Fourth Annual Study Shows Significant Increase in Cost of Lost Business Americans Continue to Stay Attentive to the Loss or Theft of Personal Information

Menlo Park, CA and Traverse City – Press Release

PGP Corporation, a global leader in enterprise data protection, and the Ponemon Institute, a privacy and information management research firm, today announced results of the fourth annual U.S. Cost of a Data Breach Study. According to the study which examined 43 organizations across 17 different industry sectors, data breach incidents cost U.S. companies $202 per compromised customer record in 2008, compared to $197 in 2007.

Editor's Note: That being the case, and assuming that the Heartland Breach compromised 100 million cardholders, I am shocked in amazement that their stock is hovering around the 8 or 9 dollars.

Within that number, the largest cost increase in 2008 concerns lost business created by abnormal churn, meaning turnover of customers. Since the study’s inception in 2005, this cost component has grown by more than $64 on a per victim basis, nearly a 40% increase.

The annual U.S. Cost of Data Breach Study tracks a wide range of cost factors, including expensive outlays for detection, escalation, notification and response along with legal, investigative and administrative expenses, customer defections, opportunity loss, reputation management, and costs associated with customer support such as information hotlines and credit monitoring subscriptions. Other key findings from the study include the following:

• Average total per-incident costs in 2008 were $6.65 million, compared to an average per-incident cost of $6.3 million in 2007.
• Healthcare and financial services companies experienced the highest churn rate – 6.5 percent and 5.5 percent respectively, on a total average of 3.6 percent, which reflect the sensitivity of the data collected and the customer expectation that information will be protected.
• Third-party organizations accounted for more than 44 percent of all cases in the 2008 study and are also the most costly form of data breaches due to additional investigation and consulting fees.
• More than 84 percent of 2008 cases involved organizations that had had more than one data breach in 2008 - meaning that companies are becoming more experienced in managing breaches over time.
• More than 88% of all cases in this year’s study involved insider negligence.
• More than half of respondents believe that training and awareness programs assist in preventing future breaches and 44 percent have expanded their use of encryption.
• The most significant cost decrease was seen in activities relating to post-breach response, which indicates that organizations are becoming more cost effective in managing data breaches.

"After four years of conducting this study, one thing remains constant, U.S. businesses continue to pay dearly for having a data breach,” said Dr. Larry Ponemon, chairman and founder of The Ponemon Institute. "As costs only continue to rise, companies must remain on guard or face losing valuable customers in this unpredictable economy."

The study, sponsored by PGP Corporation and independently conducted by the Ponemon Institute, examines the financial consequences of data breaches involving consumers’ personally identifiable information. The study uses objective methods for quantifying specific activities that result in direct, indirect and opportunity costs from the loss or theft of personal information, thus requiring notification to breach victims as required by law or policy.

“In this current economic climate, U.S. businesses can’t afford to give their customers any reason to go elsewhere," said Phillip Dunkelberger, president and CEO of PGP Corporation. “This study continues to show that the results of a data breach can seriously wound a company’s bottom line and reputation. This begs the question, when are organizations going to get proactive about protecting their critical data.”

The U.S. Cost of a Data Breach Study was derived from a detailed analysis of 43 data breach cases with a range of 4,200 to 113,000 records that were affected. The study found that there is a positive correlation between the number of records lost and the cost of an incident. Companies analyzed were from 17 different industries, including financial, retail, healthcare, services, education, technology, manufacturing, transportation, consumer, hotels and leisure, entertainment, marketing, pharmaceutical, communications, research, energy and defense. Copies of the study are available via this weblink: www.encryptionreports.com

About the Ponemon Institute
The Ponemon Institute© is dedicated to advancing responsible information and privacy management practices in business and government. To achieve this objective, the Institute conducts independent research, educates leaders from the private and public sectors and verifies the privacy and data protection practices of organizations in a variety of industries.

About PGP Corporation
PGP Corporation is a global leader in email and data encryption software for enterprise data protection. Based on a unified key management and policy infrastructure, the PGP® Encryption Platform offers the broadest set of integrated applications for enterprise data security. PGP® platform-enabled applications allow organizations to meet current needs and expand as security requirements evolve for email, laptops, desktops, instant messaging, smartphones, network storage, file transfers, automated processes, and backups.

PGP® solutions are used by more than 80,000 enterprises, businesses, and governments worldwide, including 95 percent of the Fortune® 100, 75 percent of the Fortune® Global 100, 87 percent of the German DAX Index, and 51 percent of the U.K. FTSE 100 Index. As a result, PGP Corporation has earned a global reputation for innovative, standards-based, and trusted solutions. PGP solutions help protect confidential information, secure customer data, achieve regulatory and audit compliance, and safeguard companies’ brands and reputations. Contact PGP Corporation at www.pgp.com

Media & Analyst Contacts for PGP Corporation:
North America:
Christina Grenier
PGP Corporation
+1 650 543 3697
cgrenier@pgp.com

Tom Rice
Merritt Group
+1 703 856 2218
rice@merrittgrp.com

Media Contact for Ponemon Institute:
Mike Spinney
Ponemon Institute
+ 978 597 0342
mspinney@ponemon.org