Key Takeaways
- Costly Business Interruption: The most severe costs of non-compliance stem from massive business disruptions and loss of productivity, not just regulatory fines and penalties.
- Compliance as Investment: Proactive compliance reporting and maintenance costs (averaging around $5.47 million) are significantly lower than the average cost of a major non-compliance event ($14.82 million).
- Financial Risk Mitigation: Investing in strong internal controls and centralized data governance is a critical strategy to reduce legal liabilities, safeguard against reputation damage, and avoid steep regulatory penalties.
The Cost of Poor Cybersecurity Management
The costs of poor cybersecurity compliance management are much more than those associated with compliance reporting and process optimization. If your organization is hesitant about the cost of implementing a comprehensive compliance program, compare that to the rising cost of non-compliance.
- The two biggest contributing factors for the cost of non-compliance are business disruptions and productivity loss. Other factors include revenue loss, fines, and penalties. The average cost an organization may experience for a noncompliance event has increased 45% from 2011 to an average of $14.82 million, which can vary by industry. (Source)
- Since the beginning of the pandemic in 2020, the cost of financial crime compliance has risen by double digits, with U.S. financial institutions noting the largest change. In 2022, for example, the projected cost of financial crime compliance was estimated to be about $274.1 billion. (Source)
- Payment brands can assess a monthly fine of $5,000 to $100,000 per month on an acquiring bank, which will likely be passed down to the merchant. Being out of compliance risks the termination of the relationship, which can be disastrous for smaller organizations. (Source)
- The average large company utilizes over 175 applications to operate their business. Improper visibility into these systems can lead to the opportunity for breaches or other non-compliance events. The cost of properly maintaining necessary controls or systems can add up over time, but is necessary for a strong security posture. (Source)
- Compliance costs, or the costs of maintaining proper compliance standards on an ongoing basis, can cost about $5.47 million for a company. Compare to the average $14.82 million in productivity loss, revenue loss, and fines that a non-compliance event can incur. (Source)
- $3 million can be saved by properly centralized data governance. (Source)
Speak to a Compliance Specialist.
The Benefits of Investing in Compliance
From loss of revenue due to business disruption, to productivity issues, to fines, the cost of non-compliance can add up quickly. Investing in proper controls and monitoring for cybersecurity compliance from the beginning. Compliance assessments are just one tool your organization can use to reduce the negative consequences of non-compliance.
The experienced cybersecurity compliance assessment team at Auditwerx is here to support your organization. Experience the Auditwerx difference – contact us today.
FAQs
What is the average financial consequence for an organization experiencing a non-compliance event?
The average cost an organization may incur from a single non-compliance event has been estimated at $14.82 million. This figure has risen significantly over the last decade, emphasizing the financial risk of weak security posture.
What are the two largest contributing factors to the total cost of non-compliance?
The two biggest factors driving this substantial financial cost are business disruptions and subsequent productivity loss. These operational setbacks often have a much higher overall financial impact than the direct cost of fines or penalties alone.
How does non-compliance specifically impact organizations that handle payment card data?
Organizations processing payment cards face severe financial risk. Non-adherence to the PCI DSS requirements can result in monthly fines ranging from $5,000 to $100,000 levied by payment brands, which may ultimately lead to the termination of the merchant relationship
How does investing in data governance controls directly benefit an organization financially?
Centralizing your data governance and internal controls leads to better system visibility and efficiency. Organizations that properly centralize their data management have reported saving an average of $3 million by reducing redundancy and streamlining operations.
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