Insider Risk

The Cost of Insider Threats: Financial and Reputational Impact

Lucas Seewald | November 6, 2024

Understanding the Cost of Insider Threats: Financial and Reputational Implications

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In today’s interconnected world, Insider Threats pose a significant risk to organisations of all sizes. Whether through malicious intent or inadvertent actions, insiders – employees, contractors, or business partners – can cause severe damage. Understanding the costs associated with insider threats is crucial for organisations aiming to protect their assets and reputation. This post delves into the financial and reputational impacts of insider threats, illustrating why proactive measures are essential.

Financial Impact of Insider Threats

Insider threats can lead to substantial financial losses. These can be categorised into direct and indirect costs:

Direct Costs: These include theft of intellectual property, financial fraud, and sabotage. For example, in 2020, a major financial firm reported losses of over $20 million due to an insider’s fraudulent activities. Such incidents highlight the immediate financial damage an organisation can face.
Indirect Costs: These encompass expenses related to investigating the breach, implementing remediation measures, and potential legal fees. Additionally, there are costs associated with downtime and lost productivity. According to the Ponemon Institute’s Cost of Insider Risks Global Report, the total average annual cost of an insider risk in 2023 was $16.2 million per organisation, with containment and remediation being the most expensive activities at $179,209 and $125,221 per incident, respectively.

The report highlights that the cost of insider risks is the highest it has ever been, with organisations spending more time trying to contain incidents. The average number of days to contain an incident increased to 86 in 2023, up from 85 days in 2022. The number of insider incidents also rose to 7,343 in 2023, up from 6,803 in 2022 (Ekran System).

Reputational Impact of Insider Threats

The financial repercussions of insider threats are significant, but the damage to an organisation’s reputation can be even more devastating:

Loss of Customer Trust: Customers expect their data and interests to be safeguarded. An insider breach can erode trust, leading to customer attrition. For instance, MGM Resorts International faced severe operational and reputational damage following a social engineering attack by the cybercriminal group Scattered Spider. The attack led to more than 36 hours of IT downtime, nearly $10 million in one-time expenses, and an estimated $100 million loss in adjusted property earnings.
Negative Media Coverage: Insider incidents often attract media attention, casting a spotlight on the organisation’s vulnerabilities. Negative publicity can tarnish an organisation’s image, affecting relationships with stakeholders, partners, and investors.
Long-Term Brand Damage: The long-term effects on a brand’s reputation can linger, impacting future business opportunities. Companies known for poor security practices may find it challenging to attract new customers or enter into strategic partnerships.

Combined Financial and Reputational Consequences

The financial and reputational impacts of insider threats are often intertwined. For example, Zellis, a payroll provider serving the UK and Ireland, experienced significant financial and reputational damage due to a zero-day vulnerability exploitation attack on its subcontractor. The breach resulted in the leak of sensitive customer data and reputational losses, highlighting the combined effects of financial and reputational impacts (Embroker).

Preventing and Mitigating Insider Threats

Preventing and Mitigating Insider Threats

Given the severe consequences of insider threats, prevention and mitigation are paramount. Here are some best practices:

Insider Risk Programmes: Develop and maintain comprehensive insider risk programmes that outline policies, procedures, and strategies for mitigating insider threats. These programmes should be tailored to the specific needs and risks of your organisation.
Employee Training: Regular training sessions to educate employees about security policies and recognising potential threats can reduce inadvertent risks.
Technology: Utilising advanced technologies such as User and Entity Behaviour Analytics (UEBA) can help identify unusual behaviour indicative of insider threats.

Despite the growing cost and frequency of insider risks, the Ponemon report notes that 88% of organisations devoted less than 10% of their IT security budget to insider risk management. The remaining 91.8% was spent on external threats, despite more than half of organisations attributing social engineering as a leading cause of all outside attacks (Ekran System).

Annual Ponemon Cost of Insider Risk Global Report

The Ponemon Cost of Insider Risk Global Report offers invaluable insights into the financial consequences of insider risks. The 2023 report, sponsored by DTEX Systems, highlights upward trends in incident costs, frequency, and time to contain, indicating that current approaches to insider risk management are often ineffective. This report emphasises the need for a comprehensive, industry-wide approach to better understand and address insider risks.

Conclusion

Insider threats pose significant financial and reputational risks to organisations. By understanding these impacts and implementing effective prevention strategies, businesses can safeguard their assets and maintain their reputation. For comprehensive insider risk assessments and tailored mitigation strategies, contact Signpost Six today.