Effects of Cyber-Crime on Business Productivity

In economic terms, business productivity refers to the ratio between the value of the factors of production and the value of the products produced. Simply, it is a measure of how capital, labor, land, and entrepreneurship change into goods and services. Business productivity is one measure of business growth and profitability. Cyber-crime attacks affect business productivity in a number of ways. They affect some of the aspects that promote business productivity thus leading to change, which in most cases is negative. Business productivity falls due to the following:

Financial Damage

As I mentioned earlier, cyber-crime attacks happen both for monetary and non-monetary reasons. However, the monetary reasons by far seem to be the key reasons. In the light of this, financial damage is accounts for the greatest damage inflicted by cyber-criminals on business organizations across the entire world. Most recent surveys by institutes that take cyber-crime attacks seriously indicate that the average cost per data stolen or accessed by cyber-criminals has been increasing at a very high late for the last ten years. The average cost of this breached data being over six billion dollars globally. With respect to the productivity of a business, financial damage brings an impact at the foundation of the firms. It affects the equity structure of the company as far as share capital and share prices are concerned. Many companies, especially where cyber-crime has taken roots well, find themselves recording very high after-tax cash charges because of the much they lose to cyber-criminal without their knowledge. To give an example, the Marshalls and TJ Maxx, a retail company in the US recorded an after-tax cash charge of about 118 million dollars because of cyber-attacks towards that company in the year 2007. Therefore, the effect of financial damage as towards business productivity comes in two ways. First, the direct effect that emanates from the money lost. Most of the stolen money is supposed to carry on business operations aimed for profit maximization. Without it, such operations are not possible and thus business operations do not proceed as were planned. Growth derails and so productivity suffers a negative effect. Secondly, the business organizations that suffer the financial damage have to come up with a way to control and safeguard themselves against such attacks in the future. This control measures mean that a part of fund that was priory set for growth and development now carries out non-income generating activities. This too means that business productivity is derailed.

Legal Proceedings

Once a company experiences cyber-crime exposure, it stands at a position to face certain legal consequences. This is because cyber-crime involves data breach, which in the recent years has seen a number of lawsuits emanating from agitated client and customers who fall victims of the data breach. There are rules and regulations, which companies and associations must know and strictly adhere to, in case they lose personal data concerning their esteemed customers, employees and other important company stakeholders. Respective legal bodies monitor these legal regulations. These rules include a cost expense by the business entity. These costs in most cases include installation of services such as customer’s online account monitoring systems, and most importantly, financial compensation to victimized customers. In addition to these universal rules, some companies include by-laws that advice on resignation of executives responsible for the breached data. Losing such executives leads to a loss in experience suitable for business operations of the firms in question. Their replacement is an expense as well. These legal requirements affect productivity in that money carries out non-productive activities instead of expanding the important factors of production.

Damage on Brand and Company Name

The flow of news and information in today’s world is really first. This is especially so because of the coverage by media, which is now globally unified. This way, instances of organization exposure to cyber-crime attacks by businesses and organization get the attention of the media and through that almost everybody gets to know of it. In such cases, a big problem for the firms comes up if such coverage covers as deep legal as and financial details are concerned. This attracts the attention of all current stakeholders and prospective ones too. Depending on the weight of the effects of the cyber-attack information, serious consequences follow. They vary from the loss of customers and investors, hardship in getting new ones, and a brand name damaged beyond repair. Brand name is the identity that represents and speaks for a business entity. All businesses use their brand names to determine their positions in the quest for customers once they start marketing their products. When a company’s exposure to cyber-crime attacks goes open, the people develop a fear towards it. They fear that may be victims too if they associate with it. This negative reputation gives the company’s brand name a bad image. Since brand name is responsible for establishing a steadfast mental link between a business and potential customers, the effects of a negative brand mane image difficulties in winning the trust of any more loyal customers. The demand schedule shifts downwards, the sales revenues drop as a result and units produced fall. In short, business productivity goes down.

Loss of Intellectual Property

Business organizations remain profitably up against their opponents in many ways. Other than the general production, processes that add value to the inputs thus producing outputs at a profit, business organizations also make money from the ownership of other trade instruments. In the light of the above, cyber-criminals also target some of this additional business advantages: patents, trademarks, trade secrets, and copyrights. For example, cyber-criminals may attack and steal source code or unique engineering documents from a high-tech company or steal drug ingredients and recipes from a secret research of a biotech company same industry. Such kind of information gives the companies an advantage over their competitors. When cyber-criminals get hold of this vital information, they make it accessible to the competitors, through sale to them. Now, the companies have no advantage since the consumers can get similar products from other companies as well. This reduces their market share and as a result, the productivity of the business reduces with the loss of the intellectual property rights.

Output Reduction

Cyber-crime attacks on business organizations have a direct effect that results to the reduction of output, which is a delimiter of productivity. When firms experience these attacks, they suffer downtime losses. This means that there is time lost while trying to figure out what happened to their systems, how it happened, and what exactly was lost or stolen. Figuring that out takes time, which is significant enough to affect the units of production during the period in which the company takes to figure out the whole cyber-crime scenario. Solutions to cyber-crime attacks also include measure, which involves reinstating the computer and network systems. This increases the downtime periods as well. If the downtime periods take long, with respect to the magnitude of the cyber-crime and the solutions to it, this affects the output of the firm from the interruption of the production processes. This ultimately lowers the productivity of the business.

References

  • Hamrick, T. (2013). The effects of Cyber-Crime on your Business. Retrieved May 6, 2013, from sjkberinger.com: http://www.sjkberinger.com/theeffectsofcybercrimeonyourbusiness.html
  • Reuvid, J. (2005). The Secure Online Business Handbook: E-commerce, IT Functionality and Business Continuity. London: Kogan Page Publishers.
  • Salomon, D. (2003). Data Privacy and Security. New York: Springer.
  • Salomon, D. (2010). Elements of Computer Security. London: Springer.
  • Sennewald, C. A., & Christman, J. H. (2011). Retail Crime, Security, and Loss Prevention: An Encyclopedic Reference. Burlington: Butterworth-Heinemann.
  • Vacca, J. R. (2005). Computer forensics: Computer Crime Scene Investigation, Volume 1. Hingham: Cengage Learning.
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