Why Did T.J. Maxx’s Share Price Surge After A Data Breach That Affected 94 Million Customers?
(This post originally appeared on Forbes)
This weekend you could have learned about the particular details about where I live, the value of my house, my income, my family, my friends, my life. You could have found all that stuff out online with little effort and just a few bucks. But sorry to disappoint: it’s not very exciting. We binge-watched “Parenthood” and went food shopping. Oh, and I played softball Sunday morning. So go ahead and learn all you want, if you can stay awake.
This weekend you could have also learned that the National Security Agency is currently harvesting huge numbers of images of people from communications that it intercepts through its global surveillance operations for use in sophisticated facial recognition programs, according to top-secret documents. Maybe you learned that a new federal database will track Americans’ credit ratings and other financial information. In just the past year I’m sure you’ve learned about the significant data breaches at JP Morgan, Target, Monsantoand eBay. These are in addition to breaches at other big name companiesincluding the California DMV, the University of Maryland, Nieman Marcus, Apple, Adobe, Vodafone, the National Security Agency (wait…what?), Evernote and LivingSocial. And that’s in addition to the government’s recent accusation that the Chinese have hacked into the systems of our corporate giants like U.S. Steel, Westinghouse and Alcoa.
You may have also heard about the report this month by Verizon which studied1,367 data breaches and 63,437 security incidents in 95 countries during 2013 and concluded that basically “everyone is vulnerable.” Or maybe you learned that almost half of us were hacked last year. Like it or not you’ve become familiar with terms like POS intrusions, card skimmers, DoS attacks and cyber-espionage.
You’ve learned a lot about security and data breaches and hackers over the past few years. And you are concerned about your privacy and your customers’ privacy. Relax. It’s an issue, of course. But it’s not as serious as you think. Why?
As businesses move their data to the cloud, the more secure your data will be. This seems hard to believe, based on the current headlines. But it’s true. As a consumer, you want your data to be handled securely. If you’re a business owner you will want to respond to this need and will likely find yourself moving your data to cloud based services like AWS,Rackspace, Azure and others over the next few years. These companies will never provide 100% security. But they will do a better job then you. They will hire smarter people, invest in the right systems and put in place the best security possible to ensure your customers’ data is secure. Why? Because their business model depends on it. And if you have a good enough lawyer you’ll likely be able to share liability with them if something does happen.
Your financial exposure is not that significant. If you’re a consumer, then don’t panic. A stolen credit card will generally cost you no more than a $50 liability and probably nothing at all if the company that was hacked takes responsibility (and most do). Sure, it’s a hassle, but it’s not the end of the world. If you’re worried about your password being stolen then take a few minutes out every month to change it and use stronger, more varied passwords at the sites you visit. If you’re concerned about people finding out your social security number then don’t give it out online (but know that no matter how hard you try it will be tough to keep this completely private). You can purchase reputation management, credit card and identity theft protection services too – they all provide some safeguards against your privacy. If you’re a business then buy some insurance.
The benefits outweigh the costs. I’m in sales and marketing so to me, the more data I can find out about my prospects the better I can be at targeting them with information that I believe will help them. No one likes to be spammed or solicited. But marketing is getting smarter. By tracking our movements online, monitoring what we watch, observing our buying habits, examining our travel preferences and studying our relationships with others marketers can better understand us. And that helps sales and marketing people filter out the noise to deliver to you the services, products, TV shows, food and vacation spots that you’d most likely find of interest. As a marketer, I like that. As a consumer, I love it. I’m willing to risk my so-called “private” data for this benefit. And admit it – so would you.
Investors don’t care, so maybe you shouldn’t either. Shouldn’t the investors at T.J. Maxx, JP Morgan or Adobe Systems care that their company’s data was breached? According to a recent Bloomberg Business Week article they don’t. All three companies saw their stock eventually rise afterwards. “T.J. Maxx, had a data breach affecting 94 million customers in 2007. There was no long-term damage to the company’s fortunes—in the years following, share prices surged to five times the pre-breach levels.” Why is this? See the reasons above. Investors know that their security teams are doing as good a job as possible and that a breach of confidential data is more of a nuisance and not a financial calamity to those affected. They know that their customers are willing to give up their privacy in return for a discount. And they know that if a customer really wants to keep his private data private he can do this.
Finally, if you really want to be erased, you can be erased. Celebrities manage to keep their personal information personal, unless they’re doing something stupid in public. How come you don’t know Howard Stern’s cell phone number or Beyonce’s email address? It’s because their PR firms employ consultants who specialize in removing their clients’ histories from the web and changing their online identities in order to protect them. Even in this day and age, your privacy can be protected if you take the right steps and, more importantly, are willing to pay for it.
We’ll keep hearing about data breaches, hacks and intrusions. But you can calm down. The ultimate affect on you is likely very limited.
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