The state of Texas announced it has already spent roughly $1.9 million following the exposure of more than 3.5 million people's Social Security numbers, addresses, and other personal details.

More specifically, it has spent $1.2 million on notifying victims, $400,000 on setting up a call center, and $300,000 on hiring security professionals to investigate. This could be just the tip of the iceberg when it comes to the total cost of this incident.

Fortunately for the victims, the state has decided to provide credit monitoring, Social Security number protection, and identity theft insurance.

In Ponemon's report, the "Fifth Annual U.S. Cost of a Data Breach Study," it was determined that the average cost per record lost in data breaches was approximately $204. That implies Texas is getting off easy, to date having spent less than $1 per affected person.

Organizations need to look at these incidents as wake-up calls. In this case, it is believed that none of the exposed data was ever accessed, and yet the costs continue to rise. Had the data actually been accessed by criminals, the costs could have been much higher.

The state's mistake has been repeated frequently throughout the business community. It assumed the data did not need to be encrypted because it would always be stored "inside the network," where it would be safe and secure.

Sensitive data is more mobile than ever and needs protection regardless of where you think it will be stored or contained. Consider the quantity of digital data you can carry in your pocket on a regular basis; this changes the game when it comes to protection of records.

Could you imagine losing 2 million paper records? It would require some serious effort to move that quantity of data -- and a claim of ignorance would not be a reasonable defense. While the efficiency and convenience of digital records have revolutionized the business environment, this comes with the responsibility of controlling that information flow.

I hope this incident alerts IT professionals that full-disk encryption for laptops is simply not enough when looking to protect personally identifiable information (PII). If you handle sensitive information, then you should be taking steps to protect it, regardless of where it is stored or intended to be stored.

Chester Wisniewski is a senior security adviser at Sophos Canada.

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