Data breaches 'hit shares, sales and growth for years'

As Reckitt Benkiser and TNT become the latest high profile brands to admit last month’s NotPetya ransomware attack is still wreaking havoc, a new analysis claims that data breaches have a much longer term negative impact on a company’s stock market value and can slow growth for years.
This week, Reckitt – the company behind brands as diverse as Durex, Air Wick, Cillit Bang and Scholl – said sales will be lower this year as it comes to terms with the cyber attack that ravaged its systems last month.
Meanwhile FedEx-owned TNT has been forced to warn the New York stock exchange that its earnings would be “materially” down as a result of the attack.
However, an analysis by Comparitech of 24 leading companies which had been hit by data breaches in the past – including Apple, Adobe, Dun & Bradstreet, Ebay, Experian, Sony and Yahoo – shows the effects of a data breach can last for years.
Stocks on average suffered an immediate decrease in share price following a breach. In the long term, share prices continue to rise on average, but at a much slower pace. Comparitech saw a 45.6% increase in share price during three years prior to breach, and only 14.8% growth in the three years after.
Breached companies also tended to underperform the stock market – after three years the market ultimately outperforms them by a margin of over 40%.
Finance companies experienced the largest immediate decline in share price directly after a breach, but online businesses, such as ecommerce and social media companies, suffered the most in the long term.
Unsurprisingly, breaches of highly sensitive data, such as credit card and social security numbers, had a greater impact on the immediate drop in share price following a breach than companies that leaked less sensitive data, such as email addresses.
Further evidence of the long term effects of data breaches has been provided by UK broadband provider TalkTalk, which this week reported a fall in first quarter revenues as it continues to grapple with slow growth and the loss of customers following 2015’s cyber attack.
The telecoms group said its customer base has returned to growth, adding 20,000 broadband customers, but revenues fell 3.2%.