How Identity Theft Can Cost Your Business Money — And How You Can Stop It

identity theftWe all know that identity theft is costly for victims: The average cost of repairing the damage from a stolen identity, including lost wages, legal fees, and other costs ranges from about $3,000 to $20,000. That’s not even taking into account the lost productivity and psychological costs.

However, it turns out that individuals are not the only ones who face mounting bills when their identities fall into the wrong hands. Businesses also bear some significant costs due to identity theft, to the tune of millions of dollars. And these aren’t costs from data breaches, either. These are costs directly attributable to customer identity theft that may or may not be related to a large data breach or even an individual business.

That’s right. It may seem unlikely, but the average business loses money each year due to individual identity theft, and in several surprising ways.

1. Lost Productivity

identity fraudWhen someone loses their identity, getting back on track requires reams of paperwork, hours of phone calls, and a great deal of research, investigation, and double-checking every single transaction and account. And unfortunately, these tasks can’t always wait until after working hours. The average identity theft case takes about nine months to clear up — meaning that an employee could be distracted and focused on other tasks for almost an entire year. That’s not to say that victims spend every minute of every day clearing up their data, but they do have to spend some time on it — time that equates to lost productivity for their employers.

2. Unpaid Bills

When you discover that your credit or debit card has been stolen and report it, in most cases you are not liable for any of the fraudulent charges. However, that doesn’t mean that the business that ran your card doesn’t want to be paid. Depending on the circumstances, businesses can be left holding the bag on fraudulent charges, a cost that can add up over time. Many businesses carry insurance to cover these circumstances, but again, making a claim takes time — and could lead to higher premiums. That’s not even taking into account the costs associated with collections and investigations into fraudulent purchases.

3. Damage to Reputation

identity theftOne major cost of identity theft is the loss of reputation that comes with being associated with identity crimes. For example, one nonprofit organization saw a downturn in donations when several volunteers used the information they gathered as volunteers to open credit accounts and steal hundreds of thousands of dollars’ worth of merchandise. Donors were then skeptical of how their information would be used at the charity, and therefore opted to support other organizations.

Companies that experience breaches that lead to identity theft often face an uphill battle when it comes to reputation, and can experience decreased sales, lowered customer loyalty, and costs associated with restoring customer faith as well as reimbursed charges and fees.

Solving the Problem

It’s unlikely that data thieves will ever give up, but businesses can do more to help stop them. By focusing on protecting customers and securing identities, you can reduce the costs associated with this type of theft. More specifically:

  • Offer identity protection as an employee benefit. One way that you can help prevent lost productivity due to identity theft is to offer ID protection coverage to employees, which will help block unauthorized transactions and, in the event of a theft, manage the investigation and remediation process to free up employee time.
  • Implement security protocols. Many times, ID theft happens due to careless behavior. Train employees to treat personal information appropriately, and to keep their own information secure. This means keeping their employee badges out of sight when not in use, locking computers, and mobile devices, and putting personal items like purses in secure areas.
  • Provide training to identify suspicious behavior. Employees should be trained to look for signs of fraud, and how to react appropriately should they discover anomalies. Make it a matter of policy that customers must provide appropriate ID when paying by check or if their credit cards are unsigned, for example. When employees are able to spot and help stop fraud, it saves everyone money.

Identity theft is a serious and costly issue. However, when steps are taken to prevent it from affecting your business and your employees, you help stop identity thieves in their tracks and save millions of dollars from falling into criminals’ hands.

About Mohit Tater

Mohit is the co-founder and editor of Entrepreneurship Life, a place where entrepreneurs, start-ups, and business owners can find wide ranging information, advice, resources, and tools for starting, running, and growing their businesses.

Comments

  1. One of the real dangers of identity theft is when criminals obtain Protected Health Information (PHI), and other vital medical records. Your date of birth, social security number, home address – all of this, and more, is so incredibly sensitive that when it falls into the wrong hands it’s a disaster waiting to happen. Always ensure the safety and security of PHI and all other sensitive information by being vigilant as to who you give your information to. Never assume anything – ask if you are unsure

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