Understanding Risks Associated with Not Implementing Data Protection Safeguards for Small Businesses by Tosin Ojo

Tosin Ojo, CISSP, CRISC, CISA, CISM, CIA, CFE, MSc., is the Founder and Principal Consultant at CITSAP Consulting, a next-generation customer-focused company that specializes in cybersecurity program development, risk management, risk-based IT audits, regulatory compliance, and readiness assessment for companies of all sizes.

Data is the heart of every business, which makes it a core asset of an organization, and a prime target for hackers and bad actors. The importance of data in driving business value cannot be underestimated, likewise, its protection should also be adequately prioritized regardless of the company size. However, most small businesses consider their threat level to be comparatively low when contrasted to larger organizations.

Based on recent reports, this school of thought does not stand up to reality. Recent figures show that small businesses are uniquely vulnerable to data breaches. Approximately 43% of data breaches impact small and medium-sized businesses (SMBs), and 60% of the SMBs that have been victims of data breaches end up going out of business and closing within the next six months.

The increasing reliance on cloud computing and proliferation of e-commerce businesses gives SMBs, similarly to large organizations, increased access to sensitive customer, or personal data such as credit cards, social security numbers, email addresses, and IP addresses.

Some of the risks that may materialize due to inadequate data security measures are:

1. Reputational Risk: An immediate aftermath of a data breach is bad publicity/press, resulting in a loss of credibility among customers, clients, and potential investors. Oftentimes, customers may lose trust in the ability of the business to protect their sensitive data and would seek other companies with stronger safeguards to provide the same or a similar service.

2. Financial Risk: Lack of data protection can result in financial losses for the organization. The high costs of data breaches tend to relate to the actions companies have to take after a data breach, such as the cost of investigation, implementation of security controls, legal or regulatory fines, etc.

3. Regulatory or Legal Risk: Regulatory fines could also be aftermath based on breach of data protection regulations. Customers can take legal action against the organization when their data is breached. Regulatory or legal fines could be higher when organizations cannot show due diligence was taken to adequately protect customers’ personal or sensitive data.

4. Operational Risk: Another major impact of a data breach is the potential downtime the organization may face in the aftermath of the event. Depending on the nature of the event, the business may need to shut down its operations, including the core revenue-generating systems or websites, while investigating and/or containing the damage from the breach or unplanned business disruptions; further leading to increased customer dissatisfaction and potential loss of revenue.

5. Customer or Client Risk: Hackers can use the breached customer data to commit fraud or scams, further increasing the liability of SMBs.

Considering the various impacts of not implementing data protection measures, the significance of data security for all businesses, especially SMBs, cannot be overstated. While there are several data protection measures that can be implemented, some of the key ones include data inventory, access control, multi-factor authentication, data backup, data encryption, security awareness, etc.

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