Clubhouse’s Data Spill: The Impact of Cybersecurity Breaches On Start-Up Businesses

Since the start of 2021, the launch of Clubhouse has dominated headlines. The invite-only app allows users to talk in open forums about a huge array of topics – from health and wellness to real estate.

Well-known celebrities and businesspeople have been singing its praises, with Elon Musk one of its strongest advocates.

Despite its meteoric rise, Clubhouse has faced a number of challenges in recent months – one being a recent data spill that threatened to turn users off due to a potential lack of security provisions. What members thought was a private chat forum was being streamed onto an openly accessible website.

While it appears that no personal data was stolen, the story did highlight the pressures that fast-growing businesses can face regarding cybersecurity. Any breach of personal information can have a hugely negative impact on a small business. Preventing this impact by implementing strong cybersecurity provisions is a must for any company to succeed as it grows.
 

Wary of the risks

 
Consumers are sometimes warier of risks when dealing with small businesses. While it’s positive to support small enterprises, there can be a perception that it is often these types of businesses that could lack the security provisions necessary to keep personal information safe. As an example, last year in the US, 28 percent of data breaches reportedly happened to small businesses, perhaps demonstrating a need to improve cybersecurity in SMEs.

It is, however, worth noting that more renowned, larger corporations are also regularly affected by cyberattacks. The likes of British Airways and Equifax have succumbed to serious cyberattacks in recent years, with hundreds of thousands of customers’ data stolen, and potentially huge fines and compensation bills to pay. And data leaks can be just as bad, as illustrated in the Virgin Media incident that exposed the personal information of around 900,000 people.

While consumers may want to support small businesses, people may be more cautious when considering how the data they are sharing with a business will be stored and protected.
 

How to mitigate the impact of a cyberattack

 
The vast majority of cyberattacks can be prevented by implementing strong, effective defences against cybercriminals. Requiring all employees to undergo regular training, enforcing strong passwords, and applying two-factor authentication are all simple and effective measures that can help to mitigate the risk of cyberattacks and can complement the usual strong software and systems that everyone should employ, like antivirus software and firewalls.

When it comes to training, small businesses must ensure that they continuously train staff on new and emerging cyber threats and how to combat them. Creating this open dialogue can allow employees to ask questions and flag issues if they believe there is a potential risk of a data breach.

Businesses must invest in high-quality security provisions to help mitigate the risks of attacks. If not, a cyberattack could cost millions of pounds in fines from the ICO and in compensation bills paid to customers who have had data exposed. The initial costs of improved security may feel large, but they are often nothing in comparison to the cost of a data breach. For example, some security researchers suggested that a simple bug bounty for around £4,000 could have saved British Airways from being hit with a £20m fine and facing a compensation action that could total up to £2.4bn.

While it can sometimes be impossible to eliminate the risk of a cyberattack, small businesses can implement provisions that ensure strong defences against the cybercriminals they could encounter. As the recent data spill from Clubhouse has shown, businesses that grow at an exponential rate could be at a greater risk of data breaches. The pace of rapid growth can get in the way of remembering to, or being motivated to, properly invest in the right cybersecurity technology.

Businesses of all sizes must understand the financial risks they can face with weak security provisions in place, and the potentially astronomical financial costs they could face if there is a data breach.

Written by Aman Johal, Director at Your Lawyers