What Is the Real Cost of Data Loss?
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According to statistics affirmed by Unitrends, about 96% of business servers are not backed up, and about 50% of the entire tape backups fail to restore. Furthermore, about a quarter of all PC users suffer from data loss annually, and many small businesses that experience data loss fold up within a year. Today, the amount of data being handled by organizations is increasing. Along with this data growth comes an increase in the organization’s attack surface and the risk of experiencing data loss to cyberattacks, malware, or even natural disasters.
The impact of data loss can be catastrophic for any business. Data loss is real and can happen to any organization if adequate data protection measures are not established and maintained. This issue has made backing up data a high priority and an important business decision. According to Backupify a 2018 study has revealed that the global average cost of data loss was around $142 per data record, totaling about $3.6 million. Hence, backing up Software As A Service (Saas) data should be a paradigm. Data backup ensures data safety in case of any disaster.
What is Data Loss?
An organization experiences data loss when it loses valuable data on a computer or server due to attacks, occurrences, or compromises such as theft, human errors, malware, viruses, power failure, natural disasters, etc. Data loss may occur due to physical, mechanical, or software damage or failure of equipment. Data loss can also occur when data is mistakenly deleted or becomes corrupted. Also, formatting errors and viruses can render data unusable. An organization’s financial health often significantly impacts when it loses its data.
According to an IBM study, the annual cost of a data breach is increasing by approximately 10% per year. The 2021 report says the average cost of a breach in hybrid cloud environments is $ 3.61 million, while the average cost of a ransomware breach is $ 4.62 million.
Frequently backing up files aids data recovery when data loss occurs. Data recovery becomes complicated when an organization hasn’t backed up most of its data before a loss occurs. It often requires professional services if it stands a chance of being recovered. Even if this data can be recovered, the process usually consumes time and business resources that should be channeled to other important aspects of the business. On the other hand, even IT professionals might not be able to recover lost data, signifying permanent data loss. This makes data protection and data loss prevention more important.
Effects of Data Loss On A Business
Data loss affects a business in different ways, some of which are:
- Tarnishes Reputation
The effects of data loss on a company’s reputation can not be overemphasized. When customers discover that a startup business has experienced data loss, the trust they have in the company will diminish. They see the business as incompetent and unreliable. For a business that stores data on behalf of its clients, these clients expect a high level of data security. Anything below this security standard cripples their trust in the business. Consequently, the clients cut ties with the business and move to other companies that provide better services. Eventually, the business loses customers, profit, cash flows, referrals, and competitive advantage.
- Plummeting Sales
Data loss can have detrimental effects on business sales and conversion rates. Data is a fundamental aspect of a business. Data ascertains the smooth running of a business to generate sales. When there’s an alteration due to data loss, in situations of data loss, most businesses cannot effectively operate until the lost data is recovered. Not only does it impede business operations, but it also makes business services and products unavailable to customers.
If this persists, customers will lose interest in patronizing the business. The time and resources spent on recovering data could have been used to augment the business productivity and sales.
- Disrupts Productivity
When businesses do not prepare for contingencies, even the slightest issue will have a significant impact. Companies with no measures to prevent or deal with data loss will experience disruption in their productivity during periods of data loss. Ultimately, it leads to decreased profits. Some business documents are essential in everyday business operations, and some of these documents are used by multiple employees to achieve certain business goals.
Due to data loss, the organizational workflow will be interrupted in the absence of these documents. Employees need to find an alternative to these documents, or in some instances, they can not do anything since these documents serve as the foundation of their operation. Hence, numerous business tasks are left unfinished or not done pending the data loss issue’s resolution. However, having a data loss plan with a backup system will mitigate the effects of data loss on the organizational workflow.
- Flouts Data Privacy Regulations
Like every other aspect of life, rules and regulations guide data privacy and general business operations. Regulatory data privacy compliance laws direct that acquiring, storing, or utilizing Personally Identifiable Information(PII) by businesses must be done with the legal obligation of protecting data from unauthorized access.
When data loss occurs, businesses are typically charged with the mismanagement and mishandling of sensitive data. Such an organization might face lawsuits from affected customers and regulatory bodies. This has deleterious effects on the company’s image. The company has to pay a considerable amount of money in fines or compensation.
- Loss of Potential Partnerships and Opportunities.
Another significant effect of data loss on businesses is that it affects their relationship with potential and well-established partners due to concerns over data insecurity. When such business alliances are damaged, such businesses experience a reduction in their revenue. Also, the possibility of business growth is dealt with.
Even when the data loss situation has been adequately taken care of, re-establishing a trusting relationship with the same business partners might be impossible or take some time. When these partners weigh their options, they discover that damage can be too much for them and not worth the risk in some instances. This implies that businesses that suffer data loss, in most cases, will have to start over and try to win over new partners.
- Business Closure
Extreme data loss is among the leading causes of a business shutdown. This occurs when the company doesn’t have a backup plan in place and it experiences data loss frequently. Usually, when a business experiences data loss, normal business operations are impeded for about two weeks, depending on their recovery efforts and the extent of data loss. During this period, employees still have to be paid their salaries even though the business isn’t generating enough income. Eventually, the business resorts to using the available capital to take care of the business costs before business operations are up and running.
Causes Of Data Loss
Several factors lead to data loss, both human and nonhuman errors.
- Hard Drive Failure
A hard drive is a piece of hardware that stores data. A hard drive uses its mechanical components to read and write data to a storage location. However, due to normal wear and tear that occurs in the mechanical components of a machine or device over time, there’s a possibility that they’ll become faulty after a while. This is why it is important to replace these hard drives before they fail and to do that, the data present on the old hard drive must be transferred to a new hard drive. Also, hard drive failure can result from physical damage, such as hitting the hard drive, dropping the hard drives, etc. For this reason, hard drives must be handled with care to avoid damage.
In the event of a hard drive failure, there’s a chance that the data stored on it is still intact. However, this depends on the condition of the storage plate.
- Unauthorized Access and Malware
Protecting your network from malicious attacks and unauthorized access is probably essential to data security. Computer viruses can compromise important or, even worse, delete or steal data. It gets scary for the company because stolen data can be used to commit fraud against the business or its customers, resulting in financial blight.
Furthermore, employees’ login details could be disclosed, leading to unauthorized access to their workspace from an unknown user. If an unauthorized individual gains access to a company’s network, data can be stolen, deleted, or compromised, depending on the stranger’s motive.
- Blackouts
An ongoing and prolonged power outage has also contributed to data loss. According to Monsterhost, a study conducted in 2014 revealed that 20% of data loss occurrences experienced by companies were a direct consequence of sudden blackouts, which cost between $50,000 and $ 5 million. A way to get around this is by employing a reliable hosting provider. Reliable providers set up teams who monitor servers to ensure power outages do not occur.
An organization that maintains its server or network must implement a contingency plan in the event of power outages. Using a generator that will automatically kick in whenever there’s a blackout is recommended. This ensures that your network doesn’t go offline, resulting in lost data.
- Human Errors
Human errors can not be ruled out. We all tend to make mistakes, and sometimes, these mistakes are costly. For business operations, these mistakes can cause accidental deletion of data files. Furthermore, employees can overwrite important files or omit an essential aspect of normal business operations. Likewise, human errors can be the reason behind other causes of data loss, such as hard drive damage, liquid spills, software corruption, etc.
A useful method of preventing human errors in data handling is adequate employee training. An organization should ensure that its employees comprehend the company’s data processing functionality and backup systems. Also, data loss from human error can be mitigated through some software means. One of these methods is business automation. Business automation reduces the amount of human interaction with data and reduces the risk of deleting or overwriting data. When an organization’s workflow is optimized, the chances of human errors will be slim.
For an organization to safeguard its future and prevent its downfall, it must have an effective data protection strategy in place.
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