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The Stock Market Doesn’t React Well to Data Breaches

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The latest data from UK-based research firm, Comparitech, shows that organizations who suffer a data breach continue to suffer in the stock market well after.

After a data breach, there are many costs incurred by organizations attempting to clean up the mess. Investigations, communications, public relations, legal fees, and customer notifications are just some of the costs incurred. According to the most recent Cost of a Data Breach study by research firm Ponemon, the average cost per record is $233.

But one cost isn’t factored into this cost/record: the impact a data breach has on stock price. In previous years, the general consensus was that stock takes a dip upon the news of a breach, but then comes back.

However, newer data from Comparitech shows a slightly different story that organizations need to pay attention to. According to the data, the dip/recovery story is true, but the stock continuously underperforms against the NASDAQ.

Here’s the timeline post-breach:

  • +14 days – Share prices fall 2.89% on average, and underperform the NASDAQ by -4.6%
  • +1 month – Share prices rebound and catch up to NASDAQ performance
  • +1 year – Share prices grow 8.53%, but underperformed the NASDAQ by -3.7%
  • +2 years – Share price rose 17.78%, but underperformed the NASDAQ by -11.35%
  • +3 years – share price is up by 28.71% but down against the NASDAQ by -15.58%

So, while stocks will bounce back to pre-breach values, there is steam lost and ground that will never be regained.

Organizations need to prepare themselves against data breaches with a layered security strategy that protects the logical perimeter, the endpoint, and the user. Security solutions address the perimeter (read: email and the web) and endpoint, while Security Awareness Training addresses the user’s willingness to be fooled into falling for phishing scams and social engineering tactics.

Stock price is only one factor, but it’s the one that matters to publicly-traded companies. Avoiding data breaches should be your number 1 priority to avoid a stock price disaster that will continue for years.

** Optrics Inc. is an Authorized KnowBe4 partner


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https://blog.knowbe4.com/the-stock-market-doesnt-react-well-to-data-breaches

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