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Wednesday, 10 October 2012

What does data theft look like?

When a business owner experiences theft of a valuable data asset it is often difficult for others to appreciate the actual effect on the business. We all think of data as bits of information in a computer so understanding what the effect of theft looks like can be difficult to picture.

We have taken an actual example of revenue, for a local Sydney Business and graphed the outcomes over 10 years including the effect of the theft of a critical data asset. The graph in the pdf below indicates when the business started in July 2003, the year on year growth and the actual and projected revenue through to June 2013.

When data theft occurs usually the effect on revenue is instant therefore business expenses have to be reduced immediately in an attempt to salvage the business. That usually means staff have to be let go and various other expenses reduced to match the remaining inflows. However expense items like rent, equipment leasing, power, phones etc. remain unchanged as do other critical cost areas depending on the business. This will invariably mean the forecast profits are downgraded to losses.

One of the expense areas most effected is marketing which has a knock on effect to all other areas of the business. Advertising is usually incrementally tied to revenue and profits, the more of both the more can be spent on marketing the business. The immediate impact on revenue, data theft has, means less dollars to market the business. In most service type businesses getting back to where the business was before the theft will take years let alone getting to where the business would have been, if the theft did not occur at all.

Example: Turnover at $700,000.00 achieved after 10 years with average year on year growth at 35%. Data theft reduced turnover for the following full year (after theft) to $152,000.00. If similar historic growth could be maintained it will take 6 years to get back to where the business was before the theft and 12 years to get to where it would have been had the business been able to continue on its original business plan.

In this example accounting for profits, damages and lost value at exit would require forensic accounting however it is well into 6 figures.

Employees stealing critical data from their employer effects everybody in the business. In addition to internal cost cutting, invariably arrangements have to made with creditors to keep the business going long enough for cost adjustments to take effect.

Data theft by employees is such an insidious crime it is actually negligent that State and Federal Governments have not introduced legislation that will allow Police to charge callous individuals who would be behind bars if they embezzled the equivalent value in cash.

Open the pdf here.