The Average Cost of a Data Breach in 2020

According to the 2019 Cost of Data Breach Report from Ponemon Institute and IBM Security, the latest statistics available on data breaches show the global average cost of a data breach has increased by 12% in the past five years. While the average cost of a data breach will vary across industries and countries, the general global pattern shows an overall increase in cost. This emphasizes the importance of using sophisticated tools such as managed antivirus (AV) software and vulnerability scanning software to proactively identify threats.

This article will consider figures from a range of sources to demonstrate the potential high cost of a breach and the pressing need for businesses to take measures to improve their overall security posture. Especially for managed services providers (MSPs) tasked with helping keep customers out of harm’s way, a strong effort should be made to avoid data breaches—or face potentially devastating costs. Data protection, data security, and data breach prevention should be a key part of every company’s information security policy, because the impact of a data breach can be severe, long-term, and potentially irreparable.

Types of costs associated with data breaches

In 2019, the International Association of Computer Investigative Specialists (IACIS) conducted a study called the “Economic Costs and Impacts of Business Data Breaches.” It’s a common misconception that the main cost of a data breach is caused by the immediate monetary impact on sales revenue. This IACIS study attempted to rectify this misconception by addressing the wider financial burden threatening targeted organizations. To do so, it identified three types of costs associated with a data breach:

  • Direct costs
  • Indirect costs
  • Hidden costs

Rather than simply wreaking havoc via direct costs, it’s the total sum of these costs that can lead to such significant financial disaster in the event of a data breach.


Direct costs relate to the data breach detection and notification processes. These direct costs are likely to include the immediate impact on sales revenue, typically resulting in a reduction of income. This, in turn, inevitably affects overall business productivity and operational activities. Another direct cost is the probable drop in share prices. If legal services are required to manage the litigation fallout, companies may also have to pay large sums of money for legal services. Costs are also likely to rise if investigative consultancy firms are required to identify the cause of the breach.

The final direct cost relates to the implementation of a post-breach response. This might involve establishing an emergency call center for impacted customers. A company may also need to spend money on public relations activities, which might include settlement costs and financial reimbursements to affected parties.


Indirect costs are generally attributed to a loss of customer trust, missed business opportunities, and damaged reputation. Profits are likely to decline as customers lose faith in a business and turn to competitors. Another indirect cost is the decreased likelihood of investors purchasing company stock, which will lead to restricted growth and a reduced market share. Companies may even find that talented employees choose to leave their organization as their reputation declines.

Third-party costs account for a major indirect loss and are likely to include increases in business insurance after a costly breach. Cloud service providers may also raise their prices to bolster cybersecurity in the event of a breach, which will also contribute to indirect costs.


The hidden costs of a data breach are very difficult to measure, but their impact can be severe. Some businesses may even feel the hidden costs of a data breach years after the event. For example, hidden costs can include lost business hours as employees divert their efforts to respond to the breach, rather than dedicating their time to revenue opportunities.

Moreover, future investments in technology will likely increase as the breach impacts the targeted company’s technology strategy. Companies that have experienced a breach are likely to spend more on security technology moving forward, which might be considered a hidden cost.

The average cost of a data breach: key findings

The 2019 Cost of Data Breach Report from Ponemon Institute and IBM Security is widely regarded as a reliable source of statistics on data breaches, and will serve as a key resource in this article.

A key finding of the report was that lost business, caused primarily by affected customer trust, was the biggest contributor to data breach costs. The average cost of lost business was $1.42 million, causing a 3.9% rate of churn amidst customers. In the best-case scenarios, data breaches caused less than 1% customer churn, with an average cost of $2.8 million. In the worst-case scenarios, customer churn could be more than 4%, with an average cost of $5.7 million. This is 45% higher than the average total data breach cost.

The report also found that one-third of data breach costs occur more than a year after the initial incident, according to 86 organizations surveyed across multiple years—67% of breach costs came in the first year, while 22% came in the second year, and 11% came more than two years after the initial breach.

Companies in highly regulated industries like healthcare experienced the worst long-tail costs, with breach costs rising in both the second and third years. In high data protection regulatory environments, 53% of breach costs were accrued in the first year, 32% in the second year, and 16% more than two years after the breach. It’s likely these findings are driven by new regulatory fines and the introduction of breach notification laws (e.g., GDPR).

Another of the report’s key findings was that the average breach lifecycle grew between 2018 and 2019. In 2019, the average time to identify a breach was 206 days and the average time to contain a breach was 73 days. This totaled 279 days, which was a 4.9% increase over the 2018 breach lifecycle. In general, a lifecycle lasting fewer than 200 days was an average of $1.22 million less expensive than a breach with a longer lifecycle. The faster a data breach is identified and contained, the lower the costs associated with the breach. As such, the increase in the breach lifecycle correlated to a rise in the average cost of a data breach.

According to the Cost of a Data Breach Report, criminal attacks of a malicious nature were the most common cause of breaches—and the most expensive. Since 2014, the number of breaches caused by cybercriminals has increased by 21%. Breaches of this nature take longer to identify and contain, which also contributes to higher costs.

Although malicious breaches were the most common, accidental breaches still accounted for almost half of the total data breaches studied in the report. Instances of human error, including phishing attacks and stolen devices, were responsible for roughly 25% of the studied breaches. The average loss caused by human error in these breaches was $3.5 million. System glitches which could not be tied to human activity also made up approximately 25% of breaches, with an average loss of $3.24 million.

It’s a common misconception that small businesses are less likely to be impacted by data breaches. The report found that proportionately, small businesses suffered higher breach costs. Large companies with more than 25,000 employees had an average cost of $5.11 million in the event of a breach, while smaller companies with between 500 and 1,000 employees had an average cost of $2.65 million. This means that while large companies saw a larger total cost, the approximate cost per employee was only $204—as compared to the small companies’ losses of $3,533 per employee. In other words, small companies are hit more than ten times harder than larger companies, which can have an irreparable impact on their revenue.

Protecting your MSP and your customers

As this article has demonstrated, the cost of data breaches has been on the rise in recent years, and 2020 is no exception. With direct, indirect, and hidden costs to account for, businesses must take the appropriate steps to safeguard their data. For MSPs, protecting customer data is just as important as protecting your own data. In fact, an MSP’s reputation can suffer significant damage even if a customer experiences a data breach that is in no way the MSP’s fault. Because of this, it is important that MSPs work proactively with customers to make them aware of any potential issues. To achieve this level of insight, you’ll need access to the right tools.

SolarWinds® RMM is a user-friendly and sophisticated tool designed to help you efficiently secure, maintain, and improve your customers’ IT systems. This centralized solution delivers a comprehensive suite of utilities, all from within a single dashboard. This dashboard highlights issues, helping your technicians focus their attention where it’s most needed.

SolarWinds RMM includes out-of-the-box monitoring templates, fast and safe remote access, patch management, web protection, data-breach risk intelligence, and backup capabilities. This all-in-one solution also serves as managed antivirus software and vulnerability scanning software, making it a versatile option for MSPs who want optimal, layered security against data breaches. For MSPs looking to help their customers avoid potentially debilitating data breaches, a 30-day free trial of SolarWinds RMM is available.