By Aparna Achanta, Principal Security Lead, IBM
Risk management in organizations is more than a routine checkbox exercise. Instead, it is the foundation of business resilience.
What is the impact of security risks? Failing to implement appropriate and proportionate security measures can result in data breaches, infrastructure lapses and the loss of intellectual property, among other consequences. The outcome of such incidents causes financial loss, reputational damage and operational disruption. Worse still, ignoring risks has hidden costs that lurk beneath the surface. Such hidden costs include lost business opportunities when potential customers opt for supposedly secure competitors. Additionally, data breaches can lead to long-term instability for the business.
Therefore, overlooking risk management is a poor decision that opens the door for cybercriminals to cause significant harm to your business.
Examples and Consequences of Poor Risk Management
Some real-world examples illustrate the consequences of organizations whose cyber risk management strategies fall short.
Vulnerabilities in Systems
First, let’s consider the reliance on vulnerable IT and operational technology systems. Agencies may continue to utilize outdated tools to manage critical tasks, including storing and processing public records and classified intelligence. Obsolete systems, weak cyber hygiene and a lack of resources to upgrade them have rendered them prime targets for cyberattacks from nation-state actors and other cybercriminals.
A recent warning from the UK’s National Audit Office highlighted this growing danger in the UK government, which should serve as a stark warning to security teams and business owners. According to the warning, UK government departments are under severe cyber threats due to aging systems and insufficient investment in security. The press release revealed that “58 critical government IT systems independently assessed in 2024 had significant gaps in cyber resilience.” More shocking is that “the government does not know how vulnerable at least 228 ‘legacy’ IT systems are to cyberattacks.” Running critical operations in such systems creates a dangerous blind spot that hackers are more than ready to exploit.
Regrettably, operating vulnerable systems can result in more than financial losses. It can lead to operational disruptions, the exposure of sensitive data and a decline in public trust. This means that the price of failing to act on cyber risks is steep, and organizations should not ignore it.
Insider Threats
Let’s take a look at our second example, which is insider threats. In this situation, the call originates from within the organization rather than from the usual shadowy hackers or nation-state actors. Employees and contractors can compromise security and cause cyber incidents, either through malicious intent, negligence, or simply due to bad luck.
Examples of insider threats include an employee leaking classified information, a disgruntled colleague orchestrating fraud, or an unsuspecting consultant bypassing security protocols while accessing crucial information.
Statistics indicate that insiders have been responsible for some of history’s most damaging data breaches. Currently, 76 percent of organizations have detected an increase in insider threat activity over the past five years. Despite this shocking discovery, less than 30 percent of firms believe they have the right tools to handle this threat.
More often, organizations fail to recognize warning signs. In this case, they operate with lax human security measures, including insufficient background checks, a lack of continuous employee assessment and inadequate cybersecurity training and awareness. Additionally, organizations have misplaced trust in individuals who turn out to be major risks. For example, it is easy to assume that a finance manager who has worked with the company for many years would pose no threat. Unfortunately, the same employee orchestrates a heist driven by financial gain, resulting in a significant loss of revenue for the business.
Eventually, if insider threats are left unchecked, the risk can result in a crisis with costs extending into the millions. And it’s not just financial loss at stake. The incident can potentially erode trust and create instability that may take years to recover from.
The Hidden Cost of Ignoring Threats
As of 2024, the global average cost of a data breach is USD 4.88 million. The figure represents a 10 percent increase over last year and the highest total ever recorded.
Failing to address cyber risks proactively can lead to both short-term headaches and long-term hidden costs that can be even more devastating.
Reputational damage is one of the consequences. Many customers consider trust as the currency of organizations, especially government agencies. Unfortunately, a major security failure can shake public confidence and severely damage trust. Rebuilding credibility can be an uphill task.
Secondly, poor cyber risk management can lead to legal and regulatory penalties. Violating regulatory compliance is costly, as it often results in substantial fines and legal action. Such outcomes drain critical resources and create a bureaucratic nightmare.
Thirdly, a cyber crisis can decrease workforce productivity. That is to say, when an incident is reported, it’s all hands on deck for various teams, including security operations, IT, the crisis communication team, internal legal, and top management. Shifting focus from operational works to respond to a data breach certainly delays critical projects, innovation, order deliveries, and customer support.
Moreover, a cybersecurity crisis could have significant political implications. Let’s consider a government agency that operates with inadequate risk management measures. If a high-profile cyberattack occurs, policy disasters are expected. The leadership is expected to make a public announcement and take accountability for the incident. In some cases, managers may resign from their positions. Overall, news about cyberattacks results in a loss of credibility for the affected institution and its leaders.
Strategies to Strengthen Risk Management
Government agencies and businesses must implement proactive and well-rounded cybersecurity strategies to stay ahead of emerging threats.
For instance, investing in modern technology and phasing out legacy infrastructure can close the door used by malicious actors. This also includes investing in cutting-edge cybersecurity measures, such as zero trust architecture and AI-driven threat detection.
Moreover, conducting regular risk assessments, such as penetration testing and crisis simulations, helps agencies identify and mitigate vulnerabilities commonly exploited by cybercriminals.
It is also essential to implement continuous monitoring, behavior analytics and comprehensive security training to prevent internal breaches before they spiral into full-blown crises. Leaders must embed security awareness into daily operations to ensure employees understand their role in protecting critical systems and data.
On the other hand, developing and maintaining a robust incident response plan can aid in swift response to cyberattacks if they occur. Updated incident response plans help your organization restore operations with minimal disruptions.
Notably, financial losses are the most visible consequences of a cyber incident. However, there are hidden costs, such as eroded public trust, operational breakdowns and political fallout, which can be even more damaging in the long run. Fortunately, government agencies and businesses can safeguard their operations and maintain their credibility by prioritizing risk management, investing in technology and cultivating a culture of security. In the end, addressing cyber threats proactively prevents the dire consequences of cyber crises.