Operating a business is complicated, even in the most straightforward scenario. But in the last few decades of rapid changes in technology, cybersecurity has added a level of concern for business leaders.
Financial data is an increasingly popular target for data theft, with three times as many cyberattacks conducted in the first quarter of 2021 than in 2019. Therefore, companies must put effective financial data security strategies early on.
This article will explore the importance of financial data security and what actions you can take to protect your financial information, so stay tuned until the end.
What is Financial Data Security?
Financial data security encompasses the process of securing sensitive data from unauthorised access or corruption and ensuring that your customers' and your business’ private details are well looked after.
The protection of financial data security takes many forms, from IT technology to rules and regulations, and even in the most well-oiled system, there are always strategies that businesses can implement to develop their safeguarding further.
The Negative Consequences of a Financial Data Breach
Financial data breaches can bring significant repercussions to any organisation. This is especially the case for small and medium-sized businesses since 60% of companies report being exposed to cybersecurity attacks. Indeed, cyberattacks can severely impact operations, resulting in various undesirable outcomes.
Penalties and Ramifications
Following a data breach, financial penalties can bring a significant blow to any business. Failure to comply with rules and regulations can leave organisations open to fines of up to 4% of their annual global turnover based on the severity or duration of the breach, not counting lost income in downtime or the cost of legal support.
Individuals can also claim compensation for potential damages caused by a breach. Although cybersecurity insurance can provide a solution to some of these risks, the financial setback can remain significant for a long time.
Perhaps one of the most significant setbacks a company can have following a financial data breach is loss of reputation. In the case of SMEs, reputational risk can significantly affect an organisation’s ability to stay afloat. If the target audience is local, compromised data can mean a significant loss of trust and, therefore, revenue in the long term.
Reports suggest that 65% of companies suffer reputational damage due to data misuse. Once a breach occurs, this will become publicly available information on the internet for all of your prospective customers to see. Although you can spend a significant amount of time on damage control seeking to remedy the situation, online search engines and social media platforms will keep a record of past data misuse for many years to come.
A potential data breach can lead to a disruption in day-to-day operations. After a cyberattack, company systems need to be thoroughly investigated, and new security structures need to be put in place.
Depending on the nature of the data breach, companies can lose a significant amount of business-critical data that can be difficult to recover. In many cases, these crisis managing processes can cause organisations to pause activity for months or, in severe cases, close down for good.
What Steps Can You Take To Ensure the Safety of Your Financial Data?
The threat of financial data breaches is always lingering; however, there are proactive steps that your business can take to prevent or mitigate these threats.
Know Your Threat and Be Ready to Act
A data breach can come in many shapes and forms, from internal mistakes and misuse to external threats such as phishing scams or hacking.
With the average cost of data breaches increasing by 10.3% in 2021, companies must develop an in-depth understanding of their weak points and implement appropriate safety measures. It is vital to have a robust incident response plan in place that you can apply in case of a crisis to keep service up and running with minimum interruptions.
Embrace The Cloud
Data backup is a critical element of any financial data security strategy. Besides cybersecurity measures, backing up your data can also be a great tool to avoid accidental damage and unanticipated disasters.
As we previously explored, cloud accounting can positively impact an organisation, improving areas such as cash flow management, and giving a more accurate picture of overall financial status. Hence, leveraging cloud technology can help businesses with continuity and prevent data loss.
In addition, from a data protection perspective, cloud computing can help to proactively identify and mitigate risks and better govern access across the organisation. Cloud providers are equipped with multi-layer security strategies and high-level data encryption policies to control threats effectively.
Source Specialised Expertise
Handling financial data requires a specific skill set, especially when accounting expertise is not just about the numbers but also about understanding the technology and proposing the best solutions to businesses.
Thus, in order to limit the exposure to data breaches, it is essential to invest in staff training and robust software. Understandably, the cost of training and tool kits can quickly add up; hence, it can be worthwhile to consult an external financial service provider who can advise on the best software for maximum financial security and ways to protect your financial information.
Stay on Top of Your Software Applications
When it comes to cybersecurity, firewalls and anti-virus systems are non-negotiable. Companies should invest in reputable software that performs regular scans across their network to ensure financial data protection. In addition, it is essential to keep all internal applications up to date with the latest patches, especially regarding accounting software and client management systems.
The Final Word
Data misuse is an increasingly important topic across all sectors. With 72% of small and medium-sized businesses experiencing a cyberattack attempt in the past 12 months, it is evident that an effective financial data protection strategy should be at the top of the minds of all business leaders.
At Sanay, we can help companies navigate the world of financial data, minimise financial data risks and implement the most effective safeguarding for your financial system.