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How much do security breaches cost anyway?

TJX case sheds light on 'inexact' science

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Information security breaches cost anywhere between $90 to $305 per lost record, according to a new study by Forrester Research.

Forrester bases its figures, which it has the good grace to say are difficult to be sure about, on a survey of 28 companies who had some sort of data breach. The estimate covers the cost of legal fees, call centers costs, lost employee productivity, regulatory fines, loss of investor confidence and customer losses. Senior analyst Khalid Kark describes its figures from costs as an "educated estimate". He admitted the auditing costs associated with security breaches is an inexact science (much like working out the damages resulting from malware infestations, we'd add).

Information security breach laws passed by many US states over the last two years or so have lead to multiple reports of data loses which might have gone unreported in the past. Last month, in the most high profile breach to date, TJX admitted details of up to 45.6m credit card numbers left exposed by a security breach to its database systems that lasted for over 17 months.

Excluding details of 30m expired credit cards that would be more difficult to use fraudulently, the lower end of Forrester's estimates yields a figure of $1.35bn for TJX's losses. Kark told the Boston Glode that $1.35bn was a "realistic minimum estimate" of TJX's costs over several years, though he admitted it might be lower.

A similar study by Michigan-based data privacy researcher Larry Ponemon estimated breaches cost $182 per compromised record. None of the 31 incidents cost the affected firm more than $22m. Ponemon told the Boston Globe that remediation costs, such as improving security, cost the same no matter how big the breach. TJX costs would only exceed $1bn if widespread incidents of identity theft associated with the breach forced the retail giant to slash costs and mount a costly marketing drive in a bid to woo punters back into stores.

Both the Ponemon and Forrester estimates represent a fraction of the $5bn+ loss guesstimates we've heard bandied about by security firms, with a clear axe to grind this week. TJX said it had spent just $5m up to the end of January on costs such as technical and legal fees and customer communications related to the breach. Tellingly investors haven't marked down its share price significantly in the expectation of major losses down the road.

TJX spokeswoman Sherry Lang described the $1bn cost estimates as "pure speculation by people who are outside the company". Many variables are involved in costs associated with breaches making comparisons difficult, she added. ®

The smart choice: opportunity from uncertainty

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