According to some estimates, ransomware attacks increased by an astounding 92.7 percent between 2020 and 2021. As more people turned to online businesses for shopping and other necessary activities, hackers recognized increased potential for their own unsavory work. This growth in cyber security incidents has only continued in 2022, with industry analysts reporting record-breaking numbers of phishing attacks.
As George Rosenthal, founder and president of ThrottleNet, a managed IT service provider, explains, “Businesses large and small can no longer afford to not make cyber security a top priority. The financial fallout from a single ransomware attack will be much greater than what it will cost to protect your business. This needs to become a priority today.”
What Is Ransomware?
Ransomware is a term used to describe any malicious software that blocks access to files and data — or even an entire network or computer system. This is typically done by encrypting files. Hackers keep this encryption in place until the targeted business pays an agreed-upon ransom. In some cases, hackers also threaten to publish sensitive data unless the ransom is paid.
Malware can enter a business’s network through a variety of means. From using an unsecured network to clicking on a spam email, hackers have many methods at their disposal to gain access to sensitive data.
As Rosenthal notes, “It isn’t just big businesses that are getting targeted by these attacks. Small to medium-sized businesses are often actually more appealing as targets because they typically don’t have as strong of cyber security measures in place. While the total ransom amount may be smaller for the hackers, the ease with which they can take control of a small business’s systems makes it worth their time and effort.”
Direct Costs of a Ransomware Attack
The most immediately obvious cost of a ransomware attack is the ransom demanded by the hackers. The amount of the ransom can vary significantly based on factors such as the industry or size of the business.
For example, in 2021, the average ransom payment by manufacturing businesses was $2.04 million, while at the other end of the spectrum, healthcare businesses had an average ransom payment of $197,000. Roughly 10 percent of all organizations that suffer a ransomware attack pay over $1 million.
As Rosenthal explains, however, paying a ransom doesn’t necessarily mean that a company’s woes are over. “There’s no guarantee that a hacker will unencrypt your network after you pay the initial ransom. Sometimes, they view this as a sign that they can extort your business for more money before relinquishing control. And paying a ransom once will often make you a more desirable target for future attacks if you don’t take steps to improve your security. They know you’ve been willing to pay once — so they assume you’ll pay again.”
Secondary Losses That Can Result From Data Breaches
Worse still, the ransom payment is far from the only source of financial loss that can result from a ransomware attack. One analysis found that smaller companies typically suffer losses of $713,000 per ransomware incident, with much of the loss actually resulting from downtime and harm to the business’s reputation.
Ransomware attacks can cause you to lose customer trust and loyalty, particularly if their personal data was compromised as part of the attack. The business must subsequently invest in public relations and marketing efforts to restore its reputation and regain the trust of its clients.
The loss of important files can further disrupt a company’s productivity and efficiency — especially if computers are “held hostage” for an extended period of time.
Rosenthal adds, “When certain data is exposed to the public, your business could be subjected to lawsuits or found in violation of privacy regulations. Others will try to prove that your business was negligent by not having adequate security systems in place — and they will likely succeed in such claims. Beyond these losses, businesses will also see a snowball effect as they get charged higher fees for cyber insurance or need to invest in new software and equipment.”
The expanding wave of loss resulting from a ransomware attack could easily be enough to sink a business that isn’t on firm financial footing.
Take Action to Protect Your Company
New cyber security threats are emerging practically every day. Hackers are constantly working to find new ways to digitally break into your software and servers.
In fact, most software updates are a direct result of trying to address new security vulnerabilities that have been discovered. Many businesses also protect themselves by installing firewalls and email filters. Backing up data on a secured device can also reduce the fallout from an attack.
As Rosenthal explains, however, “Ensuring that everything is backed up or kept up to date can be a tall task for a business owner, especially when you have so many other responsibilities on your plate. Turning your cyber security over to managed IT experts will ensure that everything is handled appropriately. Training your team to recognize and avoid common scams that can lead to a data breach can also make a difference. By letting experts lead out, you can reduce your risk without overwhelming your own schedule.”
As the numbers reveal, every effort to prevent ransomware attacks will provide major financial protection.
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