Advanced secure file transfer solutions, like managed file transfer (MFT) servers, are no doubt more expensive than run-of-the-mill file transfer software. In fact, you can get a File Transfer Protocol (FTP) server or even a Secure File Transfer Protocol (SFTP) server for free. Many operating systems already have SFTP servers built-in, so they’re readily available at no additional cost.
Recommended read: SFTP vs MFT: Why managed file transfer is more secure
That being said, you’d be essentially trading off security, compliance and reliability for short-term savings. While free or low-cost solutions like FTP or SFTP servers may seem appealing, they often lack the robust security features necessary to protect sensitive data in today’s threat landscape. These basic solutions are more vulnerable to breaches, lack advanced encryption standards, and fail to meet many regulatory compliance requirements.
You don’t realize it yet, but seemingly cheap file transfer solutions are actually more costly. In the following sections, we’ll explore the hidden costs of file transfer solutions that are deficient in security.
With growing concerns about data security and regulatory compliance, potential customers and trading partners have become increasingly meticulous in choosing where — and with whom — they share their data. If your file transfer system fails to meet a potential customer or trading partner’s security requirements, they may consider doing business elsewhere.
Organizations that process certain types of information are subject to data protection/privacy laws and regulations such as the Health Insurance Portability and Accountability Act (HIPAA), General Data Protection Regulation (GDPR) and Payment Card Industry Data Security Standard (PCI DSS). These laws and regulations typically require a laundry list of security controls. If your file transfer system fails to meet those requirements, you could face onerous fines and penalties.
Security vulnerabilities and deficiencies can make your file transfer system more susceptible to exploits and cyber incidents. For example, if your system lacks high availability capabilities, a sudden surge in traffic — whether caused by a legitimate spike in demand or a Distributed Denial of Service (DDoS) attack — could result in operational downtime. This could in turn translate to revenue loss.
File transfer systems that process substantial amounts of sensitive information can attract cybercriminals. And if a cyber attack leads to a data breach, you could incur even greater costs. According to the IBM/Ponemon 2024 Cost of a Data Breach Report, the average cost of a data breach is now at 4.88M USD. In the succeeding sections, we’ll discuss where those costs typically come from.
The moment you discover a data breach, you’ll have to activate a series of countermeasures that require substantial resources. These include crisis management, audit operations, digital forensics and communication with various stakeholders (e.g., executives and board of directors).
Unless you already have a budget for these incidents, you’ll have to reallocate funds and resources from other critical business areas. The longer it takes to identify, contain and eradicate the threat, the higher your unexpected costs will be.
You’ll also have to notify affected customers, regulators and other external entities regarding the breach. You may have to send out emails and letters and place outbound calls. Moreover, if your organization is subject to certain data privacy/protection laws or regulations, you may be mandated to publicly disclose via news outlets, radio and TV stations and other local and national media.
For example, under the HIPAA Breach Notification Rule, covered entities that suffer a data breach must notify affected individuals, media outlets, the Secretary of the United States and the Department of Health and Human Services.
Breach notification is just one of the many responsibilities you’ll need to meet in the aftermath of a data breach. In some instances, you may also have to provide affected customers with the following support services:
Since post-breach handling activities require participation from various departments, such as legal, HR, GRC (Governance, Risk and Compliance) and public relations, they’re not only expensive, but also resource intensive.
A data breach can expose your organization to lawsuits from customers and business partners whose sensitive data was compromised in the incident. These legal proceedings often require the services of specialized attorneys, extensive documentation as well as significant time and effort from your internal teams. Worse, class-action lawsuits can lead to hefty settlements that can further escalate costs.
Publicized data breaches — including those publicly disclosed due to breach notification requirements — can erode customer trust, which can lead to high churn rates. Customers who lose confidence in your ability to protect their sensitive information may take their business to competitors with better security practices. This loss of confidence can be particularly damaging in industries and sectors where trust is paramount, such as healthcare, financial services and government.
Read about FIPS compliance and why government agencies require them.
Inadequate file transfer security can expose your organization’s intellectual property (IP), such as trade secrets, product designs or proprietary algorithms. Once stolen, your IP can be sold on the black market and exploited by competitors. If that happens, you can lose your competitive advantage. Thus, the loss of IP doesn’t just lead to immediate financial loss. It can also seriously diminish your long-term ability to innovate and compete in your industry.
While cyber insurance can help mitigate some of the costs of a breach, filing a claim often results in higher premiums during policy renewal. Insurers may view your organization as a high-risk client and adjust rates accordingly, especially if the breach highlights inadequate file transfer security.
A data breach or failure to secure your file transfers can severely damage your organization’s reputation. Existing and potential customers and trading partners may begin to question your security capabilities. Additionally, the negative press coverage and social media backlash can amplify the fallout. To repair your brand’s image, you may have to invest a significant amount of resources in public relations and marketing campaigns aimed at rebuilding trust.
The consequences of relying on poorly protected file transfer solutions can be incredibly costly. From regulatory fines, lawsuits and operational disruptions to reputational damage and lost business opportunities, the hidden costs can quickly drain your resources.
Investing in a robust, secure file transfer solution not only safeguards your sensitive data but also protects your organization from financial devastation.
Protect your organization from hidden costs and security risks tied to poorly protected file transfers. Download our premium guide to uncover potential vulnerabilities, learn must-have features of secure MFT solutions and see how top providers ensure robust data protection.