MarketWatch reports on a study by the cyber security firm Fortinet, which revealed 71 percent of US consumers are more worried about data breaches exposing their personal information than they were last year. And no wonder: 2014 was the unofficial year of data breaches.
US companies experienced 783 data breaches last year – a record-breaking number, according to the Identity Theft Resource Center. Plus, given the continuous headlines about the Sony hack and the lingering ramifications of Target's 2013 breach, it seems consumers are right to be wary.
But the study revealed customers are unwavering in their mistrust when it comes to others protecting their data:
- Only 31 percent of consumers fully trust their doctors.
- Only 27 percent fully trust their banks.
- Only 19 percent fully trust their employers.
- Only 18 percent fully trust their health insurance companies.
- Only 14 percent fully trust their credit card companies.
- Only 4 percent fully trust retailers.
As though you need it said, those lousy trust numbers may translate into lost business. Customers are likely going to seek out competitors who can offer assurances about how they protect third-party data.
Your Word Is Only as Good as Your Reputation
So what do these numbers mean for small-business owners? Here are three takeaways:
- You can't afford to gamble with your customers' trust. As you already know, trust plays a vital role in sales. As data security becomes more of a factor in customer buying decisions, they will go elsewhere if they think their data is at risk.
- If you suffer a data breach, your business's reputation may tank as a result. Most small businesses survive and thrive because of their reputations. They depend on word-of-mouth referrals to get new clients. But who's going to recommend their friend or colleague go to a business that just had a data breach? Plus, according to Experian's research, consumers report the only things worse than a data breach for a business's reputation are environmental disasters and reprehensible customer service.
- Rebuilding your reputation takes time and serious money. Unlike huge corporations that have the resources to breathe life back into their images, small businesses aren't so lucky. While they scramble to repair their servers and notify customers, they may not have anything left in the budget to hire a PR firm.
In short, data breaches put your reputation on the line, and for most small businesses, those stakes are too high for comfort. Let's explore what you can do to mitigate the risk of losing customers over their security misgivings.
Putting Data Security First
If you handle customer payment information, personal identification information, medical records, or other confidential third-party data, you must sharpen your data breach defenses. That may mean…
- Encrypting sensitive records. Even if your system is breached, a hacker can't do much with encrypted records without the encryption key.
- Regularly updating software. Outdated software allows hackers to exploit security vulnerabilities that a quick update would have fixed. Learn more about that in "The #1 Reason to Update Your Software Today."
- Training employees on data security. As we reported in "23% of Small Business Employees Still Making This Critical Mistake," your employees have a lot of power when it comes to protecting your network. If they accidentally fall prey to a phishing scheme, your entire network could be exposed and your customers' information may suffer for it. Make sure your employees understand what risks they face and how they can do their part to protect the business's information by sharing this article with them: "How Would Your Business Do in a Phishing Test?"
- Informing customers about your security measures. It may help build trust and distinguish you from competitors.
- Investing in Cyber Liability Insurance. If you do experience a data breach (as many small businesses have), this is the commercial insurance policy that may offer coverage for breach recovery costs. Your policy may help pay for notifying affected parties about the breach, fixing your systems, and repairing your brand through good-faith advertising.
Though your General Liability Insurance may help pay for reputational damage you cause someone else, it won't help you out when a data breach harms your business's reputation. Cyber Liability is the only policy that can lend that muscle. Learn more about that in "Why Your General Liability Insurance Doesn't Cover Data Breaches."
And contrary to popular belief, you don't have to have Scrooge McDuck kind of cash to afford a Cyber Liability policy. In fact, you may be able to add the coverage to your Business Owner's Policy to save some money.