An incident response isn’t just an IT problem. It can trigger regulatory investigations, litigation, operational disruption, reputational damage, and millions of dollars in unexpected costs—often within days of discovery. 

The financial and operational consequences of cyber threats are severe. In 2026, the average cost of an incident response was $4.99 million in the U.S., with a 56% increase in AI-driven attacks.  

Here are some common risks associated with an incident response: 

Business Risks 

• Financial loss: Beyond the initial attack, organizations face investigation costs, forensic analysis, legal fees, regulatory penalties, customer notification expenses, and potential litigation, costs often passed onto consumers. 
• Operational disruption: Incident responses can disrupt normal business operations, lead to downtime and negatively affect productivity. According to research from Comparitech, publicly traded companies suffered an average drop of 3.2% percent in their stock values in the six months following an incident response. It took an average of 53 days for stock prices to return to pre-breach levels. 
• Loss of competitive advantage: Businesses rely on proprietary information and trade secrets for a competitive edge. Mishandling such information can lead to a loss of competitive advantage and damage market position.  
• Reputational damage: An incident response can cause severe reputational damage, particularly for organizations operating in the legal, medical, and financial industries. Recent research has shown that the risk is especially great for companies in the operational technology (OT) sector, where cyberattacks can put critical infrastructure and national security at risk. 

Legal and Compliance Risks 

• Regulatory non-compliance: All U.S. states, the District of Columbia, Puerto Rico, and the Virgin Islands have enacted incident response laws that require notification of security breaches involving personal information. Many states mandate specific timelines, ranging from 30 to 45 days after discovery of the breach. Failure to comply can result in severe legal penalties, fines, and enforcement actions. 
• Litigation exposure: An incident response exposes a company to significant legal risks, including lawsuits and regulatory investigations. Organizations may face exposure for negligence, privacy law violations, and breach notification delays that result in financial damages, reputational harm, and defense costs. 

Individual and Societal Risks 

• Identity theft and Imposter scams. According to the Federal Trade Commission (FTC), people lost $3.5 billion in imposter scams in 2025. These scams often begin with a fake security alert from a bank via text, phone, email, and social media. The number of imposter scams significantly increased in 2025, when more than 1.15 million such scams were reported to the FTC in the first three quarters of the year alone. 
• Loss of privacy. Mishandling personal data is a violation of individuals’ privacy rights, and this erosion of privacy can have significant social and ethical implications. A cyber threat can cause feelings of helplessness as a person’s sensitive information is distributed without their consent. 

National Security Risks 

• Espionage and cyber warfare. Malicious actors frequently repurpose sensitive data stolen in a breach for espionage or cyber warfare, leading to potential national security risks. For example, threat groups linked to China, North Korea, and Russia are known to use stolen data to launch cyberattacks targeting telecommunications, military strategy, and medical research. 

The clock starts ticking the moment a breach is discovered. As a result, protection from cyber threats  requires strict security protocols, advanced technology, and continual data handling education for employees.  

Where AI Changes the Breach Response Workflow 

Once a breach occurs, organizations must rapidly determine what information was compromised, who was affected, and what legal obligations are triggered. Historically, teams have relied on a combination of eDiscovery platforms, search terms, regular expressions, and offline spreadsheets to accomplish this work and track individuals. That approach was never designed specifically for breach economics, workflows or breach deadlines. Purpose-built AI changes that by enabling teams to: 

• Scope: securely process and cull incident data down to the breach-relevant population.  
• Detect: identify PI and PHI across the relevant data. 
• Link: connect each data element to the specific individual it belongs to, then normalize and deduplicate across the full population.  
• Report: resolve conflicts, validate edge cases, and generate a reviewable, notification-ready entity report with a defensible audit trail. 

Solutions like Relativity aiR for Data Breach Response are transforming how organizations respond to cyber incidents by moving beyond simple PII detection. Relativity aiR for Data Breach Response applies generative AI to the specific problem breach teams face: finding documents that contain PI and PHI is the “easier” part, connecting that data to the individuals it belongs to, across emails, spreadsheets, scanned forms, and handwritten records, is where teams lose the most time. aiR for Data Breach Response identifies PI and PHI across the relevant data, automatically links it to the individual it belongs to, deduplicates those individuals across the full population, and produces a reviewable, notification-ready entity report, all inside RelativityOne. The technology handles the volume work; experienced reviewers handle the judgment work, validating edge cases, resolving any flagged conflicts, and making the calls that carry legal consequence. Every decision carries documented rationale and a full audit trail, so the process holds up to scrutiny from clients, regulators, and opposing counsel. 

Purpose-built AI turns what is often a chaotic process into a faster, more defensible workflow,  but the technology is only part of the answer. Knowing how to scope a dataset, where to apply human review, and how to document decisions that will be scrutinized months later is what makes a breach response hold up. 

CDS provides a full range of advisory services related to incident responses. To find out how we can boost your company’s response, contact us at  today.