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Home  /  Uncategorized  /  Impact of data breach on startups
06 July 2017

Impact of data breach on startups

Written by Seqrite
Seqrite
Uncategorized
Estimated reading time: 3 minutes

Cyber breaches are a threat to almost all kinds of businesses. Many large organizations establish elaborate policies and deploy sophisticated technology to ensure security of their infrastructure as well as their data. Smaller companies and start-ups, however, are different. Due to their nature of being dynamic, fast paced and open culture organizations, there is a constant movement of employees in and out of their systems which makes them highly vulnerable to the risk of data loss. As more and more customers are added, more data points are exposed to the outside world. With growing business, the volume of critical data increases and hence the risk of cyber threat sees an exponential rise.

Sources of Risk

Small budget and lack of security strategy

Unlike established organisations, startups usually have a constrained budget for various business functions. They often have just about enough funds to cover their operational costs hence cyber security is not their top priority and doesn’t get enough budget allocation. Further, they feel that they are small, thus, not vulnerable to attacks. This is where they falter. With their Intellectual Property, and exponentially growing business (as it should increase in the startup phase), the risks also grow exponentially. Any security incident in this period can spell an end to its growth plans.

Workforce

The workforce in start-ups comprises youngsters. They are creative explorers who don’t like to be tied down by policies and processes. Subsequently, most of the start-ups have open access to the Internet and social media websites, webmails, and other vulnerable sites. They also encourage their employees to use their own devices sometimes to keep the cost low or to allow employees to work from their home. All this increases the risk of breach both intentional and accidental.

Competition

The start-up world is quite competitive. There are many companies which are targeting the same market, same employee skills and many times even same investors. In such a situation, a malicious competitor can launch a targeted attack to cripple your organization. The start-ups need to protect themselves against all these threats.

Impact of Breach

Brand Reputation

Data breach leaves a bad mark on customer experience. Whether big or small, the companies are not immune to the bad publicity generated by a data breach. The older customers may leave and new ones may either hesitate or not come at all. The larger, more established companies may use their resources and recover from such an incident, but it’s a disaster for start-ups.  With already constrained resources, rebranding can be a herculean task leading to a steep fall of reputation.

Customer Loyalty and Trust

Startups work hard to increase their customer base and maintaining customer loyalty and trust is key to keeping their business competitive and successful. When clients share their sensitive information, they trust companies to maintain the safety of their data. Exposure of customer data to hackers breaks their confidence in you. This deteriorates their loyalty to your brand and subsequently, they may move to another vendor. It leads to not just revenue loss but also the loss of customer acquisition cost as well as up-selling and cross-selling opportunities.

Legal Costs

Cyber security breach also has legal implications. Customers who have lost data might choose to sue the startup. The total cost of settling the case may actually shut down the company. The entrepreneurs may not be able to start another venture and that could possibly be the biggest blow to the entrepreneur himself.

It is true that start-ups are constrained for resources, but ignoring security of their systems is the biggest mistake they can make. Start-ups have intellectual Property and customer data which the hackers may sell on the dark web. The implications of a single attack could be as severe as a total shutdown of business and multiple lawsuits against the entrepreneur. Thus, it is important that start-ups have a well-defined security strategy and plan coupled with some easy to implement solutions like Seqrite Endpoint Security which provides the security that start-ups need.

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