What Is the True Cost of a Successful Phishing Attack?

Written by Matt Adams on November 8, 2022

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With successful data breaches costing companies an average of $4.24 million per incident, businesses cannot afford the financial consequences of a successful phishing scam.

But, a successful phishing scam will cost you more than money.

Aside from the monetary repercussions, a phishing attack disrupts business operations, decreases employee productivity and can cause irreversible reputational damage.

The aftermath of a cyberattack also requires significant time, human resources and technical expertise to respond, resolve, report and remediate—which sidelines efforts and resources that should be focused on other company functions.

To put all this in perspective, let’s review all the elements that contribute to the cost of a successful phishing attack.

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The Five Impacts of a Phishing Attack

Financial Loss

We’ll start with the most obvious. Malicious actors have leveraged phishing techniques to steal money from companies ranging from a few thousand to millions of dollars.

While stolen funds represent a huge chunk of financial losses, the cost of ransomware payments, breach response costs and loss of employee productivity is significant too.

Indirect costs associated with phishing attacks also include money spent on investigations, notification and regulatory fees, productivity losses, PR campaigns and legal expertise, among others

Response/Remediation Costs

Dealing with the damage and aftermath of a phishing attack demands an even bigger price on your business’s time. After a breach, affected businesses must divert company time to:

  • Determine the full extent of the attack, as well as the compromised accounts, IT systems, data assets and affected employees
  • Conduct forensic investigations to determine the cause and attack vector used to perpetrate the scam
  • Organize incident response teams and initiate business continuity plans
  • Execute communication protocols and public relations procedures
  • Prepare required disclosures such as notice documents for regulatory agencies and data breach victims
  • Assemble a team of accounting and legal experts for audit, defense and compliance purposes
  • Seek expert legal counsel to handle potential lawsuits and regulatory fines

Productivity Losses

The resources spent on phishing attack remediation inevitably lead to the loss of employee productivity.

Organizations with an average of 9,567 employees lost 65,343 hours of productive work hours per year to phishing scams due to employees spending time dealing with the consequences of a phishing attack.

On average, businesses lose seven productive work hours annually to employees viewing and possibly responding to phishing emails. The 2021 Cost of Phishing Study shows that the loss of such productive hours cost organizations $3.2 million in 2021.

Reputational Damage

Reputational damage remains one of the most impactful and potentially irreparable costs of a successful phishing attack. Some businesses will eventually recover from the financial implications of a breach, but the damage to their reputation can last decades.

According to a Verizon research study, organizations will experience a 5% drop in stock price within six months following a breach.

Reputational damage can also have real effects on a company’s value. For instance, it can cause a shift in market sentiment and investor confidence, which can reduce the company’s valuation and share prices.

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Xoom Corporation is a prime example. A phishing attack (culminating in employee impersonation and fraudulent requests) enabled malicious actors to steal $30m. When news of the attack became public, the company also lost 17% of its valuation.

A successful phishing attack reduces consumer confidence and causes potential new customers to question the viability of a company’s offerings and its ability to safeguard confidential data.

It also results in loss of leads, customer loyalty and brand affinity. Potential customers are less likely to do business with companies that suffered a phishing attack and tend to avoid organizations with a history of phishing attacks.

Hikes in Cyber Insurance Premiums

An often overlooked and underreported cost of phishing attacks is the resulting rise in cyber insurance premiums.

The cyber insurance industry took a big hit in 2021, making cyber insurance unprofitable for many insurers. Direct payouts for ransomware, BEC/wire transfer fraud, malware, credential harvesting and legal action exceeded premiums, with insurers experiencing direct loss ratios ranging from 73 % to 114.1%.

Now, many insurers no longer take on new cyber businesses and existing customers have to pay much higher premiums for less than half the coverage they used to get.

This rise in cyber insurance premiums, the shrinking of coverage and the unwillingness of insurers to take on more cyber business will have far-reaching implications in the future.

How to Avoid Phishing Attacks Before They Start

Understanding the true cost of phishing attacks has become essential as the digital threat landscape becomes more dangerous.

In light of the unchecked rise of cybercrime, it’s well worth the effort and investment to protect your business from an expensive phishing attack.

The good news is that with security awareness training, anti-phishing solutions and the deployment of the right controls, your company can work to thwart even the most sophisticated phishing attacks and social engineering techniques.

Learn More About How to Avoid a Phishing Attack

There was a 14% increase in security breaches in the first quarter (Q1) of 2022 compared to Q1 2021, and there’s no indication that this growth will slow down.

As organizations settle long term into hybrid remote-office work models, malicious actors are leveraging the increased adoption of cloud-based services like Microsoft Office 365 to launch sophisticated and targeted phishing emails.

The widespread adoption of cloud solutions and the rise in the volume of email correspondence present cybercriminals with a myriad of opportunities for executing phishing, account takeovers and business email compromise attacks.

Consequently, threat actors will continue targeting these vectors with more sophisticated attacks in the hope of compromising business credentials.

To increase your chances of recovering from a catastrophic phishing scam, organize ongoing phishing training for employees to strengthen your company’s cybersecurity posture.

At Warren Averett Technology Group, we help companies design and structure security awareness training that is comprehensive and focused on simulating real-world scenarios. We can also help you understand more about anti-phishing solutions and how to secure your IT environment by scheduling a cybersecurity consultation.

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