Preparing for and Recovering from a Data Breach

As an SMB, you might be wondering why you should care about data breaches, ransomware, and other cybersecurity issues. After all, SMBs are too small to be of interest to cybercriminals, right?

Unfortunately, that’s not true, and this misconception can be costly.

SMBs face growing cybersecurity threats with increasingly severe consequences. Cybercriminals no longer only target large enterprises. In fact, the majority of data breaches now affect SMBs.

The reasoning is simple. SMBs often lack the layered security architecture and mature incident response processes of larger organizations, which makes them easier targets.

In this guide, we’ll outline a two-pronged approach for SMBs:

(1) How to prepare for a data breach, and
(2) Build a data breach recovery plan.

Both can help organizations reduce the impact of a data breach significantly and enable them to resume normal operations more quickly and securely.

Why SMBs Need a Strong Data Breach Recovery Plan

The financial impact of a data breach continues to rise, surpassing $3 million for companies with fewer than 500 employees in 2023. Even worse, nearly one in five SMBs are forced to close their business after a successful cyberattack.

A breach can have devastating financial and legal consequences for unprepared businesses. However, the damage is not limited to the breach itself. It also includes reputational harm, legal penalties, and operational downtime, which can lead to customer attrition and even more lost revenue in the long term.

But why are small businesses increasingly becoming the target of cybercriminals? Here are the top reasons:

• Fewer cybersecurity resources: Often, one person or a very small team is responsible for every aspect of the IT environment. This results in many SMBs lacking dedicated cybersecurity staff, leaving vulnerabilities unpatched and systems unmonitored.

• Valuable data: Just like every other company, SMBs store sensitive data, such as financial records, intellectual property, and personally identifiable information (PII), which cybercriminals can use to extort them or sell on the black market.

• Third-party exposure: IT resellers and MSPs (which are SMBs themselves), as well as SMBs that serve as vendors for larger companies, create an attack vector for supply chain breaches. This means they serve as the back door to the large companies they target.

• Outdated infrastructure: Due to budget constraints, the use of legacy systems (don’t forget to update your Windows PCs soon) and insufficient network segmentation are common, which makes it easier for attackers to move laterally within networks.

Part 1: How to Prepare for a Data Breach

Preparation is the first line of defense in an effective SMB cybersecurity strategy. While no security posture is completely impenetrable, there are steps you can take to fortify your business before a breach occurs.

1. Conduct a Comprehensive Cyber Risk Assessment

Identify all sensitive data and digital assets in your environment, such as:

• Customer information and PII
• Payment processing systems (PCI-DSS scope)
• Health data (if applicable under HIPAA)
• Intellectual property

Don’t forget to include all relevant business data. For example, if you own a construction company, include building plans; if you run a small retail business, include inventory information. Even if this information is not considered “sensitive”, losing it would still be devastating for your business.

2. Create a Data Inventory and Classification Policy

Once assets have been classified according to sensitivity and risk exposure, document which systems house this data and who has access to it. Classifying data based on sensitivity (i.e., public, internal, confidential, or restricted) enables the implementation of appropriate protection levels across various security solutions.

You can use a simple spreadsheet or, if your budget allows, automation tools such as data loss prevention (DLP) solutions, which help identify and track sensitive data across your environment.

3. Implement a Layered Security Architecture

To ensure that no single point of entry can cause the failure of your IT environment, security measures must be implemented across the entire network. Adopt a comprehensive security strategy that includes the following controls:

• Firewall and IDS/IPS systems: Monitor and filter incoming and outgoing traffic. Bonus points for AI-enhanced solutions that detect unusual activity.

• Endpoint protection: Install advanced anti-malware and behavior-based detection tools on every server and PC, and ensure they are always up to date.

• Multi-factor authentication (MFA): Require MFA for all critical systems and user accounts, regardless of how annoying users may find it.

• Data encryption: Use robust algorithms like AES-256 to encrypt sensitive data at rest and in transit.

• Least privilege access controls: Implement role-based access control (RBAC) and regularly audit permission changes.

4. Train Employees on Cybersecurity Awareness

22% of all data breaches are caused by human error. In general, most data breaches stem from social engineering attacks, such as phishing. That’s why a regular, up-to-date cybersecurity awareness training can drastically reduce the likelihood of user-initiated breaches. This training should include examples of phishing simulations, password hygiene, recognizing suspicious emails and websites, and secure data handling.

5. Maintain Regular, Verified Backups

If all of the above fail, backups are your last line of defense against revenue loss or business closure. Every company should perform regular backups. They are a requirement for most compliance regulations and cyber insurance providers. But even outside of those requirements, backups enable you to restore your systems to a state before the breach occurred, ensuring that you won't lose all your data — perhaps just changes from the last few days.

To ensure that your backup solution is as effective as possible, follow these steps:

• Use the 3-2-1 strategy, which states that you should have three copies of your data on two different types of media, with one copy stored offsite (ideally in the cloud).

• Ensure that all your backup storage devices are encrypted, whether they are local or in the cloud.

• Perform regular backup testing to verify data integrity and recovery speed.

• Consider using immutable storage, which prevents backups from being altered or deleted within a specified time frame.

Part 2: Building a Data Breach Recovery Plan for SMBs

When a breach occurs, time is of the essence. Having a well-documented and practiced recovery plan can dramatically reduce your “mean time to recovery” (MTTR) and protect your business from losing revenue due to downtime.

1. Create a Formal Incident Response Plan (IRP)

An effective IRP clearly defines the roles and responsibilities of each team member, as well as the communication channels and escalation procedures to be followed in the event of a breach. It should include the following:

• Identification: How to detect anomalous behavior or system compromise.

• Containment: Steps to isolate affected systems and prevent the spread of the issue.

• Eradication: Remove malware, close vulnerabilities, and patch systems.

• Recovery: Restore data from verified backups and validate system integrity.

• Post-incident analysis: Document what happened, what worked, and what didn’t to improve future responses.

Thoroughly document your IRP and review it quarterly, or at least after significant changes to your infrastructure or personnel.

2. Establish a Breach Communication Strategy

Transparency builds trust. Regulatory requirements may also mandate a timely breach notification. This should include:

• Internal notifications: Inform leadership, IT, and affected departments.

• External notifications: Notify customers, partners, and vendors as needed.

• Regulatory notifications: Report to relevant bodies, such as the FTC or state attorneys general, within the required timeline.

• Press and social media handling: Prepare templated responses that have been vetted by your legal advisor.

Don't overshare technical details but demonstrate accountability by explaining how you plan to resolve the issue.

3. Conduct Regular Tests

Practice makes perfect. Simulate breach scenarios through tabletop exercises involving your IT team, managers, and anyone else who should be part of the process. These drills will help you identify gaps in your IRP and develop the muscle memory necessary for a rapid response and recovery.

Below are some example scenarios that you could simulate:

• Ransomware encrypting critical databases
• Insider data theft
• Compromise via a third-party vendor
• Distributed denial-of-service (DDoS) attacks targeting customer-facing portals

If you are unsure about how to perform these tests, simulation solutions are available online.

4. Monitor Systems for Post-Breach Activity

Even after returning to business as usual, attackers may have planted backdoors in your systems. To reduce the risk of a second attack immediately following the first, take the following steps:

• Monitor logs for unauthorized access attempts or data exfiltration.
• Change credentials across all affected systems.
• Revoke or rotate encryption keys if a compromise is suspected.
• Conduct a full forensic analysis to understand the scope and origin of the breach.

5. Evaluate Cyber Liability Insurance

Even if you can fix a data breach relatively quickly, the costs associated with downtime and penalties can be devastating. That’s where a cyber insurance can help. They typically cover:

• Legal fees and regulatory fines
• Notification and credit monitoring for affected customers
• Forensic investigations
• Business interruption costs

To be eligible for a payout, make sure you’re following the insurance company's guidelines and requirements. Also, review policy exclusions and coverage limits, and familiarize yourself with the insurer’s incident response support services.

SMB Compliance and Cybersecurity Go Hand-in-Hand 

Many SMBs avoid compliance requirements because they see them as costly or complex. However, frameworks such as NIST, ISO 27001, and the CIS Controls are designed to establish a robust security foundation. Adopting these best practices enhances your breach readiness and positions your business for growth and trust in competitive markets, even if you're not subject to specific mandates or don’t get the entire certification. 

Depending on your industry, be aware of these common regulatory mandates for SMBs: 

• HIPAA: For health-related businesses 
• PCI-DSS: For organizations that process credit cards 
• GDPR/CCPA: For businesses handling personal data of EU or California residents 

Staying compliant helps you avoid fines and ensures that you are prepared for and know how to respond to a potential data breach. 

Prepare for the Inevitable, Recover with Confidence 

Data breaches are no longer a matter of "if" but "when," especially for SMBs. However, with proactive preparation and a well-executed recovery plan, the consequences of a data breach don’t have to be catastrophic. Instead, they can become an opportunity to strengthen your defenses, rebuild customer trust, and become more resilient. 

Here’s a quick recap: 

• Perform regular risk assessments and prioritize critical assets. 
• Implement multi-layered security controls and access restrictions. 
• Educate employees on cyber hygiene and phishing awareness. 
• Maintain and test secure, redundant, and recoverable backups. 
• Develop a documented, rehearsed incident response and communication plan. 

Don't wait until a breach occurs to take action. Contact us, and we will be happy to help you set up a 3-2-1 backup strategy.