Storing personal information on computer networks is common in the internet age. From passwords to bank accounts to individual tax information and credit card numbers, a lot of important and vulnerable information is stored there where faceless hackers are lurking. Companies with extensive computer networks can risk serious financial effects from such cyber risk.
Regulations Require Costly Reporting
In most states, regulations mandate reporting a network breach to any people whose personal records may be affected. This may entail writing a letter or email to each individual, or it may mean using a call center to contact individuals by phone. Offering free monitoring of people’s credit is another possible step to take. In addition, a corporation might also have to pay for public relations work to repair its image, rebuilding client trust. The costs add up.
Fines and Lawsuits
For a company dealing with medical records, cyber riskmight mean violating HIPPA regulations when individual medical records are exposed after a network breach. A similar situation could take place at a financial institution such as a hedge fund or a bank whose client information was exposed. In either situation, fines may ensue. Individuals might also sue the company, so it would incur additional costs from litigation.
Savvy Solutions to Cyber Crimes
Corporations can mitigate potential financial damages for cyber risks by taking out privacy and network insurance policies. These can cover the cost of forensic work to learn the full extent of the breach, client notification costs, as well as the cost of reputation damage control.