Study: Stocks Fall An Average Of 5% After Data Breach

Study: Stocks Fall An Average Of 5% After Data Breach

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by: Jayson Derrick, Benzinga Staff Writer


The latest "ransomware" cyberattack is showing up across the globe from hospitals in Britain, schools in China and government networks in Russia. Assuming a public listed company is to be crippled by a similar attack, how will the stock react?

There is some data available for investors worried about the impact of cybersecurity on their investments. According to Centrify, once a company discloses a breach, their stock has fallen on average by 5 percent. But the decline could extend as much as 7 percent for companies with poor security postures. In fact, within 120 days of the breach disclosure, shares of the affected company failed to recover to their prior levels.

But on the other hand, companies with a high-security posture experienced a decline of no more than 3 percent. Also, after 120 days following the breach disclosure, their stock has not only rebounded but even gained in value from where they were trading at before the breach disclosure.

"Data breaches are very real business and bottom line concerns," said Tom Kemp, CEO of Centrify. "This new report serves as a wake-up call to every organization that security isn't just about protecting data, it's about protecting the business. It is no longer just an IT problem — it must be elevated to the C-suite and boardroom because it requires a holistic and strategic approach to protecting the whole organization."



Effect On Business

The impact to a company obviously extends beyond the stock's price. Companies that don't have strong security measures could lose up to 7 percent of customers. This statistic is backed up by consumer data, which show 31 percent of customers won't shop at businesses that were impacted by a data breach. A larger 65 percent of consumers lose trust in the company in question.

FedEx Corporation FDX confirmed Friday it was hit by this latest attack, but released few details.

It's unknown at this time how many other public companies, if any, were affected. Department of Homeland Security officials told Fox News a "limited number" of U.S. companies were hit over the weekend.


© 2017 Benzinga does not provide investment advice. All rights reserved.


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