and adaptation to the specifics of your company's operations. 

Here are a few resources to assist you in this process:

  • You should not do it alone. Look for solutions that can help you automate as many tasks as possible so that you and your team can focus on more strategic activities.
  • Look for new cybersecurity developments in various industries and implement those that appear to be the best fit for your company.
  • When it comes to the sensitive user or employee information, look into secure document management or automation systems. This will help you safely automate most (if not all) parts of your document management lifecycle. In addition to safely generating documents at scale.

In fact, one of the biggest benefits of document automation is improving the security of your sensitive documents and information.

So, if you’re looking to avoid data breaches in your company, you should start with where most of your sensitive information is saved.

For more information on this, be sure to read our detailed guide on how document automation works to see how you can utilize this for your specific industry.

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