SMBs Unprepared For Security Breaches

The security needs for a small or midsize business (SMB) can be quite spartan: a firewall, antivirus software, regular updates, and basic employee training.

Yet many SMBs fail to take even those steps and lack the knowledge to safely handle the sensitive data in their care. Some 55 percent have had a data breach, and of those, more than half have had multiple incidents in the past year, according to a survey published last week by the Ponemon Institute.

While state laws requiring the disclosure of breaches have led to the exposure of massive incidents, only a third of compromised SMBs notified the victims of a breach, the survey found. Firms are putting themselves in danger by not focusing on the security of their data, says Eric Cernak, vice president of specialty insurer Hartford Steam Boiler, which commissioned the study.

"The first thing that many small businesses need to realize is that they have an exposure," he says. "They need to look around their organization and see what information they maintain and how long they maintain it."

Employee and contractor negligence caused more than half of breach incidents, while a lost or stolen device accounted for 42 percent of cases, according to the survey of more than 1,200 managers and information-technology specialists in SMB firms.

Despite the threat that data loss poses to their businesses, 70 percent of respondents thought their companies would have difficulty detecting a breach.

"Small businesses are less prepared for these kinds of things," says Paul Wood, cybersecurity intelligence manager for security firm Symantec. "But if they don't report a breach, there are legal implications that can get them into hot water."

Many small businesses are unprepared to deal with breaches because the Internet is secondary to their businesses. In a report published in November, Symantec found that 80 percent of the data breaches reported in 2012 happened to organizations that did not rely on the Internet as a core piece of their businesses.

[Accepting the risks that come with relying solely on antivirus not only puts data at risk, but also could kill future earning potential. See What Antivirus Shortcomings Mean For SMBs.]

Employee and contractor negligence, which could include Internet-enabled issues, topped the list in the Ponemon study. The next three most common issues included lost or stolen laptops and devices, procedural mistakes, and lost or stolen paper files.

Third-party service providers also played a role in breaches, with two of every 10 respondents blaming a service provider for their leaked data.

From Web hosting and outsourcing IT to employee benefits and payment processing, SMBs use a large number of third-party providers that have access to their sensitive data. Almost 60 percent of companies give employee information to third-party suppliers, and 56 percent of firms give similarly sensitive customer information to their providers. Yet few use contracts to make third-party providers pay the costs of a data breach.

Many SMBs do not have the expertise to deal with the issues. For those companies, a consultant or managed security service provider can put SMBs on the right road to locking down their data.

Hartford Steam Boiler (HSB), a subsidiary of insurance firm Munich Re, argues that insurance can not only help SMBs offset some of their risk, but also educate firms in good practices. The company offers data-compromise coverage that includes initial consultations to establish good security practices.

It's an old model, Cernak says. In 1866, when exploding steam boilers were a common occurrence, HSB engineered a better boiler and also offered insurance to businesses. The approach works for today's companies worried about digital threats as well, he says.

"Back in 1866, boiler insurance was the cybercoverage of its day," he says.

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