Phishing was regarded as the most common type of cyberattack in 2020 (PDF), increasing from 114,702 incidents in 2019 to 241,342 the following year. The statistic also reveals the increasing success of these attacks, which occur when a hacker tries to dupe a person, business or organization into providing access to unauthorized information via email, text or telephone.

But, how does phishing affect a business? Understanding the impacts can help you better prepare your defenses for phishing attacks.

4 ways phishing can hurt your business

1 Financial losses

The average cost of a data breach in 2020 was $3.86 million, according to IBM research. This figure includes far more than just fending off the attack—from recovery costs to depreciating stock value to regulatory fines associated with the incident if regulators find your company didn't have the proper security mechanisms in place. Although the financial costs of a data breach can vary depending on the size of an organization, that's still money that could be deployed elsewhere in the business to better serve customers, improve operations or strengthen the financial health of the company.

2 Reputational risks

Customers are more likely to do business with brands they trust. In fact, a 2020 study by global communications firm Edelman finds that trust is the second most important factor (PDF) in a consumer's decision to make a purchase. The ability to safeguard consumers' data privacy has become crucial to establishing and maintaining trust, so when a data breach occurs, whether it's due to phishing or another type of cyberattack, it undermines consumers' belief in the brand. This could lead them to take their business elsewhere.

3 Loss of proprietary data

Hackers commit cybercrimes because data is valuable. One 2020 study indicated that hackers make $1.5 trillion a year from these crimes. If cybercriminals access your proprietary company information, which can include trade secrets, information on upcoming product launches, or new partnerships and acquisitions, it can affect your competitive advantage in the marketplace.

4 Disrupted business operations

When a breach occurs, it takes an average of 280 days for a company to identify and contain a data breach, according to IBM research. During this time, especially in the days immediately following a cyberattack, the business may be unable to operate properly. This can have a snowball effect on other parts of your business, such as processing customer orders, communicating with customers in a timely manner or procuring the necessary materials or goods to keep your product or service available in the market.

How to protect your company from phishing scams

Although phishing attacks have become more common and clever, your company can take several steps to prevent or reduce the likelihood of these incidents.

Employee training

Ongoing employee training is one of the best defenses against phishing attacks. Hackers often prey on employees, but training your employees to recognize suspicious emails, text messages and phone calls can help you potentially avoid these attacks. Use company newsletters and other communications to continuously build your employees' cyber awareness and offer virtual, on-demand cybersecurity training that they can access at any time to refresh their knowledge. Make cybersecurity training a part of your new-hire onboarding process and consider making it mandatory for all employees—updating the content as new threats arise.

Email security and better threat detection

Your company also can put mechanisms in place to strengthen email security. You can require two-factor authentication—where employees have to enter their password and then a code or PIN to gain access to systems. Also, ask employees to change their passwords every few months. Threat detection solutions or services to monitor traffic on your network 24/7 can also help isolate potential threats before they infiltrate your systems.

Protecting your business from phishing attacks

Phishing attacks are a reality for businesses today, but that doesn't mean your company can't take meaningful action to protect itself. Building your employees' cyber awareness, applying email security best practices and leveraging advanced cybersecurity technologies can reduce your risks and potentially prevent your company from experiencing the harmful business impact of a phishing attack.

So, how does phishing affect a business? Any organization that can't answer this question puts itself at significant risk of a cyberattack. Fortunately, effective responses and defenses abound, including cyber insurance, which is worth every penny.