Cybersecurity Risk Management in SMEs: Investment Implications Post-Breach

The cybersecurity landscape for small and mid-sized enterprises (SMEs) has become a critical focal point for investors in 2025, as regulatory scrutiny intensifies and the financial toll of data breaches escalates. The case of Eastern Radiologists, a North Carolina-based healthcare firm, offers a stark illustration of the risks and consequences SMEs face when cybersecurity lapses lead to litigation and reputational damage.

The Eastern Radiologists Case: A Cautionary Tale

In November 2023, Eastern Radiologists suffered a cyberattack that exposed the sensitive data of 884,935 individuals, including Social Security numbers, health insurance details, and medical records, according to a Newsweek report. The breach, attributed to unauthorized network access, culminated in a $3.25 million class-action settlement, as outlined on the settlement site. While the firm denied wrongdoing, the settlement included compensation for documented out-of-pocket losses (up to $5,000 per person), pro rata cash payments, and one year of free medical account monitoring, according to DailyHodl. This case underscores the dual burden SMEs face: litigation costs and the operational expenses of post-breach remediation.

The regulatory response, overseen by North Carolina's Superior Court Judge Matthew T. Houston, highlights the growing role of judicial oversight in enforcing accountability, as detailed in the settlement FAQ. For investors, the incident signals that even firms with decades of operational history are not immune to cyber risks, and that litigation outcomes can erode shareholder value.

Industry-Wide Financial and Investor Impacts

The Eastern Radiologists breach aligns with broader trends in cybersecurity costs for SMEs. According to an Abacode analysis of IBM's 2025 Cost of a Data Breach Report, the average cost of a breach in the U.S. surged to $10.22 million, driven by regulatory fines and operational disruptions. For SMEs specifically, the median cost per attack in 2023 was $46,000, though over half of incidents exceeded $100,000 in expenses, per the SmartFinancial report. These figures are compounded by indirect costs, such as reputational damage and loss of customer trust.

Investor behavior reflects this heightened awareness. Public companies experiencing breaches often see immediate stock price declines-on average, a 5.3% drop within days of disclosure-and long-term underperformance against sector benchmarks of up to 15%, according to a Westbourne analysis. In the SME sector, where resources are tighter, the consequences are even more severe: 47% of very small firms allocate nothing to cybersecurity, according to a Purple Shield study, making them prime targets. The result is a growing reluctance among investors to fund SMEs with inadequate security measures, as evidenced by the 21% rate of M&A deals being delayed or abandoned due to cybersecurity concerns in a Cyberbuilders analysis.

Investment Implications and Strategic Shifts

The financial and reputational fallout from breaches is reshaping investment priorities. In 2025, SMEs are projected to spend $29.8 billion on cybersecurity, with a focus on managed security services, AI-driven threat detection, and employee training, according to Moss Adams. Investors are increasingly favoring firms that adopt proactive measures, such as real-time breach reporting and compliance with frameworks like NIST and ISO 27001, as outlined in a ResearchGate review.

Cyber insurance has also gained prominence, with premiums rising as insurers adjust to the higher frequency of claims. While adoption rates among SMEs increased by 40% in 2025, per a LinkedIn article, coverage gaps remain, particularly for incidents involving AI-related vulnerabilities, which added $670,000 to the average breach cost, according to BrightDefense data. This has spurred demand for hybrid solutions that combine insurance with preventive technologies.

For investors, the key takeaway is clear: cybersecurity is no longer a peripheral concern but a core component of risk assessment. Firms that fail to invest in robust defenses risk not only litigation but also diminished access to capital. Conversely, SMEs that prioritize cybersecurity-through AI integration, employee training, and compliance-position themselves as attractive candidates for investment in an increasingly risk-averse market.

Conclusion

The Eastern Radiologists case serves as a microcosm of the challenges SMEs face in balancing operational efficiency with cybersecurity resilience. As regulatory pressures mount and investor scrutiny deepens, the imperative for proactive risk management has never been clearer. For investors, the path forward lies in supporting SMEs that treat cybersecurity as a strategic asset rather than a compliance checkbox. In an era where a single breach can unravel years of value creation, the cost of inaction far outweighs the investment required to stay ahead of threats.