AshleyMadison: The Reputational Hazards of Data Breaches

Data breaches are becoming increasingly popular in today’s highly digitized society. While most consider the financial effects of these cyber-attacks, it is also critical to examine the potential reputational damage a company can endure. Protecting and repairing a company's reputation goes beyond a standard Privacy and Network Security policy; it requires constant due diligence and follow-up on updating security measures.

According to the Better Business Bureau, each data breach victim loses an average of $6,300 and 40 hours of repair time due to managing creditors, customer complaints, and credit bureaus.

Even more importantly, brand reputation can suffer huge losses as a result of these breaches. Customers are less likely to do business with a  company who has suffered data breaches in the past.

Even more importantly, companies can undergo reputational damages from a data breach as customers are less likely to do business with an entity who has suffered an attack. According to a Radius Global survey, 69 percent of consumers would hesitate before doing business with a breached company; half of which would be willing to pay more for a competitor’s services with more secure data and privacy systems.

In recent news, AshleyMadison.com, a dating website designed to provide extramarital relationships, suffered a data breach that compromised 37 million customer’s information. “The Impact Team” claims to be responsible for this breach as a result from a service launched by the website last year that promised heightened security features to its customers and would delete user information for an additional fee.

When the service was not executed as advertised, this group become resentful and plotted the attack against AshleyMadison.com. If AshleyMadison.com does not shut down its website, the perpetrator threatens to divulge the client information. Given the nature of the site, customer privacy is essential to the business.  If the information is released, the already controversial company will likely struggle to recover its customer’s trust and reputation.

What steps could AshleyMadision.com and other companies with questionable services do to protect the reputation that is essential to their business, after a data breach?

• Explain what is happening honestly to clients
• Acknowledge damage immediately and clarify how the situation is being handled
• Apologize for the damages outright
• Respect and empathize with concerns

At PL Risk, we understand the lasting effects of data breaches. We strive to protect your clients' reputation and financial liability as a result of these cyber-attacks. For more information on how we can serve your client’s needs, contact us today at (855) 403-5982.

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