The Consequences of Data Loss and Recovery for Businesses

Data loss is one of the most significant security challenges that businesses face. Lost data isn’t just an annoyance but a potentially large legal and financial issue as well. Catastrophic threats such as malware/virus attacks, or disasters such as server crashes, data corruption, or device theft can leave a business vulnerable to lawsuits and penalties.  There are three major spheres that can be impacted negatively by data loss. These include damage to the brand’s reputation, legal ramifications (if there were violations of privacy regulations), and financial ramifications should resolution call for payment to vulnerable parties. Let’s explore these three areas and see how your organization could benefit from IT management for compliance and security through Spectra Networks. 

data loss

Damage to Brand Reputation

When data is lost at an organization there is almost always a backlash from clients, vendors, employees, and the public at large. Stakeholders may demand to know how their data was affected by the data loss and whether it fell into the hands of a malicious third party possibly causing more damage than initially projected. This backlash can do considerable damage to an organization’s reputation and future success. A study from Forbes Insights found that 46 percent of organizations suffered reputational damage after a data breach, while 19 percent suffered damages due to a third-party security breach. These reputational damages can lead to a loss in sales, customers, and future revenue.  Additionally, Unitrends reports that “7 out of 10 small firms that experience a major data loss go out of business within a year.” (DTI/Price Waterhouse Coopers) This statistic takes into account financial consequences, reputational consequences, and legal ramifications after a data loss has occurred. 

Legal Ramifications 

Federal and state laws regulate complicated data privacy compliance laws. Businesses have a legal obligation to protect sensitive and personal data from falling into the wrong hands. This is especially true in the legal and healthcare fields where compliance is strictly regulated.  Organizations that lose or mishandle data can face lawsuits from customers and regulatory compliance penalties. This not only leads to huge amounts of lost money in fines but also impacts a company’s brand reputation and future sales with publications of legal battles dealing with the lost data.

man thinking about money

Financial Consequences 

The fear of data loss is not just regarding reputational and legal issues but also the almighty dollar.  Data loss can cost anywhere from a few thousand dollars to more than $15 million, depending on the volume of data. On average, small instances of data loss (fewer than 100 files) cost businesses between $18,000 to $35,000, while large-scale incidents can cost up to $15.6 million, according to a study by Verizon.


Knowing these three key consequences of data loss means that organizations should take action prior to an incident to layer their security and have a rock-solid disaster recovery plan as well as backup plans and continuity plans. Talk to our team here at Spectra Networks about our security and compliance services as well as our disaster recovery and backup options.