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Stormy Weather
Customer confidence is at risk when a data breach occurs.
When TJX Corp. reported lower profits for the first quarter of 2007, CEO and president Carol Meyrowitz said "comparable store sales results in April were below our expectations, which we attribute to the unseasonably cold and wet weather across most regions of the country during the first half of the month."
Was she actually blaming April showers--not the biggest credit-card number heist in history--for disappointing sales at TJX discount stores T.J. Maxx, Marshalls, Bob's Stores and others?
But Meyrowitz's comment was not far-fetched.
"It's almost impossible to correlate a security breach to retail sales," says John Pescatore, a vice president at Gartner. Weather patterns, layoffs, expansion, fuel costs and yes, well-publicized security breaches--all of these affect a company's bottom line to varying degrees.
Indeed, it's safe to say that some of TJX's longtime customers will continue to shop at its stores. Yet others will view T.J. Maxx with suspicion for months or years to come, undermining decades worth of efforts to promote TJX's brands.
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Quantifying Trust Trying to wrap a dollar figure around brand value is an extremely daunting task as it is difficult to put a dollar number on trust. Still, the Ponemon Institute estimates that the cost of a data breacch is $182 per compromised record. This includes direct and indirect costs.
Crisis Communications If your company experiences a data breach, act quickly. First apologize, then take responsibility for the breach and its fallout. Finally, outline concrete steps to protect customers in the future. Many organizations wait too long to react to the crisis.
New Threats Monitor your domain names and be on the lookout for new schemes such as domain kiting. These types of ploys can have an adverse effect on your brand image.
Incident Response Create an incident response plan immediately. Get feedback from various departments within your organization including public relations, legal and human resources, among others. Ensure that a C-level executive is also a stakeholder in the plan in the event that you need to use it.
Take Stock Some of the most egregious data breaches--ChoicePoint. Boeing and Bank of America--have bounced back from the negative PR. The companies' stock today is trading higher than it was before the breach.
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