What is ransomware?

Ransomware has become one of the most disruptive and costly cyber threats in the world. Once considered a nuisance targeting individual users, it has evolved into a powerful weapon for organized cybercriminal groups. Ransomware attacks now regularly cripple businesses, hospitals, schools, and even government agencies. At its core, ransomware is malicious software that encrypts or locks access to a victim’s data and demands payment, usually in cryptocurrency, in exchange for a decryption key.

The financial stakes are enormous. Cybersecurity Ventures estimates that ransomware cost businesses and governments over 30 billion dollars globally in 2024. This figure includes not only ransom payments but also operational downtime, legal fees, regulatory fines, and long-term reputational damage. The FBI’s Internet Crime Complaint Center reported over 3,700 ransomware complaints in 2023, with adjusted losses of 1.2 billion dollars. These numbers are widely believed to underestimate the true scale because many victims avoid reporting incidents for fear of reputational fallout.

Criminals are more organized than ever. Ransomware-as-a-service (RaaS) has emerged as a dominant model where professional developers lease their ransomware platforms to affiliates. These affiliates conduct attacks and split ransom proceeds with the developers. This system has lowered technical barriers to entry and created a thriving underground economy. Attackers also use double and triple extortion techniques where they not only encrypt data but also threaten to publish stolen information or launch distributed denial-of-service attacks if victims do not comply.

This article explains what ransomware is, how it works, its many variations, and the devastating consequences it can bring to organizations.

Ransomware explained

Ransomware is a type of malicious software designed to block access to computer systems or data until the victim pays a ransom. It typically uses strong encryption algorithms to lock files, rendering them unusable without a unique decryption key held by the attackers. Victims are presented with a ransom note containing payment instructions and warnings of permanent data loss or public exposure if they refuse to comply.

The concept of ransomware dates to 1989 with the AIDS Trojan, a crude program distributed on floppy disks to AIDS researchers. It encrypted file names on DOS systems and demanded a 189-dollar payment sent to a post office box in Panama. However, the AIDS Trojan was easily defeated and lacked the sophistication needed to scale.

The first true ransomware to spark global awareness was CryptoLocker, discovered in 2013. CryptoLocker spread through massive phishing email campaigns and used RSA-2048 encryption, which was virtually impossible to break without the attacker’s key. It also pioneered the use of Bitcoin as a payment method, which provided pseudo anonymity for cybercriminals. CryptoLocker infected over 250,000 systems within a few months and collected an estimated 3 million dollars in ransom payments. It marked the beginning of ransomware as a serious threat to businesses and individuals alike.

Since CryptoLocker, ransomware has evolved rapidly. Modern groups like LockBit, BlackCat (also known as ALPHV), and Akira run highly organized, multi-million-dollar operations. These groups deploy advanced encryption, steal sensitive data to increase pressure on victims, and even maintain “customer service” portals to facilitate ransom payments. Many operate like legitimate corporations, complete with business hours, support desks, and performance incentives for their affiliate attackers.

Types of ransomware

Ransomware attacks can vary significantly in approach and impact. Here are the most common types:

Crypto ransomware
This is the most widespread form of ransomware. It encrypts important files such as documents, images, and databases, making them inaccessible. Victims often face total operational paralysis unless they have reliable backups.

Locker ransomware
Rather than encrypting individual files, locker ransomware locks users out of their entire system. Victims are presented with a full-screen message demanding payment. They cannot access any applications or files until the ransom is paid.

Doxware or leakware
This variation steals sensitive data before encryption. Attackers threaten to release it publicly or sell it on dark web markets if the victim refuses to pay. This tactic adds reputational and regulatory pressure, particularly in industries where data privacy is critical.

Scareware
Scareware pretends to be legitimate security software that claims to detect malware or system issues. It prompts the user to pay for a fake repair. While less sophisticated, scareware still generates revenue for attackers.

Ransomware-as-a-Service (RaaS)
In this model, ransomware developers rent their tools and infrastructure to affiliates. Affiliates launch attacks and pay a percentage of collected ransoms back to the developers. This business model lowers the barrier of entry for cybercriminals as almost no coding knowledge is needed as an affiliate and has significantly increased the number and variety of ransomware attacks.

How ransomware works

A typical ransomware attack follows a sequence of stages. Each step gives attackers more control over a victim’s environment.

Initial access
Most ransomware campaigns begin with phishing emails. These emails trick users into clicking malicious links or opening infected attachments. Other common entry points include exploiting unpatched software vulnerabilities, weak Remote Desktop Protocol credentials, and compromised third-party vendors.

For example, in the Colonial Pipeline breach, attackers gained access using a single compromised VPN password. This led to one of the most significant critical infrastructure attacks in United States history.

Lateral movement
Once inside a network, attackers rarely launch ransomware immediately. Instead, they spend time mapping the environment, escalating privileges, and seeking out high-value targets such as backup servers. Tools like Mimikatz and Cobalt Strike are commonly used during this phase. This is typically the time where criminals will “case the joint” and run analysis on who they have breached and look at financial statements to see how much cash is available for a ransom demand.

Data exfiltration
Modern ransomware operators often steal data before encryption. This enables them to threaten public exposure if the ransom is not paid. Double extortion has become the norm in recent years.

Encryption
After reconnaissance and data theft, attackers deploy the ransomware payload. The malware encrypts files using strong algorithms like AES-256 and displays a ransom note. Victims are often given a short window to pay before data is permanently lost or published online.

Ransom demand
Attackers typically demand payment in cryptocurrency due to its relative anonymity. Some groups offer “discounts” for quick payment or increase the ransom over time to create urgency.

Impacts of ransomware

Ransomware attacks are not just a technical nuisance. They are existential threats that can bring organizations to their knees. The impact of a successful attack ripples far beyond IT systems, affecting financial stability, operational continuity, customer trust, and even public safety.

Financial loss
The most immediate consequence of a ransomware attack is financial damage. IBM’s 2024 Cost of a Data Breach Report places the average total cost of a ransomware incident at 5.4 million dollars. This figure includes ransom payments, which can range from tens of thousands to millions, as well as indirect costs like downtime, data restoration, legal fees, and regulatory penalties.

But the true financial impact is often higher. Many organizations face weeks or months of reduced productivity while systems are restored. For example, the 2021 attack on Colonial Pipeline cost the company nearly 4.4 million dollars in ransom alone. Additional costs from operational shutdowns and reputational harm pushed total damages even higher.

Operational disruption
Ransomware attacks frequently paralyze critical systems, forcing organizations to suspend operations. Hospitals have canceled surgeries and diverted ambulances because electronic medical records were inaccessible. Municipal governments have been unable to process taxes, issue permits, or provide essential services after ransomware crippled their networks.

In manufacturing and logistics, a single ransomware infection can halt production lines and disrupt global supply chains. One automotive parts supplier lost over a month of output after attackers encrypted its systems. For small and medium businesses without redundancy plans, even a few days of downtime can threaten survival.

Reputational damage
Data breaches erode customer trust. Once sensitive data like Social Security numbers, medical records, or payment information is exposed, rebuilding confidence is a long and expensive process. Studies show that 78 percent of consumers are less likely to engage with a business after learning it suffered a data breach.

Competitors may seize the opportunity to attract disillusioned customers, while partners may reconsider agreements. In the case of the 2023 MGM Resorts attack, guests experienced widespread outages that disrupted reservations, gaming systems, and even electronic room keys. The damage to MGM’s brand was felt globally.

Regulatory consequences
Ransomware incidents often trigger regulatory scrutiny, especially when personal data is involved. Laws such as the General Data Protection Regulation (GDPR) and the Health Insurance Portability and Accountability Act (HIPAA) impose strict requirements for breach reporting and data security. Failure to comply can result in fines reaching millions of dollars.

For example, a healthcare provider hit by ransomware that leads to patient data exposure may face penalties from regulators on top of lawsuit settlements from affected individuals. Legal fees and court costs further add to the financial burden.

Detection and prevention

A strong defense against ransomware is not built on a single tool or process. It requires a multi-layered strategy that combines advanced technologies, robust processes, and well-trained employees. Each layer complements the others to create resilience against even the most sophisticated attacks.

Modern endpoint protection
Legacy antivirus tools are no match for today’s ransomware. Advanced endpoint protection platforms use behavioral analytics and machine learning to detect early indicators of attack such as mass file encryption, unauthorized privilege escalation, or unusual network traffic. These solutions can automatically isolate compromised devices, preventing the spread of malware across the network. Some also feature rollback capabilities, allowing organizations to restore files that were altered during an attack without relying on external backups.

Cloud and endpoint backup
Backups remain the last line of defense when all else fails. However, not all backups are created equal. Attackers often target backup systems during the lateral movement stage, corrupting or encrypting them to prevent recovery. Resilient organizations rely on immutable, air-gapped backups that cannot be altered or deleted by attackers. A hybrid approach combining cloud-to-cloud backup with endpoint backup ensures critical data is protected at multiple levels. Regular testing of backup and restoration processes is essential to guarantee they will function during a crisis.

Email and DNS security
Email remains the most common entry point for ransomware. Phishing protection systems filter out malicious attachments and links before they reach end users. DNS filtering adds another layer by blocking connections to known malicious domains and command-and-control servers. Together, these defenses prevent attackers from establishing the footholds needed to launch their payloads.

Patch management
Unpatched vulnerabilities are low-hanging fruit for attackers. The WannaCry outbreak in 2017 exploited EternalBlue, a Windows SMB vulnerability for which a patch had already been available. Routine patch management and vulnerability scanning can close these gaps and dramatically reduce an organization’s attack surface.

Threat intelligence and SOC automation
Staying ahead of ransomware requires visibility into the evolving threat landscape. Threat intelligence platforms provide up-to-date information on new ransomware strains, attack techniques, and indicators of compromise. Security operations centers (SOCs) that leverage automation can accelerate their response to alerts, reducing dwell time and stopping attackers before encryption begins.

User awareness training
Technology cannot block every attack. Employees remain a critical line of defense against social engineering. Regular phishing simulations and security awareness programs teach users to recognize suspicious emails, resist manipulation, and report potential threats. Over time, this creates a security-conscious culture that strengthens the organization’s overall posture.

Responding to ransomware

Despite the best defenses, no organization is completely immune. A clear response plan can mean the difference between a minor incident and a major catastrophe.

1. The first step in a ransomware response is containment. Infected systems should be immediately isolated from the network to prevent the malware from spreading laterally.
2. Next, teams must assess the scope of the attack. Identifying which systems and data have been compromised will guide recovery efforts.
3. Eradication comes after assessment. Security teams need to remove ransomware from infected systems and verify that no backdoors remain.
4. Recovery is only possible with clean backups. Restoring from a tested, secure backup can bring systems back online without paying the ransom. However, recovery may still require significant downtime, making the speed and reliability of backup systems critical.
5. Finally, a post-incident review should be conducted to identify gaps and strengthen defenses. Regulatory notifications may also be required if sensitive data was exposed.

Conclusion

Ransomware has grown from a minor nuisance into one of the most serious threats facing businesses and communities today. Its ability to disrupt operations, steal sensitive data, and inflict financial and reputational harm has made it a top concern for security leaders across every industry.

Defending against ransomware requires more than just a single solution. Organizations need a comprehensive approach that combines advanced endpoint protection, resilient and regularly tested backups, robust email and web filtering, and real-time threat intelligence. Just as important is fostering a culture of security awareness so that employees can recognize and resist social engineering attempts.

No organization can eliminate risk entirely, but with a defense-in-depth strategy and a tested recovery plan, it is possible to reduce the likelihood of a successful attack and minimize the impact when one occurs. Resilience is the new benchmark for cybersecurity. Those who invest in layered defenses today will be far better prepared to weather the inevitable storms of tomorrow’s threat landscape.