Infosys, a global leader in next-generation digital services and consulting, and Interbrand, a global brand consultancy firm, revealed that the potential risk in brand value of a data breach to the world’s 100 most valuable brands could amount to as much as $223 billion, according to a joint cybersecurity and brand value impact report launched.
The report, called ‘Invisible Tech. Real Impact,’ examines the long-term impact of data breaches on value of the world’s top brands across sectors.
View a short video on the report HERE
To quantify this risk, Infosys and Interbrand identified the brand factors most impacted when a company suffers a data breach – presence, affinity, and trust – and simulated the resulting brand value at risk in the event of a breach, using Interbrand’s proprietary brand valuation methodology.
Infosys and Interbrand found that industries such as Technology, Financial services and Automotive might suffer a higher overall brand value at risk from data breaches, whereas Luxury brands and Consumer Goods face greater value at risk as a percentage of their net income. Specifically, the report quantified the brand value risk different industries face because of a data breach, including:
- Technology – Up to $29b brand value risk (up to 53 percent of 2020 net income)
- Financial Services – Up to $2.6b brand value risk (up to 52 percent of 2020 net income)
- Automotive – Up to $4.2b brand value risk (up to 77 percent of 2020 net income)
- Consumer Goods – Up to $5b brand value risk (up to 114 percent of 2020 net income)
- Luxury – Up to $2.4b brand value risk (up to 115 percent of 2020 net income)
Infosys Chief Information Security Officer & Head Cyber Security Practice Vishal Salvi said cybersecurity for long was seen as a cost of doing business. However, in this digital age, where a company’s reputation is based on its ability to protect customer data and establish digital trust, cybersecurity is becoming a business differentiator.
Cybersecurity investments
“Through this report, we bring a novel approach to quantifying the impact of a data breach to the brand value to help businesses understand and evaluate if the cybersecurity investments they are making are proportionate to the risk they face. It also reinforces the need for CISOs to engage with the board and build a robust governance ecosystem while employing a ‘secure by design’ approach to safeguard their brand value and reputation,” said Vishal Salvi.
Interbrand Chief Growth Officer (India) Ameya Kapnadak said there’s a fundamental shift in how brands engage with their customers.
“As the lines between the physical and virtual worlds increasingly blur, and brands rely more and more on the digital world to create unique experiences for their customers, data breaches have the potential to dent the very core of the brand’s relationship with its customers. These shifts underscore the need to re-evaluate ‘hygiene’ aspects of customer experience, like cybersecurity,” said Ameya Kapnadak.
Valuation experts
For the study, Infosys partnered with Interbrand to simulate the value at risk for a brand in the event of a data breach. Interbrand’s global team of valuation experts estimated the impact of a breach on a brand strength with scores from Best Global Brand (BGB) 2020 as a benchmark.
The simulation used these ‘post breach’ brand strength scores to estimate the “Value at Risk” due to a breach, on the Best Global Brands. CMOs, CISOs and other decision-makers can leverage the methodology as a template to help them understand similar risks they might face to their brand value and calculate the right level of cybersecurity investment for them.
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With a network of 21 offices in 16 countries, Interbrand is a global brand consultancy, and publisher of the highly influential annual Best Global Brands and Breakthrough Brands reports, and Webby Award-winning brandchannel.
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Methodology
Having pioneered brand valuation in 1988, Interbrand have a deep understanding of the impact a strong brand has on key stakeholder groups that influence the growth business. Interbrand was the first company to have its methodology certified as compliant with the requirements of ISO 10668 (requirements for monetary brand valuation) and played a key role in the development of the standard itself.
There are three key components to all of Interbrand’s valuations: an analysis of the financial performance of the branded products or services, of the role the brand plays in purchase decisions, and of the brand’s competitive strength:
1. Financial Analysis
This measures the overall financial return to an organization’s investors, or its economic profit. Economic profit is the after-tax operating profit of the brand, minus a charge for the capital used to generate the brand’s revenue and margins.
2. Role of Brand
This measures the portion of the purchase decision attributable to the brand as opposed to other factors (for example, purchase drivers such as price, convenience, or product features). The Role of Brand Index (RBI) quantifies this as a percentage.
3. Brand Strength
Brand Strength measures the ability of the brand to create loyalty and, therefore, sustainable demand and profit into the future. Brand Strength analysis is based on an evaluation across 10 factors that Interbrand believes constitute a strong brand. Performance in these areas is judged relative to other brands in the industry and relative to other world-class brands. The Brand Strength analysis delivers an insightful snapshot of the strengths and weaknesses of the brand and is used to generate a road map of activities to grow the brand’s strength and value into the future.
4. Value at Risk
For the purposes of this study, we estimated the Value at Risk that the Best Global Brands might have, in the event of a data breach. To do this we first arrived at estimates of a “post breach” brand strength score based on the brand strength factors that the breach might most impact – presence, affinity and trust. Using these post-breach brand strength scores allowed us to calculate the ‘post breach’ brand value. Finally, comparing the lower ‘post-breach’ brand value to the original brand value gave us the estimated Value at Risk.
