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Report: Healthcare Data Breach Costs Remain Highest Among Industries

June 16, 2016
by Heather Landi
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The average global cost of a data breach in the healthcare industry is $355 per stolen record, more than twice the average global cost across all industries, according to the Ponemon 2016 Cost of Data Breach study.

The study, sponsored by IBM and conducted by the Ponemon Institute, surveyed 383 organizations across 16 industries and in 12 different countries to quantify the economic impact of data breaches and examine cost trends over time in order to show the costs associated with data breach incidents.

The study found that the average cost of a data breach for companies surveyed has grown to $4 million, representing a 29 percent increase since 2013, and the average cost paid for each lost or stolen record containing sensitive and confidential information increased from $154 in 2015 to $158 in this year’s study. The average per capita cost of a data breach has increased 15 percent since 2013.

According to Larry Ponemon, chairman and founder of the Ponemon Institute, in a blog post about the study, data breaches are now a consistent cost of doing business in the cybercrime era. “The evidence showed that this is a permanent risk organizations need to be prepared to deal with. It needs to be incorporated into data protection strategies.”

Since the Ponemon Institute first began studying data breaches, the cost of a data breach has not fluctuated significantly, which suggests that it is now a permanent cost organizations have to address.

According to the report, highly regulated industries such as healthcare and financial services have the most costly breaches because of fines and the higher-than-average rate of lost business and customers. With healthcare, the average cost of a data breach at $355 per record is a full $100 more than the average cost per record in 2013.

After healthcare, the second highest average cost of data breach per lost or stolen record was education, with an average cost of $246, followed by financial with an average cost of $221. The lowest average cost per stolen or lost record were found in the transportation industry ($129), research ($112) and public sector ($80).

Another major finding of the study was that the longer it takes an organization to detect and contain a data breach, the more costly it becomes to resolve. “While breaches that were identified in less than 100 days cost companies an average of $3.23 million, breaches that were found after the 100 day mark cost over $1 million more on average ($4.38 million),” the study authors wrote.

The average time to identify a breach in the study was estimated at 201 days, and the average time to contain a breach was estimated at 70 days.

According to the study authors, leveraging an incident response team was the single biggest factor associated with reducing the cost of a data breach—saving companies nearly $400,000 on average (or $16 per record). In fact, response activities like incident forensics, communications, legal expenditures and regulatory mandates account for 59 percent of the cost of a data breach. Part of these high costs may be linked to the fact that 70 percent of U.S. security executives report they don't have incident response plans in place.

The study found that companies that had predefined Business Continuity Management (BCM) processes in place found and contained breaches more quickly, discovering breaches 52 days earlier and containing them 36 days faster than companies without BCM.

And, over the years, detection and escalation costs have increased, according to the Ponemon Institute’s research. This suggests, Ponemon said, that investments are being made in technologies and in-house expertise to reduce the time to detect and contain a threat.

Most data breaches continue to be caused by criminal and malicious attacks, according to the report. These breaches also take the most time to detect and contain. As a result, they have the highest cost per record.

The study also notes that improvements in data governance initiatives will reduce the cost of data breach. The study authors recommend that a number of steps can be taken—incident response plans, the appointment of a CISO, employee training and awareness programs and a business continuity management strategy—that can help to reduce the cost of a data breach incident.

“Investments in certain data loss prevention controls and activities such as encryption and endpoint security solutions are important for preventing data breaches. This year’s study revealed a reduction in cost when companies participated in threat sharing activities and deployed data loss prevention technologies,” the study authors stated.

In addition, the study outlined a number of effective steps organizations must take in the process of responding to a data breach:

  • Work with IT or outside security experts to quickly identify the source of the breach and stop any more data leakage
  • Disclose the breach to the appropriate government/regulatory officials, meeting specific deadlines to avoid potential fines
  • Communicate the breach with customers, partners, and stakeholders 
  • Set up any necessary hotline support and credit monitoring services for affected customers

“Each one of these steps takes countless hours of commitment from staff members, taking time away from their normal responsibilities and wasting valuable human resources to the business,” the study authors stated.

And, the study suggests that incident response teams can expedite and streamline the process of responding to a breach. Incident response teams typically address all aspects of the security operations and response lifecycle, from helping resolve the incident, to satisfying key industry concerns and regulatory mandates. Additionally, incident response technologies can automate this process to further speed efficiency and response time.


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