Why Small Businesses Fail After a Cyberattack

Why Small Businesses Fail After a Cyberattack | Cyberdot

It is clear to any business owner that a cyberattack can dramatically hurt a small company’s chances of success. In fact, several years ago, some claimed that figures showed that 60 percent of small businesses within six months of a cyber-breach failed. Whether or not the specific figure cited in the statistic is accurate, it is safe to say that a highly significant portion of small to medium-sized businesses will experience failure following a cyber attack. Between a lack of resources, the high costs of an attack, and the potential for fines, there are numerous factors preventing these companies from recovering from a breach.

5 Main Reasons Why Small Businesses Fail After a Cyberattack

Lack of Cybersecurity Resources

As a general rule of thumb, small business owners simply do not have access to the same cybersecurity tools and resources as larger companies. This begins with the lack of IT staff. For maximum protection from cyberattacks, companies must have a robust IT department that can keep up with the latest threats as well as technology to mitigate those security threats.

Instead, small businesses tend to have relatively small IT departments, sometimes just a single person, that must protect multiple security components, including the network, cloud services, user identity, and device. In this situation, the IT department, even if it contains several employees, is spread too thin to effectively ensure all systems operate correctly and remain secure from cyberattacks.

Additionally, the lack of resources includes a frequent inability to provide ongoing cybersecurity training. As cybersecurity continually changes, as well as the threats and solutions it presents, ongoing training is necessary to ensure employees follow the latest recommendations. Smaller businesses are unlikely to have the resources to send staff to training or take time out of their busy days for in-house training, let alone pay for the cost of training. This leaves a company exposed to cyberattacks as employees and the business as a whole follows outdated methods that may not address current concerns.

In cases where a cyberattack does occur, small businesses lack additional related resources, such as forensics, to determine how the data breach occurred and prevent it from occurring in the future. Between the absence of forensics to pinpoint causes and the small IT team typical of small businesses, mitigation of cyberattacks becomes a serious challenge, leaving small businesses vulnerable and without the resources to even minimize a cyberattack. Without minimization of an attack, its impact is more devastating and has a greater potential to cause business failure.

Lack of Marketing Brand Recovery Assistance

Since internet usage is so widespread, it has become more challenging than ever before to successfully recover your brand image following a cyberattack. Customers expect the companies they work with to protect their information. If they are unable to do this, such as in the case of a security breach, that company’s reputation becomes tarnished, likely permanently. A breach can lead to an excessive amount of bad press, whether via traditional news sources or social media. To make matters worse, all of this negative press remains on the internet forever, always showing up in search results if a potential client searches for your brand.

Small businesses tend to lack the resources necessary to recover their brand image. While larger multinational corporations have extensive PR teams at their disposal, this is simply not within the budget of the average small or even medium business. In addition to not having an in-house PR team with sufficient experience, small businesses lack the financial resources to hire a PR firm or large legal team.

Lack of Legal Assistance

Similar to the lack of a dedicated PR team or resources to hire one, small businesses tend not to have a large legal team on staff and may not be able to afford one. Following a breach, a sizable legal team becomes necessary to counter legal issues regarding violations of customer privacy. There is also the possibility of legal cases sought against your company by individual clients for failing to protect their information in addition to government fines. A single court case can easily bankrupt a small business, leading to failure.

Fines if Regulated Under PCI, HIPAA, and GLBA

Without a legal team to help defend small businesses and protect their financial interests, these companies will likely have to pay fines if regulations such as HIPAA, GDPR, or PCI are broken. Those fines are in place to protect customer security and prevent companies from misusing personal information, but the fines alone have the potential to bankrupt a small business. Larger companies are able to absorb these fines, although they may still feel the blow, that is simply not possible for companies with fewer financial resources. HIPAA violations, for example, can range from $100 to $50,000 per violation.


The cost of a cyberattack varies, but from 2014 to 2017, the average cost of a breach was $394,000. As these are average figures, your small business may experience higher or lower costs based on the type of attack you experience.

How Cyber Insurance Helps Small Businesses Recover

Despite all the challenges you face as a small business following a cyberattack, there are some resources available to assist you, the most notable of which is cyber insurance. Cyber insurance will allow your small business to recover thanks to your ability to work with experts on your side and a proven track record of tools.

There are numerous specific ways in which cyber insurance can allow for improved recovery from a breach, including the ability to handle ransomware attacks. Big organizations can likely handle the required ransom payments, even if it does dramatically affect their bottom lines. Small businesses, however, are unlikely to have enough financial resources available. Many types of cyber insurance will cover ransomware attacks, providing peace of mind in this case.

Additionally, cyber insurance will include access to a security team with years of experience and up-to-date knowledge on the risks and how to minimize the impact of a breach. The best insurance will even include a legal team that prevents the need for small businesses to hire an independent legal team at an additional cost or waste valuable time searching for lawyers familiar with cyber security. Insurance can even include a marketing team to repair your business’s reputation in the same way an expensive PR firm would.

Small businesses face a lack of resources that put them at a severe disadvantage when it comes to preventing cyberattacks and the potential for failure due to these attacks. Don’t let these common cyber security mistakes ruin your business. Cyber insurance can mitigate the risk of an attack somewhat and provide small businesses with the resources they need to recover from a breach.

All small businesses need cyber insurance coverage, it’s time protect your business.

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