Ransomware has become a significant threat in today’s digital landscape, with cybercriminals using it as an effective means of making money, often with a low cost and high profit margin. Victims rarely recover their stolen data in full, despite promises from the perpetrators, so most of the time paying the ransom is not a viable solution. The threat of ransomware attacks has become a growing concern for many organizations, having evolved into sophisticated strategies like combining encryption with other tactics to increase pressure on victims to pay ransom. Some of the most prominent variants include Conti, Clop, and LockBit. Double extortion attacks have become widespread, involving processes to infiltrate the victim’s network, exfiltrate sensitive data, delete backups, and encrypt data—all before ultimately demanding a ransom from the victim.
Going a step further, the triple extortion method has since emerged, bringing even more sophistication to the process, involving launching DDoS attacks against a victim’s critical infrastructure for ransom. With the development of the Ransomware-as-a Service (RaaS) model—which allows anyone to execute a ransomware attack regardless of their skill—ransomware attacks are expected to become more advanced and challenging to prevent. Given the context, protecting against these malicious attacks has become an urgent priority for organizations and individuals alike. It is therefore important to remain vigilant and implement robust security measures to mitigate the risk of falling victim to ransomware attacks.
In this blog, let’s take a closer look at the financial implications of ransomware, the hidden factors that influence their economic impact, and briefly explore the path forward to keep IT systems secure.
Components of cost
The total cost of a ransomware attack can be split into two categories:
- Tangible (both direct and indirect)
Direct tangible costs: Direct costs are the first level of expenses that an organization has to expend when it comes to dealing with a detected attack. These include costs concerning investigative activities, compensation to affected customers, legal fees, penalties, and more.
Indirect tangible costs: Indirect costs can be taken as the second level of expenses that indirectly impact the expenses an organization faces. These expenses are directly proportional to the effort put in, and the resources that are used by an organization. For example, renewing accounts, communication around status of the condition, loss from system downtime, etc.
Intangible costs: Intangible costs justifiably relate to costs that cannot be precisely quantified but are the result of lost business opportunities and reputational harm. These costs can include loss in potential customers, depreciation in future profits, and more.
Factors that impact financial loss
The costs of a ransomware attack can be substantial, not just in terms of the ransom payment itself, but also in terms of downtime, reputational damage, legal expenses, and other factors. Understanding the various financial costs that can be incurred from a ransomware attack is crucial for organizations to be able to assess and mitigate the risks associated with these types of cyber attacks.
The ransom payment is the most direct and obvious cost associated with a ransomware attack. It refers to the amount of money demanded by the attackers in exchange for the decryption key needed to unlock the encrypted data or systems. This payment is typically made in cryptocurrency, which is difficult to trace, and the amount demanded by attackers can vary widely. However, the ransom payment is not always the largest factor in the overall cost of a ransomware attack. Cybersecurity Ventures predicts cybercrime damage costs to grow by 15 percent per year over the next three years, reaching $10.5 trillion USD annually by 2025.
Experts advise against paying the ransom because it not only supports the cyber-criminal industry but also does not guarantee the full restoration of data or systems. In fact, many examples show that paying the ransom can result in a higher ransom being demanded. It is also worth noting that paying the ransom is also illegal in most cases according to the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC).
Ransomware attacks can cause significant downtime for organizations, which means less productivity and interruptions in business operations. On average, organizations experience almost three weeks of downtime when successfully targeted by ransomware. Recovering from a ransomware attack can take a long time, even for large organizations with significant resources. Organizations face challenges in both accessing their data and investigating the causes of the attack. Recovery efforts can be disjointed and painful, and many organizations perform recoveries manually, which adds to the challenges. The indirect costs of a ransomware attack, such as business interruption costs, are often higher than the direct costs.
Downtime caused by ransomware can be extremely disruptive and can affect not only businesses but also critical services such as hospitals and schools. Even if organizations can restore their data from backups and avoid paying the ransom, they still face significant business interruption losses due to downtime. While governments and security experts discourage paying ransoms, many organizations end up paying because the resulting downtime from a ransomware attack can result in enormous productivity losses and disruptions in services.
Ransomware attacks can lead to costly legal expenses for businesses. The loss of sensitive data can result in legal action from customers or regulators, particularly if there has been a breach of service level agreements (SLAs) or regulatory requirements such as HIPAA. This can result in legal fines and settlements, as seen in many high-profile cases such as the Colonial Pipeline ransomware attack. In addition to direct compensation, customers can also sue for damages related to the increased risk of identity theft or credit card fraud resulting from an attack.
Downstream firms can also sue for loss of business continuity, incident response costs, and recovery expenses resulting from the ransomware attack. The cost of these lawsuits can be substantial and may lead to expensive legal battles, settlements, or fines. Moreover, companies that fail to prevent data breaches can face large penalties from authorities. Privacy violations, negligence, service downtime, and loss of business can also result in expensive lawsuits, fines, and settlements.
Ransomware attacks can be highly destructive and visible, leaving victims with no choice but to make it known to the public that they have been breached. This public admission can often result in outcry and disapproval from customers, investors, and other stakeholders. While the data can be restored, it’s not always so easy to restore public trust. This can have adverse effects on retaining existing clients, generating future business, and even negatively affect the company’s stock prices.
Forbes Insights found that 46% of organizations suffered damage to their reputations and brand value as a result of cybersecurity breaches. A ransomware attack can damage a company’s brand and reputation, making it difficult to attract new customers and business partners. Research from the National Cyber Security Alliance indicates that 60% of small and medium-sized businesses (SMBs) go out of business within six months of falling victim to a data breach or cyber attack. 86% of private sector victims claimed they had lost business and/or revenue as a result of the attack. Thus, the consequences of a ransomware attack can be severe and long-lasting, affecting a company’s reputation, growth potential, and mere survival.
To fully account for the costs associated with ransomware attacks, it is necessary to include the costs of preventing future incidents, besides expenses involved in responding to an attack. To ensure preparedness and incident response, organizations should include infrastructure costs that reduce the risk of a ransomware attack, backup and labor costs, and the premiums for cybersecurity insurance. It’s crucial not to underestimate the expenses of securing the network from future attacks. Even if paying a ransom results in the release of infected machines, there is no guarantee that the attackers will not retain access to the enterprise.
Once the ransom is paid, there is no assurance that the attackers will disinfect the machines, delete pilfered data, or give up their access to the victim’s network. The possibility of the attackers implanting more malware on the systems or selling or transferring their illicit access to another criminal group remains. To prevent further attacks, organizations must upgrade their infrastructure and implement better controls. Incident response and IT upgrade costs necessary to secure the network from further attack are often hidden costs that victims fail to consider.
Wrapping it up
As the fastest-growing cybercrime category, it is crucial to take preventative measures by keeping systems up-to-date, implementing strong password policies, and educating employees on safe browsing practices. While most organizations are concerned about ransomware, they may lack the resources to keep up with the latest threats. Therefore, being proactive and having a plan in place can help reduce the impact of a ransomware attack. Proper data security and protection can prevent attacks and help recover quickly to avoid the high cost that comes with any ransomware attack. Get started today—be proactive by quickly identifying and responding to ransomware attacks, minimizing the damage and reducing the cost of recovery.