The cost of ignoring privacy
David Fraser has a post entitled Effect of privacy/security incidents on stock prices in his Canadian Privacy Law Blog. It reinforces the concept that doing privacy and security badly, or suffering a breach, can indeed impact the bottom line of any business - large or small. I have seen price reduction formulas applied to small business sales due to inadequate privacy policies.
The "headline risk" of privacy and security breaches is significant.
He points to an article that takes the position that privacy and security breaches can in many cases affect a business's reputation so much that it will lower its stock price.
David adds that in his opinion, if your business is a critical service provider to other businesses, you may risk losing significant contracts if you suffer a privacy/security breach.