How much should SMBs allocate to their cybersecurity budget?

In a time when large-scale commercial attacks make news, small and medium-sized enterprises (SMBs) may find it more straightforward to neglect cybersecurity concerns. However, SMBs are regularly the target of data breaches and other assaults by hackers, so companies of all sizes must prioritize cybersecurity measures.

A cybersecurity budget is not just an added expense; it is a strategic investment that protects your business from the potentially devastating consequences of cyber incidents. In fact, according to the Netwrix Research Lab’s 2023 Hybrid Security Trends Report, 43 percent of data breaches involved small businesses. Establishing a cybersecurity budget for your SMB comes with several benefits, including protecting your business from the costs and disruptions of a cyberattack, satisfying risk-assessment clauses in contracts, ensuring compliance with regulations, and enhancing your competitiveness in the market.

As you embark on the journey to allocate a cybersecurity budget, it's essential to consider various investment areas. These include risk assessment, business preparation and continuity, incident response, employee training, network and website vulnerability identification and management, regular scanning and testing, and cyber insurance policies.

The question that often arises is, how much should SMBs allocate for their cybersecurity budget? Cybersecurity spending is typically tied to the overall IT budget, and businesses globally are planning to increase IT budgets in response to security incidents, system updates, security software enhancements, and investments in managed security services. On average, businesses worldwide spend about 12 percent of their IT budgets on cybersecurity.

However, the percentage of total IT spending on cybersecurity can vary based on industry, company size, compliance mandates, data sensitivity, and stakeholder requests. When creating a cybersecurity budget, spending a manageable amount at a time is advisable. Instead, start with a modest investment, such as performing a cybersecurity risk assessment, and gradually increase the budget as needed.

I think collaborating with your cybersecurity provider is essential in this process. They can help identify your business's highest-priority and lowest-cost action items, tailoring your cybersecurity program to provide enhanced protection and mitigate risks over time. Getting company leadership on board is crucial, mainly when operating on tight budgets. Performing a basic risk assessment can demonstrate the critical nature of cybersecurity and justify the investment needed to protect the company from threats.

The cost of a comprehensive cybersecurity program may seem significant, but it pales in comparison to the potential impact of a data breach. According to IBM's 2023 Cost of a Data Breach Report, the average effect of a data breach on organizations with fewer than 500 employees is $3.31 million. The direct costs include monetary theft, remediation, regulatory fines, legal fees, notification, identity theft repair, and increased insurance premiums. Indirect costs encompass business disruption, loss of customers, intellectual property loss, and damage to the company's credibility and reputation.

To further understand the necessity of cybersecurity, it's crucial to be aware of common cyberattack types. These include denial-of-service (DoS) and distributed denial-of-service (DDoS) attacks, phishing and spear-phishing attacks, man-in-the-middle (MitM) attacks, drive-by-download attacks, and password attacks. Implementing cybersecurity measures can mitigate the impact of these attacks, but it's important to note that no solution provides 100 percent protection.

A panel of cyber industry experts emphasized the need for small businesses to prioritize cybersecurity despite concerns about expenses. The benefits, including protection against financial losses, reputation damage, and legal liabilities, far outweigh the costs. They suggested leveraging community immunity through AI and adopting all-in-one AI-enabled solutions to compensate for small businesses' lack of dedicated cybersecurity teams.

The key takeaway is that cybersecurity is no longer a luxury; it's necessary for businesses of all sizes. While there's an associated cost, the peace of mind gained from knowing that your company is better protected is well worth the investment. In a world where cyber threats constantly evolve, a multifaceted and ongoing cybersecurity program is essential to safeguard your business and its sensitive data.