At some point last year, Yahoo was forced to go public about its data being compromised two times in relatively quick succession. With this information came a potentially instructive decision for Verizon. Would the telecommunications firm decide to let their $4.83 billion agreement with Yahoo go south or would they just swallow the pill and find a more reasonable way out?
At the end, Verizon CEO Lowell McAdam decided to go with a discount. The two Yahoo breaches are said to have lowered the deal’s value by a whopping $350 Million. Verizon also chose to split liabilities that would come as a result of the hack, where Yahoo would meet 50% and the telecommunications giant the same.
Security breaches are becoming more of an issue than ever before
Not only are the risks of data room breaches rising, but the costs are also shooting upwards. Between 2013 and 2016, the costs coming from an average breach increased from $3.1 million to $4 million. This translates into a 29% increase in just a matter of 3 years as per information gathered by IBM. Shareholders as well as investors, who were previously never too invested in the IT needs of their companies, are taking notice and getting more worried about the impact these breaches could have on their bottom line. A survey carried out on 30 executives indicated that 80% believe cyber-security to be a critical area of their ventures. 73% of those interviewed stated that cyber security concerns had risen over the years.
The consequences of data breaches are far-reaching. We know that they do undercut the deals a company can make. Even more concerning, they can reduce the value of a company and diminish its reputation in the eyes of the public. Last year, a survey carried out on investors who deal with mergers and acquisitions found out that 23% of them had dumped potential investments when they realized that the companies fronting them had data breach issues in the past.
The real cost of data breaches
CGI and Oxford Economics indicate that over the last four years, data breach issues have caused drops in share values in companies around the world to the tune of $52.4 billion. In a study, the cybersecurity consultant found that shares of a given company will fall permanently by 1.8% after a data breach. As such, a regular FTSE 100 firm will lose $150 million in share value to these types of issues. The case is worse at times, with companies losing up to 15% of their valuation.
It goes beyond monetary valuation
Sure, we are always going to the financial damage a company suffers as a result of a breach. However, in the deeper end, the company’s image becomes shattered. Any breach spells trouble for a firm because the public is going to start asking questions. When word makes its way around, people become distinctly wary of a company whose data has been compromised. What follows are questions about the reliability of its security infrastructure from top to bottom.
Data is without a doubt the most important aspect of a company’s operations. It is the only way a firm can stay up ahead of the competition and remain relevant. There should always be measures in place to secure data as well as protocols that govern its handling and sharing. In order to avoid data being compromised, the different players need to understand their roles. An employee, for instance, has to know that security protocols exist to protect company data, whose responsibility they have been handed. It is therefore only logical for them to be sentinels of company information. The honchos at the top on the other hand need to have a full understanding of what data security is all about. They should go further and set up an impenetrable infrastructure that keeps prying eyes out.
Yahoo certainly knows what these things can do. Their data room lost plenty of passwords and usernames. They also lost quite a bit of personal user information. Most critically, they lost big on their security infrastructure, and this ended up costing them their reputation as well as valuation. As CGI and Oxford aptly puts it, companies need to wake up and stop looking at cyber security issues as peripheral, because this sort of ignorance could slice deep in the future.
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