Report: Consumers paying the price for data breaches

IBM Australia Limited

Wednesday, 19 October, 2022


Report: Consumers paying the price for data breaches

IBM Security has released the annual Cost of a Data Breach Report, revealing costlier and higher-impact data breaches than ever before, with the global average cost of a data breach reaching an all-time high of $4.35 million for studied organisations.

With breach costs increasing nearly 13% over the last two years of the report, the findings suggest these incidents may also be contributing to rising costs of goods and services. In fact, 60$ of studied organisations raised their product or services prices due to the breach, when the cost of goods is already soaring worldwide amid inflation and supply chain issues.

The perpetuality of cyber attacks is also shedding light on the ‘haunting effect’ data breaches are having on businesses, with the IBM report finding 83% of studied organisations have experienced more than one data breach in their lifetime. Another factor rising over time is the after-effects of breaches on these organisations, which linger long after they occur, as nearly 50% of breach costs are incurred more than a year after the breach.

The report is based on in-depth analysis of real-world data breaches experienced by 550 organisations globally between March 2021 and March 2022. The research, which was sponsored and analysed by IBM Security, was conducted by the Ponemon Institute.

Some of the key findings include:

  • Critical infrastructure lags in zero trust — Almost 80% of critical infrastructure organisations studied don’t adopt zero trust strategies, seeing average breach costs rise to $5.4 million — a $1.17 million increase compared to those that do. All while 28% of breaches amongst these organisations were ransomware or destructive attacks.
  • It doesn’t pay to pay — Ransomware victims in the study that opted to pay threat actors’ ransom demands saw only $630,000 less in average breach costs compared to those that chose not to pay — not including the cost of the ransom. Factoring in the high cost of ransom payments, the financial toll may rise even higher, suggesting that simply paying the ransom may not be an effective strategy.
  • Security immaturity in clouds — 43% of studied organisations are in the early stages or have not started applying security practices across their cloud environments, observing over $660,000 on average in higher breach costs than studied organisations with mature security across their cloud environments.
  • Security AI and automation leads as multimillion-dollar cost saver — Participating organisations fully deploying security AI and automation incurred $3.05 million less on average in breach costs compared to studied organisations that have not deployed the technology — the biggest cost saver observed in the study.
     

“Businesses need to put their security defences on the offence and beat attackers to the punch. It’s time to stop the adversary from achieving their objectives and start to minimise the impact of attacks. The more businesses try to perfect their perimeter instead of investing in detection and response, the more breaches can fuel cost-of-living increases,” said Charles Henderson, Global Head of IBM Security X-Force.

“This report shows that the right strategies coupled with the right technologies can help make all the difference when businesses are attacked.”

Over-trusting critical infrastructure organisations

Concerns over critical infrastructure targeting appear to be increasing globally over the past year, with many governments’ cybersecurity agencies (including Australia’s) urging vigilance against disruptive attacks. In fact, IBM’s report reveals that ransomware and destructive attacks represented 28% of breaches amongst critical infrastructure organisations studied, highlighting how threat actors are seeking to fracture the global supply chains that rely on these organisations. This includes financial services, industrial, transportation and healthcare companies, amongst others.

Despite the call for caution, and a year after the Biden Administration in the United States issued a cybersecurity executive order that centres around the importance of adopting a zero trust approach to strengthen the nation’s cybersecurity, only 21% of critical infrastructure organisations studied adopt a zero trust security model, according to the report. Add to that, 17% of breaches at critical infrastructure organisations were caused due to a business partner being initially compromised, highlighting the security risks that over-trusting environments pose.

Businesses that pay the ransom aren’t getting a ‘bargain’

According to the report, businesses that paid threat actors’ ransom demands saw $630,000 less in average breach costs compared to those that chose not to pay — not including the ransom amount paid. However, when accounting for the average ransom payment, which according to Sophos reached $812,000 in 2021, businesses that opt to pay the ransom could net higher total costs — all while inadvertently funding future ransomware attacks with capital that could be allocated to remediation and recovery efforts and looking at potential federal offences.

The persistence of ransomware, despite significant global efforts to impede it, is fuelled by the industrialisation of cybercrime. IBM Security X-Force discovered the duration of studied enterprise ransomware attacks shows a drop of 94% over the past three years — from over two months to just under four days.

These exponentially shorter attack lifecycles can prompt higher impact attacks, as cybersecurity incident responders are left with very short windows of opportunity to detect and contain attacks. With ‘time to ransom’ dropping to a matter of hours, it’s essential that businesses prioritise rigorous testing of incident response (IR) playbooks ahead of time. But the report states that as many as 37% of organisations studied that have incident response plans don’t test them regularly.

Hybrid cloud advantage

The report also showcased hybrid cloud environments as the most prevalent (45%) infrastructure amongst organisations studied. Averaging $3.8 million in breach costs, businesses that adopted a hybrid cloud model observed lower breach costs compared to businesses with a solely public or private cloud model, which experienced $5.02 million and $4.24 million on average respectively. In fact, hybrid cloud adopters studied were able to identify and contain data breaches 15 days faster on average than the global average of 277 days for participants.

The report highlights that 45% of studied breaches occurred in the cloud, emphasising the importance of cloud security. However, a significant 43% of reporting organisations stated they are just in the early stages or have not started implementing security practices to protect their cloud environments, observing higher breach costs1. Businesses studied that did not implement security practices across their cloud environments required an average 108 more days to identify and contain a data breach than those consistently applying security practices across all their domains.

Additional findings in the 2022 IBM report include:

  • Phishing becomes costliest breach cause — While compromised credentials continued to reign as the most common cause of a breach (19%), phishing was the second (16%) and the costliest cause, leading to $4.91 million in average breach costs for responding organisations.
  • Healthcare breach costs hit double digits for first time ever — For the 12th year in a row, healthcare participants saw the costliest breaches amongst industries with average breach costs in healthcare increasing by nearly $1 million to reach a record high of $10.1 million.
  • Insufficient security staffing — 62% of studied organisations stated they are not sufficiently staffed to meet their security needs, averaging $550,000 more in breach costs than those that state they are sufficiently staffed.

1. Average cost of $4.53m, compared to average cost $3.87 million at participating organisations with mature-stage cloud security practices.

Image credit: iStock.com/aislan13

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