The Hidden Costs of Cyber Incidents: Why Public Entities Can't Afford to Wait

In today's digital age, cyberattacks are a daily reality, and public entities are prime targets. While financial losses are the most visible outcome, there are several hidden costs of a cyber incident that public entities cannot ignore:

1. Loss of Public Trust
   For public entities, trust is invaluable. A cyber breach that exposes sensitive citizen data can erode trust in the organization’s ability to safeguard critical information. The aftermath? It can take years to rebuild public confidence. Reputational damage can lead to decreased citizen engagement, hesitance to adopt new services, and even legal ramifications.

2. Operational Downtime
   When a public entity suffers a cyberattack, the impact often extends beyond immediate financial losses. Service disruptions, like interruptions in water systems or healthcare services, can severely affect entire communities. Downtime can last days or even weeks, putting vulnerable citizens at risk and requiring resources to rectify.

3. Legal and Regulatory Consequences
   Cyber incidents can lead to legal actions from affected parties and the need to comply with ever-evolving regulatory frameworks. Penalties for failing to comply with data protection laws (like GDPR or state-level regulations) can be substantial, adding to the already heavy financial burden of recovery.

4. Increased Insurance Premiums
   Failing to prevent or adequately respond to a cyber incident can lead to higher insurance premiums, or worse, difficulty obtaining future coverage. Public entities that suffer frequent or large-scale attacks may find themselves viewed as higher risks, making insurance less affordable or accessible.

5. Long-Term Recovery Costs
   Beyond immediate damage control, public entities often face long-term recovery costs—upgrading systems, training staff, implementing new security protocols, and conducting public outreach. These costs can accumulate over time, far outweighing initial financial losses.

A Dangerous Gamble: Why Paying a Ransom Isn’t the Easy Way Out

It’s understandable why some public entities may consider paying a ransom when faced with the immediate threat of losing access to sensitive data or systems. Executive directors I’ve spoken with have even admitted that paying seems like the “easier route.” But taking this route often comes with serious long-term consequences. Paying a ransom doesn’t guarantee the data will be returned or that systems will be fully restored. In fact, in many cases, organizations that pay once can become repeated targets.

Moreover, paying ransoms can lead to further erosion of public trust. Citizens and stakeholders expect public entities to protect their personal identifiable information (PII), and a ransomware payment suggests that the organization wasn’t adequately prepared. This can have a significant reputational impact and create a perception that the organization is vulnerable.

Proactive Measures: The Key to Avoiding Ransomware Payments

By taking proactive steps—such as regularly updating security protocols, conducting risk assessments, and investing in cybersecurity training—public entities can reduce the likelihood of being in a position where paying a ransom seems like the only viable option. Implementing multi-factor authentication, maintaining secure backups, and using real-time threat monitoring can help protect against ransomware attacks in the first place.

Investing in cyber insurance that covers incident response services is another powerful strategy. With the right coverage, public entities can receive support to recover from an attack without having to consider paying a ransom. Insurers and cyber risk mitigation partners like KYND provide the tools to monitor and manage risks before they escalate to that level.

Public entities can’t afford to wait when it comes to getting ahead of cyber risk resilience for their portfolios. Proactively investing in robust cyber risk mitigation frameworks, regular risk assessments, and an incident response plan is crucial to mitigate not just the immediate financial impact, but also the hidden long-term costs of cyber incidents.