Data breach could cost world's top brands up to $223 billion, finds study

Customers might either stop engaging with a brand due as news of a breach spreads, loss figure could touch $223 billion

The world’s top brands across sectors might lose between $93 billion and $223 billion because of a data breach, a first-of-its-kind study by Interbrand and Infosys, called ‘Invisible Tech, Real Impact’, has found. 

This represents 4-9.6 per cent of their cumulative value.

The study gains significance in the backdrop of yet another massive hack, this time of Microsoft’s email software, which is estimated to have affected at least 60,000 known victims globally, according to Bloomberg.

The study found that there is a long-term impact of data breaches on brands across sectors. This is because companies are increasingly embracing digital platforms to improve customer experience, one of the reasons why customers are willing to pay a premium, it pointed out.

This has two implications: For consumers, it implies a quid pro quo –sharing personal information with brands for a personalised experience. For brands, it means the real and virtual have to coexist in creating this unique experience. 

This is not just true for digital or tech brands like Google and Amazon, but also brands that were focused on offline. For instance, it is estimated that the amount of data shared online at the beginning of 2020 was a staggering 44 zetabytes. 

Ameya Kapnadak, chief growth officer of Interbrand India, said the study evaluated parameters like financial value of the company, role and strength of the brand.

“There are three factors of particular interest that a breach directly impacts: Presence, affinity, and trust. At the most basic level, a data breach instantly creates negative news about the brand, which can create a negative perception in social media and impact presence. In fact, we believe that the presence score is dented for every brand regardless of whether it is digital or physical,” he added.

The second significant impact that a breach has is on affinity. In case of a breach, customers might either stop engaging with the brand or reduce engagement. 

In Interbrand’s estimate, a breach might impact affinity scores between 0.5 points and 2 points, depending on the extent to which consumers engage with them digitally. The most significant impact of a breach, however, is on trust, which is at the heart of any strong relationship.

“The issue of cyber security is real and important… to quantify (this) financially was difficult. This report talks about that and also how other business segments should embrace security. We need to bring deeper commitment to this conversation,” said Vishal Salvi, chief information security officer and head cyber security practice, Infosys.

The report said that, traditionally, banks that handle large amounts of customer wealth may see up to 16-17 per cent of their brand value at risk.

Tech brands also have 9-12 per cent of their brand value at risk. The largest of tech brands, for instance, might have up to $29 billion of their value at risk in the event of a breach (Facebook, in fact, lost almost 12 per cent of its brand value in the wake of bad press and regulatory pressures). This, in many ways, represents the ubiquity of these brands in everyday lives, with customers willingly sharing vast amounts of personal data with them, said the study.