Data breaches are a serious concern for organizations, as they can have a significant impact on their clients and regulators. When a breach occurs, it is crucial for companies to respond in a robust manner to reassure all parties involved. Rishi Baviskar, the Global Head of Cyber Risk Consulting at Allianz Global Corporate & Specialty (AGCS), and Michael Daum, the Global Head of Cyber Claims at AGCS, provide insights into how organizations can ensure that their response is effective in mitigating the aftermath of a cyber incident.

The first and most important step in preparing for a data breach is to have a thorough understanding of what is likely to happen and what is at stake. Companies must be meticulously prepared with a cyber incident response organization and plan in place. This involves conducting critical scenario exercises in advance and having a trained team that clearly understands their roles and responsibilities. It is essential to practice these plans to assess their effectiveness during a real-life incident. By being prepared, companies can minimize the damage caused by a breach.

The Allianz Risk Barometer, an annual report that surveys experts from around the world, indicates that the growing number of cyber incidents remains the biggest concern for companies for the second year in a row. In the 2023 report, 34% of the respondents ranked cyber incidents as the greatest risk their companies face. Data breaches, particularly those involving ransomware attacks or standalone breaches, are becoming more prevalent. According to the respondents, a data breach is the top exposure that concerns companies the most, with 53% ranking it as their primary worry.

The risk of data breaches is further intensified by the increasing focus on data privacy and protection. IBM’s The Cost of a Data Breach Report reveals that the average cost of such incidents reached an all-time high in 2022, amounting to $4.35 million. It is expected that this figure will surpass $5 million in 2023. Regulatory pressure is also ramping up, with regulators becoming stricter towards companies with inadequate security measures. British Airways, for example, received a £183 million ($222 million) fine from the UK’s Information Commissioner’s Office (ICO) in 2019 after data on 500,000 passengers were stolen.

To effectively respond to a data breach, companies must act swiftly. Under the European General Data Protection Regulation (GDPR), companies are required to report a breach within 72 hours of becoming aware of it. The same timeframe is imposed by the ICO in the UK. In the US, reporting requirements vary based on jurisdiction, but new federal data-breach reporting legislation signed by President Biden aims to tighten the notice period to within 72 hours. In any case, once a breach occurs, companies must mobilize their breach response team and follow the critical steps outlined by regulatory bodies such as the US Federal Trade Commission (FTC) and the UK ICO.

A key aspect of responding to a breach is securing expert assistance. It has become increasingly difficult for companies to have the necessary expertise in-house to handle a cyber crisis. The dynamic nature of cybercrime makes it challenging to stay ahead of the attackers. This is where external experts can provide valuable support. Allianz Global Corporate & Specialty (AGCS) offers a network of partners that provide incident response services, including IT forensic services, forensic accounting, public relations, crisis communications, cyber extortion advice, and legal services. Having access to these specialists can help companies navigate through a crisis and limit the damage caused.

Clear communication is another crucial element in responding to a data breach. A well-planned and comprehensive communications strategy is necessary to reach all affected parties, including employees, customers, investors, business partners, and other stakeholders. Mishandling communications around a breach can have severe repercussions for a company’s reputation, including a decline in share price. Norsk Hydro, a global aluminum producer, experienced a cyber attack in 2019. Despite the severity of the breach, the company’s transparency and openness in handling the incident resulted in trust being maintained, and the share price actually increased.

To ensure effective crisis communication, companies should include a crisis communications plan as part of their cyber incident response plan. This plan should include a list of contacts, urgent tasks, and appointed individuals responsible for overseeing the communication process. It is also essential to draft and test pre-prepared statements for various scenarios to anticipate the questions and concerns that stakeholders may have.

In conclusion, data breaches are a significant cyber threat that organizations must take seriously. By being prepared with a cyber incident response organization and plan, conducting scenario exercises, and securing expert assistance, companies can effectively respond to breaches and limit the damage caused. Clear and transparent communication with stakeholders is also crucial in maintaining trust and mitigating reputational harm. In a constantly evolving cyber threat landscape, organizations must continually evaluate and enhance their response strategies to ensure they are robust in the face of cyber incidents.

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