You've probably heard of the recent cyberattacks on large, nationally recognized companies like T-Mobile and Colonial Pipeline. But small businesses are equally at risk.
Ready for the numbers?
- Post-cyber attack, only 17% of small businesses are financially prepared to recover their losses.
- 43% of all cyberattacks occur to small and medium-sized enterprises.
- CyberSecurity Magazine reported that 61% of all small businesses faced at least one cyberattack in 2021.
- 91% of small businesses have not invested in cyber liability insurance.
How does cybercrime affect small businesses?
It's clear from these statistics that no company, big or small, is safe from cyberattacks. Instead, small businesses may be more at risk because they're less prepared to deal with one. Plus, hackers target small businesses because they're more willing to pay up and most likely haven't budgeted for a fully equipped IT arsenal.
Here are four potential consequences a cyberattack could have on your small business:
1) Massive costs:
Cybercrime can financially kill small businesses and start-ups. Ransomware attacks prevent accessing your computer systems or confidential data unless you pay the hackers a "ransom." Suppose you decide to pay off the hackers (which is strongly discouraged). In that case, it can create a considerable strain on your financial resources.
Ransomware attacks aren't the only financial liability you'll have to face. After a data breach, the subsequent legal fees and liability charges can quickly sink your company.
The WSJ recently reported about a cyberattack involving the small business, Innovative Higher Ed Consulting. This two-person start-up had criminals running more than 100,000 stolen cards through their payment system in what's called a "card testing fraud." The scam left the company paying its payment processing vendor $27,000 to reverse the charges. By the following year, Innovative Higher Ed Consulting shut down due to the attacks. Unfortunately, their company faced reputational damages that could not be reversed as quickly as the credit card charges.
2) Lost Business:
With reputational damage comes a drop in revenue, as customers lose trust in the security of your business and take their business elsewhere. For publicly traded companies, the reputational damage due to data breaches can result in a temporary 3.5% drop in market value. Further, most companies have to suffer halted operations and business interruptions during and after cyberattacks, resulting in even more lost income.
Malware and viruses can handcuff your business's operations by either erasing high-profile information or blocking access to your website. Unfortunately, these things happen more often than we'd like to think. For example, suppose government agencies and MNC's aren't immune to cybercrime. In that case, small businesses are just as likely to suffer a cyberattack and lose potential business.
3) Reputational damages:
Reputation is an intangible asset - but that doesn't mean it's worthless. Small businesses typically rely on word-of-mouth promos to market their services within their vicinity. Cyber attacks can significantly tarnish a company's brand image. Even just one data breach can destroy your company's reputation, leaving you to rebuild connections with your community from scratch.
Picking up the pieces after a cyber attack is not a fun proposition. When data breaches affect your customers, it becomes your responsibility to:
- notify all your customers,
- handle identity theft monitoring, and
- figure out how your systems got hacked in the first place.
Each of these activities is important - and costly.
Cyber liability insurance can cover your business when hackers attack your systems to either prove a point or, more probably, to get a ransom.
Does your small business need cyber insurance?
Not every business requires cyber liability insurance - it depends on the industry and type of business you run.
Does your company:
- Store any amount of personally identifiable information on a computer connected to the Internet?
- Actively engage in e-commerce or use an online network for your daily operations?
- Accept credit cards and information like SSNs?
If you replied yes to one of these questions, then you need cyber insurance. But there's no one-size-fits-all type of cyber insurance plan, so talk to an advisor about how much protection and what kind of coverage is necessary for your business. Carriage Trade Insurance specializes in studying the insurance needs of small companies and identifying what your business needs.