A new report is “conservatively” forecasting that European finance organisations are about to shell out €4.7 billion in first three years after the GDPR comes into power thanks to data breaches which they don't currently have to declare.
Consult Hyperion, which commissioned AllClear ID to carry out the research said in a press release, “this forecast is conservative and excludes compensation claims, costs associated with lost customers, damaged reputations and senior executive resignations.”
SC Media UK asked Consult Hyperion how the report reached this figure, and a spokesperson for the firm said the stats were, “gathered from historical data breach figures, adjusted for the size of the organisations and then the GDPR sanctions were added on top.”
To explain how the number was reached, the report says that, “based on the available data globally there were on average 514 verified breaches per year in the financial sector between 2013 and 2016. With a quarter of the world's banks in the European Union and no discernible difference in the regional pattern of reported breaches this implies there are around 128 breaches in the financial services industry each year in the EU. This is a highly conservative estimate.”
A press release from the company says, “It was assumed that breaches were at the lower end of the GDPR fine scale, which is €10 million or two percent of global annual turnover.”
SC asked the UK Information Commissioner's (UK ICO) office its opinion on the number;a spokesperson for the governing body opined that the numbers are very much “speculative” as there is no way to predict how many breaches there will be from May 2018 and beyond.
It's important to note that the UK ICO only governs data in the UK and has no jurisdiction in other European countries. In the year 2016/17 the ICO only issued one data protection fine to a finance firm and that was £150,000 to Royal and Sun Alliance for losing the personal information of 60,000 customers.
Finance companies also fined for either nuisance calls and texts which comes under different legislation or for failing to notify the ICO.
Further analysis from Consult Hyperion suggests that, “there have been no fewer than 27 data breach incidents among Tier 1 banks in the last decade, with some banks as multiple offenders, potentially liable for fines at the four percent of turnover level. This indicates an eight percent chance that any Tier 1 bank will suffer a data breach in any given year.”
Consult Hyperion says it expects to see two/three breaches of tier one banks, six breaches of tier two banks and a “long tail of breaches in Tier 3 financial institutions” over the next three years.
The firm concluded: “We estimate the average Tier 1 bank fine will be €260 million and the average Tier 2 bank fine at €48 million. The analysis forecasts that European banks can expect fines in the region of €4,662 million in the first three years after the introduction of GDPR.”