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Data Breach Could Cost Top Global Brands up to $223 Bn: Study

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Top 100 Brands will lose $223 billion in brand value from data breach, shows a recent study.

Almost every week, we get to hear the news of brand owners disclosing a data breach has occurred. The effect of a data breach goes far beyond the costs and resources in dealing with the breach and is not just a data privacy concern. It can cause substantial damage to brand value due to harm to the goodwill in a brand and loss of consumer trust. It is a concern of all stakeholders and especially those that protect the goodwill of brands.

At a time when brands around the world are striving to establish goodwill and trust, a new report brings out a harsh truth that the world’s top-100 brands could see a whopping $223 billion getting wiped off their brand value due to data breach. The report, launched by IT major Infosys and global brand consultancy Interbrand, ‘Invisible Tech. Real Impact,’ examines the long-term impact of data breaches on value of the world’s top brands across sectors.

To quantify this risk, the researchers identified the brand factors most impacted when a company suffers a data breach – presence, affinity, and trust – and simulated the resulting brand value at risk in the event of a breach, using Interbrand’s proprietary brand valuation methodology.

“Cybersecurity for long was seen as a cost of doing business. However, in this digital age, where a company’s reputation is based on its ability to protect customer data and establish digital trust, cybersecurity is becoming a business differentiator,” Vishal Salvi, Chief Information Security Officer & Head Cyber Security Practice, Infosys said.

The report reveals that industries such as technology, financial services and automotive might suffer a higher overall brand value at risk from data breaches, whereas luxury brands and consumer goods face greater value at risk as a percentage of their net income. For example, the technology sector shows up to $29 billion brand value risk (up to 53 percent of 2020 net income), followed by financial Services – Up to $2.6 billion brand value risk (up to 52 percent of 2020 net income) and automotive that shows up to $4.2 billion brand value risk (up to 77 percent of 2020 net income).

If we take the example of technology sector alone, the recent times have seen a number of new technologies become a part of our lives and businesses – 5G and IoT to AI, cloud technology and ML. While these technologies create efficiencies, save time, reduce costs, they have also led to an increase in the amount of data we create and share online. New technologies mean vulnerabilities are lesser known and easier to exploit.

In fact in a recent survey by Raconteur, 94% of the telecom operators and industry experts agreed that security challenges would escalate with the advent of 5G technologies. It is no wonder that the absolute Value at Risk for the technology brands is the highest across industries. In fact, the cumulative value at risk that tech brands have in the event of a breach could be as high as 29 billion dollars. This represents up to 53% of their total cumulative brand value.

This is of course commensurate with the overall value of technology brands. But more importantly, it is reflective of the value that technology (and tech brands) plays in our lives. Whether it is hailing a cab, making an appointment at the dentist, paying bills or transferring money – technology is at the center of most of our tasks and daily chores. The corollary is that as the research notes, users willingly share large amounts of personal data with these brands. The value at risk then, is also reflective of the importance of safeguarding this personal information.

As tech plays a deeper role in our lives, issues like security and privacy are expected to become even more important in driving brand choice.

Ameya Kapnadak, Chief Growth Officer (India), Interbrand, said, “There’s a fundamental shift in how brands engage with their customers. As the lines between the physical and virtual worlds increasingly blur, and brands rely more and more on the digital world to create unique experiences for their customers, data breaches have the potential to dent the very core of the brand’s relationship with its customers. These shifts underscore the need to re-evaluate ‘hygiene’ aspects of customer experience, like cybersecurity.”

The report examines the impact of a data breach to the brand value to help businesses understand and evaluate if the cybersecurity investments they are making are proportionate to the risk they face. It also reinforces the need for CISOs to engage with the board and build a robust governance ecosystem while employing a ‘secure by design’ approach to safeguard their brand value and reputation.

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