The results of a global study examining the financial impact of data breaches reveals that the incidents cost companies $3.86 million per breach on average, and that compromised employee accounts were the most expensive root cause.
Sponsored by IBM Security and conducted by the Ponemon Institute, the 2020 Cost of a Data Breach Report also found:
• Smart Tech Slashes Breach Costs in Half: Companies who had fully deployed security automation technologies (which leverage AI, analytics and automated orchestration to identify and respond to security events) experienced less than half the data breach costs compared to those who didn’t have these tools deployed – $2.45 million vs. $6.03 million on average.
• Paying a Premium for Compromised Credentials: In incidents where attackers accessed corporate networks through the use of stolen or compromised credentials, businesses saw nearly $1 million higher data breach costs compared to the global average – reaching $4.77 million per data breach. Exploiting third-party vulnerabilities was the second costliest root cause of malicious breaches ($4.5 million).
• Mega Breach2 Costs Soar by the Millions: Breaches wherein over 50 million records were compromised saw costs jump to $392 million from $388 million the previous year. Breaches where 40 to 50 million records were exposed cost companies $364 million on average, a cost increase of $19 million compared to the 2019 report.
• Nation State Attacks – The Most Damaging Breaches: Over the nine-month period examined in the report, nation states were the costliest type of threat actor examined in the report. State-sponsored attacks averaged $4.43 million in data breach costs, surpassing both financially motivated cybercriminals and hacktivists.
“When it comes to businesses’ ability to mitigate the impact of a data breach, we’re beginning to see a clear advantage held by companies that have invested in automated technologies,” said Wendi Whitmore, Vice President, IBM X-Force Threat Intelligence. “At a time when businesses are expanding their digital footprint at an accelerated pace and security industry’s talent shortage persists, teams are overwhelmed securing more devices, systems and data. Security automation is resolving this burden, not only enabling a faster breach response but a significantly more cost-efficient one as well.”
Employee Credentials and Misconfigured Clouds – Attackers’ Entry Point of Choice
Stolen or compromised credentials and cloud misconfigurations were the most common causes of a malicious breach, representing nearly 40% of malicious incidents. With over 8.5 billion records exposed in 2019, and attackers using previously exposed emails and passwords in one out of five breaches studied, businesses are rethinking their security strategy via the adoption of a zero-trust approach – reexamining how they authenticate users and the extent of access users are granted.
Similarly, companies’ struggle with security complexity – a top breach cost factor – is contributing to cloud misconfigurations becoming a growing security challenge. The 2020 report revealed that attackers used cloud misconfigurations to breach networks nearly 20% of the time, increasing breach
dollars to $4.41 million on average – making it the third most expensive initial infection vector examined in the report.
State Sponsored Attacks Strike Heaviest
Despite representing just 13% of malicious breaches, state-sponsored threat actors were the most damaging type of adversary according to the 2020 report, suggesting that financially motivated attacks (53%) don’t translate into higher financial losses for businesses. The highly tactical nature, longevity and stealth maneuvers of state-backed attacks, as well as the high value data targeted, often result in a more extensive compromise of victim environments, increasing breach recovery costs to an average $4.43 million.
In fact, the Middle East, which historically experiences a higher proportion of state-sponsored attacks compared to other parts of the world3, saw a 9% yearly rise in its average breach cost, incurring the second highest average breach cost ($6.52 million) amongst the 17 regions studied. Similarly, the energy sector, one of the most frequently targeted industries by nation states, experienced a 14% increase in breach costs year over year, averaging $6.39 million.
Advanced Security Technologies Prove Smart for Business
The report highlights the growing divide in breach costs between businesses implementing advanced security technologies and those lagging behind, revealing a cost-saving difference of $3.58 million for companies with fully deployed security automation versus those that have yet to deploy this type of technology. The cost gap has grown by $2 million, from a difference of $1.55 million in 2018.
Contributing to the lower breach costs companies experience due to fully deployed security automation is the significantly shorter response time to breaches. The report found that AI, machine learning, analytics and other forms of security automation are enabling companies to respond to breaches over 27% faster than companies that have yet to deploy security automation – the latter of which require on average 74 additional days to identify and contain a breach.
Incident response (IR) preparedness also continues to heavily influence the financial aftermath of a breach. Companies with neither an IR team nor testing of IR plans experience $5.28 million in average breach costs, whereas companies that have both an IR team and use tabletop exercises or simulations to test IR plans experience $2 million less in breach costs – reaffirming that preparedness and readiness yield a significant ROI in cybersecurity.
Some additional findings from this year’s report include:
• Remote Work Risk Will Have a Cost – With hybrid work models creating less controlled environments, the report found that 70% of companies that adopted telework amid the pandemic expect it will exacerbate data breach costs.
• CISOs Faulted for Breaches, Despite Limited Decision-Making Power: Forty-six percent of respondents said their CISO/CSO was ultimately responsible for the breach, despite only 27% stating the CISO/CSO is the security policy and technology decision-maker. The report found that appointing a CISO was associated with $145,000 cost savings versus the average cost of a breach.
• Majority of Cyber Insured Businesses Use Claims for Third Party Fees: The report found that breaches at organizations with cyber insurance cost on average nearly $200,000 less than the global average of $3.86 million. In fact, of the organizations that used their cyber insurance, 51% applied it to cover third-party consulting fees and legal services, while 36% of organizations used it for victim restitution costs. Only 10% used claims to cover the cost of ransomware or extortion.
• Regional & Industry Insights: While the U.S. continued to experience the highest data breach costs in the world, at $8.64 million on average, the report found that Scandinavia experienced the biggest year over year increase in breach costs, observing a 13% rise. Healthcare continued to incur the highest average breach costs at $7.13 million — an over 10% increase compared to the 2019 study.