POINT: The Viral Spiral of the Data Breach

Computer break-ins are real and costing U.S. businesses billions of dollars a year, even robbing us of our identities.

By CYRIL TUOHY, managing editor of Risk & Insurance®.

We are at war with malicious gangs of roving infections that pollute corporate servers and maim local desktop computers. There's no relief from botnets, Trojan horses, worms, and all manner of nasty-sounding computer infections. At worst, small businesses go bankrupt, huge corporations stand to lose tens of millions in shareholder value, and even the world's most powerful governments -- their militaries included--are vulnerable.

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Individual users have been put through hell, as they try to salvage their identities erased in a rampage through their hard drive. Corporations of all kinds, in all industry sectors are at risk. The risk to their reputations is huge, and the blizzard of liability lawsuits that follow are costly, and drain resources from more productive pursuits. From behemoths in the entertainment industry to financial services companies with huge credit-card databases, to midsize manufacturing companies with proprietary processes, to hospitals with confidential healthcare data, to high technology start-ups sensitive to the vulnerabilities of the Internet, no company is immune.

From professional services firms with nimble telecommuting infrastructures, to quick-acting consulting firms with offices around the world, to small local bakeries and mom-and-pop retailers, they, too, are vulnerable.

Everywhere, companies are at risk, from the corporate giants towering over the canyons of Wall Street, to the office park in suburban Kansas, to the gift shop at the entrance of Glacier National Park, to the rock climber using a personal digital assistant at the top of Yosemite's El Capitan.

In one of the latest incidents, a data breach in August at Purdue University put 7,093 former students and faculty members' Social Security numbers at risk of getting into the wrong hands, according to a data loss database maintained by the Open Security Foundation. In January 2009, hackers were able to breach Heartland Payment Systems' computer defenses. The incident also affected Tower Federal Credit Union and Beverly National Bank. As many as 130 million records were compromised, according to the foundation.

Insurance carriers have been relatively quick to respond, and several of them now have policies offered as standalone products within their professional risk offerings. Like insurance, though, these policies are only designed to make victims whole again, once the damage already has been done.

The risk of data theft is real and anyone who tells you to think otherwise is infected with the same virus that has wiped clean his or her hard drive.

October 1, 2011

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