Are customers desensitised to data breaches?
- 21 March, 2012 09:27
A Symantec sponsored report by the Ponemon Institute covering data breaches at 49 US companies has found fewer customers ditched their providers after a data breach occurred.
"For the first time, fewer customers are abandoning companies that have a data breach. However, certain industries are more susceptible to customer churn, which causes their data breach costs to be higher than the average," the Ponemon Institute report on data breaches in 2011 notes.
The 49 cases involved record losses of between 4500 to 98,000.
The institute makes its claim based on a 0.7 decline in the average "churn" -- the industry term for customers ditching their service provider -- after a breach from 3.9 per cent in 2010 to 3.2 per cent in 2011.
It's hard to tell what this means for consumer attitudes towards data breaches. The US has had dozens of different state-led breach reporting requirements in place for years now. A Gartner analyst speculated after the massive Epsilon breach there was "breach notification fatigue" in the US.
The Australian Law Reform Commission acknowledged the risk of notification fatigue when it recommended breach notification laws in Australia in 2008. Australia has yet to implement any such law.
Besides this, Ponemon concedes the sample size of 49 is too small for it make any generalisations about a breach's impact in cost and on the victim. For the company however, it notes that for the first time the cost per cost lost record has fallen -- from $US215 to US$194.
Of the 49 companies surveyed the highest churn rate was 8.7 per cent. Ponemon observed that some industries are more vulnerable to churn. If a financial services company suffers a breach, the churn on average is 5.6 per cent. Communications, healthcare, pharmaceutical and services are also relatively high at between 4 and 5 per cent.
In the mid-range is consumer, education, industrial, technology, hospitality and transportation, at between 2.3 per cent and 3.7 per cent, while the lowest churn occurs in media (1.9 per cent), retail (0.8 per cent) and public sector (0.7 per cent).
The report notes features which may influence the cost of a breach, with the lowest per capita cost at $149 for organisations that employed a CISO that centralised the security function.
Key figures included that forty-three per cent of the 41 companies had a security leader, 41 per cent suffered a breach due to third party (for example, an outsourced provider), 41 per cent notified victims within 30 days or less, 39 per cent involved lost or stolen devices, 37 per cent hired a consultant to help respond to the breach, and 22 per cent reported the 2011 breach was the first experienced.
One possible problem with Ponemon's data breach figures, at least in terms of how quickly customers were notified, is that most companies don't know they have suffered for months, and often only do after law enforcement, a regulator or the public informs them.
On average companies remained unaware of a breach for five months, according to security vendor Trustwave, which based its research on post-breach investigations.
Only 16 per cent of organisations "self-detected" a breach while those that were informed by a third party on average were unaware of the breach for 173.5 days, the vendor said.
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