When many small business owners think about the costs of a cyberattack, their thoughts turn first to the obvious financial losses. And with good reason. The average cost of a data breach for Australian small businesses is $46,000, while for medium companies, it is $97,000, depending on the severity of the attack. While these numbers are daunting, SMBs often overlook the hidden costs, which can be just as, if not more so, devastating.
From reputational damage to lost productivity, these hidden costs can bring a small business to its knees.
Cyberattacks are no longer just a tech problem; they are a serious threat to business longevity. In response, forward-thinking SMBs are increasingly turning to managed service providers to implement robust security measures. For many SMBs, this proactive investment can be the difference between survival and closure in the wake of an attack.
What Are The Hidden Costs Of Cyber Attacks?
Reputational Damage
If you’ve ever been on the receiving end of a customer data breach, you know how it can instantly shatter your trust in the company. The trust your customers place in your business can be destroyed overnight with a cyberattack. Studies show that 87% of consumers will take their business elsewhere if they feel their data isn’t properly protected. Rebuilding your brand’s reputation after a breach can be an uphill battle, and businesses may face long-term losses as customers seek safer alternatives.
Take the Australian transportation and logistics giant Toll Group, for example. They suffered two cyberattacks within three months in 2020, and the company faced significant reputational damage despite their recovery efforts.
Customers expressed frustration over delays in services, including disrupted freight and parcel deliveries, and this frustration was echoed widely on social media.
Toll Group was forced to take its systems offline, significantly impacting business operations and customer relations, with long-term effects on trust and client retention. Even months after the incidents, Toll Group reported that they were still managing the fallout from the breaches, including reputational harm and ongoing efforts to regain customer confidence.
Operational Downtime and Productivity Loss
Another critical hidden cost is the loss of productivity during and after a cyberattack. It is not uncommon for businesses to experience days, weeks, or even months of downtime as they recover from a breach. On average, it takes 280 days to identify and contain a data breach, according to IBM’s 2023 Cost of a Data Breach Report.
Significant revenue losses often result here, as operations are halted, projects are delayed, and resources are diverted to deal with the fallout. Small businesses, in particular, struggle to absorb this loss, with research showing that 60% of SMEs that suffer a cyberattack go out of business within six months.
Legal and Regulatory Consequences
In Australia, the legal consequences of a cyberattack can be a massive financial burden for businesses. Under the Notifiable Data Breaches (NDB) scheme, businesses are required to notify affected individuals and the Office of the Australian Information Commissioner (OAIC) when certain types of personal information are compromised. Failing to comply with these regulations can result in fines of up to $2.1 million, which is a devastating hit for companies of any size.
However, the legal implications of a cyberattack go beyond regulatory fines. Many businesses, particularly small and medium-sized enterprises (SMEs), face litigation costs after a data breach, with affected customers or partners suing for damages related to the breach. Unfortunately, a significant number of SMEs are unprepared for these legal battles. As it stands, only about 20% of SMEs in Australia have stand-alone cyber insurance.
Without this coverage, businesses are left to shoulder the full burden of legal fees, settlements, and damages out of pocket, which can be devastating to their financial stability.
Customer Loss and the Rising Cost of Acquisition
When a business suffers a data breach, one of the immediate challenges is retaining customers. Cybersecurity statistics show that 48% of small to medium businesses are forced to raise prices following a breach to cover recovery costs, which can lead to further loss of customers.
Even your most loyal customers can be hard to keep around after a breach. Sure, studies show that loyal customers are five times more likely to forgive a mistake if you’ve built up enough trust. However, when a cyberattack compromises their personal data, that trust can evaporate quickly. Rebuilding trust doesn’t happen overnight and usually requires a significant investment in marketing, customer outreach, and new security assurances to show that their information is safe going forward. So, while loyal customers might want to stick by your side, regaining their confidence post-breach takes time, effort, and resources.
Security Investments Post-Breach
One of the most significant expenses following a breach is upgrading security systems to prevent further incidents. According to IBM’s 2024 report, the average cost of recovering from a breach was $4.88 million, covering everything from immediate recovery to long-term improvements in cybersecurity infrastructure.
Unfortunately, these investments often come too late, and the damage is already done. For many Australian businesses, especially SMEs, this kind of financial hit can be devastating if the proper preventative measures aren’t already in place.
Why Small Businesses Need Managed Service Providers (MSPs) to Prevent Cyber Attacks
If you’re a small business and haven’t yet been affected by a cyber incident, you’re in the minority and lucky.
Cyberattacks are snowballing rapidly, with over 43% of cyberattacks targeting small and medium-sized businesses (SMBs)
Now is the time to act, and one of the smartest moves you can make is to partner with a Managed Service Provider (MSP). MSPs offer expert, proactive solutions to safeguard your business, allowing you to focus on growth without worrying about cyber threats.
Here’s how partnering with an MSP can benefit your business:
1. Proactive Cybersecurity
MSPs monitor your systems 24/7, identifying vulnerabilities before they become major problems. This proactive approach helps prevent downtime, data loss, and business disruption. By applying real-time threat detection and keeping your software up to date, MSPs stop attacks before they can cause serious damage. With cyberattacks increasing in frequency and sophistication, businesses that rely on reactive security measures are often too late to prevent the damage.
2. Cost-Effective Expertise
Building an in-house IT security team can be expensive and beyond the scope of your business’s resources. MSPs give you access to top-tier cybersecurity experts without the high costs of hiring, training, and maintaining an internal team. By outsourcing IT services, you can significantly reduce operational costs while still benefiting from cutting-edge technology and best practices. Partnering with an MSP ensures you have access to this technology, offering powerful protection without the hefty price tag.
3. Regulatory Compliance Support
Data protection laws in Australia, like the Notifiable Data Breaches (NDB) scheme, have stringent requirements for businesses. MSPs help ensure your business stays compliant with these regulations by managing data encryption, monitoring, and breach reporting. They also help with international regulations, such as GDPR, if your business operates across borders, saving you from costly penalties.
4. Disaster Recovery and Business Continuity
In the unfortunate event of a cyberattack, MSPs provide disaster recovery and business continuity plans to get your operations back on track as quickly as humanly possible. They ensure your data is backed up securely, reducing downtime and loss of important information. Their support ensures that, even in the face of a breach, your business can continue functioning, minimising disruptions and maintaining customer trust.
At Helpdesk Computers, we protect your business by offering comprehensive IT solutions. Our focus is on providing robust security and visibility across your entire IT environment, including Microsoft 365 (M365). As an approved network partner of the Australian Signals Directorate (ASD), we align our services with government standards, ensuring the highest level of security for your business.
Meet with us today for a no-fuss security assessment, and receive a Free Security Report and Action Plan to enhance your current security posture with a clear roadmap for improvement.