On average, how much do companies spend on cybersecurity? Knowing which expenses to expect can make allocating funds much more manageable. Still, every sector is different. How can a business create an adequate cybersecurity budget?

How Much Do Companies Spend on Cybersecurity?

Typically, companies spend 12.7% of their total IT allowance on cybersecurity. Since that number comes from various industries worldwide, a business should expect to use anywhere from 10% to 20% of its funds to meet its cybersecurity needs. For more specific figures, reviewing companies in the same sector is an option.

Pinning down an exact number for average cybersecurity spending is challenging because every sector has varying requirements. For example, a healthcare facility would likely need a larger budget than a retail company. An organization’s security expenses depend on its information storage, size, industry and compliance requirements.

Budget Considerations

Every company’s budgeting needs depend on its current and desired state of security. There are a few primary budget considerations for businesses:

• Software and hardware: Outside the business’s network, multiple areas require attack protection for complete security. For example, applications, information storage systems and client data need separate safety measures.
• Employee training: Employee training costs will typically solely be labour-related. Human error is responsible for about 95% of business cybersecurity challenges, so training is often necessary.
• Maintenance and upkeep: Software and hardware eventually require updates and repairs. Businesses should consider long-term costs in their cybersecurity budget.
• Cyber insurance: Cyber insurance isn’t necessary but is a significant consideration. It can protect an organization from financial damage caused by breaches or attacks. Considering the average cost of a cybersecurity incident is over $4 million, insurance is a vital choice to weigh.
• Security staff hiring: Even though a company may already have a cybersecurity team in place, budgeting for additional staff is essential for scalability. It also provides more flexibility in the case of salary negotiation.
• Service providers: Outsourcing responsibilities to various service providers is an option. For example, a cloud content management system can limit access to authorized individuals or provide data encryption. Since most businesses use cloud computing as of 2021, a vendor with built-in security can be beneficial.

There are many temporary and long-term cybersecurity budget considerations. Even though a company may only need to factor in some, keeping each in mind can be beneficial.

Cybersecurity Budgeting Tips for Businesses

On top of using the primary considerations to build a cybersecurity budget, businesses should consider some tips. It may help them prioritize spending to align with their goals.

1.    Evaluate Current Cybersecurity

Before a company begins budgeting, it must evaluate its current cybersecurity needs. In addition to the considerations above, it should factor in its size, type of operations, data storage and compliance requirements. Leaders should ask themselves which systems, tools or services are essential for security. The result differs for everyone.

2.    Identify Security Priorities

While securing everything is ideal, some companies may have to choose what to cover due to spending constraints. Identifying security priorities can help make the most out of their cybersecurity budget. What they should focus on depends on their sector and business model.

To understand how to prioritize, they can take inventory of their software, hardware and operations. For example, a company that deals with client information may want to protect data storage systems. It should consider the decision’s potential legal ramifications, return on investment and financial implications before finalizing it.

3.    Gain Cybersecurity Spending Support

Chief information security officers are responsible for gaining support for additional cybersecurity spending. Although asking for an increase isn’t critical, it can significantly help. Allocating funds can be much easier when the budget is flexible.

Many feel that a successful pitch relies on presenting quantifiable data and thorough explanations. For instance, telling the board of directors about the financial risks of unsecured systems can help put expenses into perspective. Data depicting potential costs and standards of other organizations in the industry can encourage them to consider increasing their budget.

4.    Identify Software and Hardware Needs

The type of hardware and software a business uses changes depending on the sector and client needs. However, even companies in the same industry have widely varied cybersecurity spending. A specific analysis is necessary to represent the necessary funding accurately.

Evaluating software and hardware requirements is essential for adequately allocating funds. It can help determine if new equipment is necessary or if the current versions work well enough. While some only have an initial cost for use and installation, others require recurring payments for access or maintenance. Companies should also consider their growth opportunities for long-term solutions.

5.    Allocate for Incident Response

Allocating resources for incident response is critical. Consider using PagerDuty Alternatives to streamline this process and develop practices for smooth operations. Although it may seem like the money is better spent on preventative security measures, organizations adding it to their budget are more prepared to bounce back after a cyber attack. It’s better to have the savings to respond rather than pull funds from other departments.

Create a Cybersecurity Budget

Cybersecurity spending is necessary, but determining what to prioritize can be challenging. Businesses can have a much easier time if they account for considerations and tips. Evaluating security needs and aligning them with funding can be beneficial for building a proper budget.