No Cybersecurity? The Top 5 Consequences of Losing Your Legal Data

In the legal world, cybersecurity has become the center of attention when it comes to compliance. Over 25% of law firms have reported an attempted data breach, 10% of which resulted in the direct loss of revenue. The cybersecurity landscape is continually evolving, with attackers devising new techniques to beat measures of data security that have already been put in place. In the legal field, data loss can have serious consequences. 

Law firms are entrusted with clients' private and sensitive information. In the legal framework, the data includes both primary data and metadata--a set of data that gives more information about other legal data. Therefore, effective data management is crucial to the continual operation of law firms. In this article, we’ll discuss the consequences of data loss in the legal field.

Client data is one of the key factors that drive business in law firms. Any event that compromises client personal information could potentially drive customers away from your business. Besides the loss of client trust, here are five consequences of losing your legal data:

From the time legal data is lost, to the time your firm finishes investigating, recovering and settling the legal ramifications of the loss, the effects of data loss will significantly impact your firm’s operations. The severity of the effects of data loss will vary depending on whether it’s a mere breach or a complete loss of vital legal data. The most common immediate course of action is a total shutdown of the firm’s operations until the data is recovered or an alternative solution is found. The longer the duration of operations shut down, the more revenue you will lose. Unfortunately, up to 60% of SMEs shut down within six months of a severe cyber-attack. 

In the legal field, the consequences of data loss trickle down to almost every department and operation. Sensitive data regarding court cases may be lost, which leads to significant delays in the prosecution process. For instance, while conducting investigations into the twin tower bomb attacks, data at the Pentagon was compromised. This data contained records crucial to both the prosecution and defense. This breach led to a significant delay in the pre-trial hearing.

2. You Will Lose Money

Legal data often support critical functions in a business; functions which may be adversely affected by the loss of legal data. Therefore, in the event of data loss, your business will not be able to earn its normal revenue while at the same time, you will be spending tons of money on data recovery. According to Kaspersky Lab, small businesses incur up to $38,000 to recover information in case of a data loss.

There are indirect costs associated with losing legal data. For instance, your insurer may hike premiums to keep your contract active. You will also spend hefty amounts of money on investigations and public relations to help soften the blow of the breach. 

In most cases, data loss leads to loss of customers and potential customers, which could, in turn, lead to a permanent business failure.  

Initially, the Federal government was slow to pass laws on data breach. When it became inevitable, three legislators tabled the data security and breach notification act and it was passed. The law requires data handlers to report the breach or loss of such data in 30 days. Failure to do so willfully could lead to five years in jail. 

Besides a jail term, you should be ready to face multiple class-action lawsuits. Class action lawsuits have the effect of multiplying the cost arising from data loss due to the litigation fees that arise from the data breach. 

In a different light, shareholders and clients could sue you for being unable to render your business services due to a fault on your end.

In recent events where customer data has been compromised, court settlements amounting to millions of dollars are not uncommon. In these cases, the data handlers are liable for the monetary compensation of all financial losses that the clients incur. Courts may also order your firms to reimburse their clients for any expenses incurred in an attempt to recover the lost data. The financial and legal consequences of such events could lead to business closure, especially for smaller firms.

4. Damaged Reputation and Loss of Business

When you lose your clients’ data, your firm’s long-term reputation is at stake. Over 85% of data breach victims will share the details of their ordeal to other prospective clients. If your law firm ends up in the headlines for failing to protect client data, your brand’s reputation is compromised. This is why large law firms tend to spend millions in Public Relations and damage control after a data loss event.

The legal field is highly sought after by cybercriminals because of the sensitive nature of client data. Legal firms hold privileged information on behalf of their clients, and it is imperative of any legal practice to ensure proper client data management. If your firm cannot protect sensitive information for its clients, they will look for legal services in firms that assure them of their data security. It is difficult to drum up business when your trusted clients take their business elsewhere.

While this is the worst-case scenario, you cannot ignore the possibility of a permanent business closure arising from loss of legal data. We have already seen the economic, legal, and non-financial impacts that loss of data has on your company. You end up losing productive work hours, client trust, brand reputation, and you encounter various legal ramifications. In the absence of proper data recovery methods, it may be difficult for your firm to get back on its feet.

Every year, several organizations have to discontinue operations as a result of data loss. Some of these firms are unable to bear the brunt of data loss since they never put in place data protection measures. When you combine the financial, legal, and other costs arising from the data loss, you could create the perfect storm which small businesses may fail to recover from. Losing brand reputation and revenues simultaneously could be so harmful to business operations that closing its doors remains the only viable option.

Your Role in Protecting Client Data

Owing to the increased importance of data security, federal and state authorities have passed regulations that ensure compliance. These laws differ by state and jurisdiction, and it is up to individual law firms to understand the implications. Every law firm should enforce stringent cybersecurity policies to keep client and firm data safe from attacks. Lawyers should acquaint themselves with modern technology issues and cybersecurity options. With a proper data management plan in place, the law firm can cushion itself from the effects of data breaches.