Look, we need to talk about something that might make you uncomfortable. Your business login system is probably a disaster waiting to happen. And before you tell me "we use strong passwords," let me stop you right there.
Microsoft's latest Digital Defense Report confirms that identity compromise is now the most common attack vector. Attackers aren't breaking the door down anymore, they're simply logging in. That's why ITDR (Identity Threat Detection and Response) has become a foundational security capability, even for smaller organisations.
The numbers are stark. Small and mid-sized businesses accounted for 70.5% of data breaches in 2025, and the average cost for micro and small businesses to recover from a serious breach stands at GBP £7,960. That's not including the lost business, reputational damage, or the sleepless nights.
Here's what's changed: cyber criminals have stopped trying to hack through your firewall. They've realised it's much easier to simply log in using credentials they've stolen or tricked your employees into giving away.
The Identity Security Problem UK SMEs Refuse to Face
Most small businesses treat login security like a necessary evil. You set up passwords, maybe add some two-factor authentication if someone forced you to, and hope for the best. But the threat landscape has fundamentally shifted.
By 2026, identity-based cyber attacks will be one of the most effective ways to bypass security controls. Think about it - if someone has legitimate login credentials, they walk right past every security system you've put in place.
The attackers know this too. In 2026, expect to see a sharp rise in AI-driven attacks: automated phishing campaigns that look eerily authentic, deepfake videos of leadership authorizing wire transfers, and malware that adapts in real time to bypass your defences.
The report cites phishing as the most prevalent form of attack, with 85% of UK businesses targeted by email scams. Your employees receive these attacks daily, and it only takes one successful attempt to compromise your entire system.
But here's the thing that really keeps me awake at night: around two million SMEs in the UK—representing approximately 39% of the total—have not provided cyber security training to their staff. We're literally handing attackers the keys to our businesses.
Why Traditional Security Approaches Don't Work Anymore
Remember when cybersecurity was about building a fortress? Strong perimeter defences, firewalls, antivirus software - keep the bad guys out and everything inside is safe. That model is dead.
Think of identity as the front door key, and attackers are getting very good at copying keys. Once they have legitimate credentials, they're not trying to break in - they belong.
The shift is happening at regulatory level too. It's no coincidence that Cyber Essentials updates in 2026 lean heavily into this area. Clearer expectations around login security and access control are coming.
And it's not just about external threats. Just as shadow IT created risk in the past, shadow AI is emerging as a major blind spot. Employees are deploying AI tools without approval, often processing sensitive data across unknown environments. Uncontrolled AI adoption introduces invisible risk at scale.
Staff click malicious link
Employee receives convincing phishing email and clicks link or downloads attachment
Credentials get stolen
Malware captures login details or employee enters them on fake website
Attackers log in legitimately
Using stolen credentials, criminals access your systems as if they were employees
Data gets accessed and stolen
With legitimate access, attackers can view, copy, or encrypt your business data
The Real Cost of Getting Identity Security Wrong
When we talk about cybersecurity costs, most people think about the immediate ransom payment or system recovery. But the real costs run much deeper.
Seventy-one per cent of organisations reported receiving fines related to data breaches or compliance failures in the past 12 months. Of those fined, nearly one-third paid more than £250,000, while almost half incurred penalties between £100,001 and £1 million.
Beyond the fines, there are the human costs. One-third of leaders faced job losses or disciplinary action, and 18 percent of organisations were forced to shut down or make major strategic changes following serious breaches involving employee data.
But here's what really hurts: customer trust. Once word gets out that you've lost customer data, winning that confidence back is nearly impossible. I've seen established businesses fold not from the immediate cost of a breach, but from the long-term reputational damage.
How Modern Identity Attacks Actually Work
Let me walk you through how a typical identity-based attack unfolds, because understanding the mechanics helps you see why traditional defences fall short.
Deepfake technology has advanced to the point where video calls, voice messages, and audio instructions can be convincingly forged in real time. Imagine receiving a video call from your "managing director" asking you to urgently transfer funds or share system access. Could you tell if it was fake?
Despite advances in technology, attackers continue to exploit human processes. Help desks remain a prime target, with attackers impersonating employees to request password resets or access changes. Recent high-profile incidents have demonstrated how effective these attacks can be. A single phone call can still defeat advanced security controls.
The attackers are also getting more organised. Ransomware used to be blunt. Encrypt files. Demand money. Now it's a lot more organised. Data is copied first. Pressure is applied later. Executives are contacted directly. Information is released gradually. It's persistent, structured, and very deliberate.
The Three Stages of Modern Identity Attacks
Stage 1: Reconnaissance - Attackers research your company structure, identify key employees, and gather information from social media and public sources.
Stage 2: Initial Access - Using social engineering or AI-generated content, they trick employees into revealing credentials or installing malware.
Stage 3: Persistence and Escalation - Once inside, they move through your systems, gathering sensitive data and establishing multiple access points before you even know they're there.
Building Identity Security That Actually Works
Right, enough doom and gloom. Let's talk about practical solutions that don't require a PhD in cybersecurity or a massive budget.
The good news is that effective identity security doesn't have to be complex. Many of our clients are surprised to find that a few smart moves -like MFA, regular backups, and employee training, can help to mitigate their risk.
Start With Multi-Factor Authentication (MFA)
This should be your first priority. 83% of IT SME professionals require employees to use multi-factor authentication, or MFA. If you're not in that 83%, you need to be.
But not all MFA is created equal. SMS-based authentication can be intercepted. App-based solutions like Microsoft Authenticator or Google Authenticator are better. Hardware tokens are best for high-risk accounts.
Move Beyond Passwords
Passwords are expected to become obsolete in organisational security strategies, replaced by platform-based and biometric authentication. Eliminating passwords from authentication workflows entirely, instead focusing on platform and biometric authentication methods that are more secure and user-friendly. This shift is expected to result in improved security as well as a better experience for users.
Look for solutions that support:
- Windows Hello for Business
- Biometric authentication where available
- Hardware security keys for critical accounts
- Single sign-on (SSO) to reduce password fatigue
Implement Zero Trust Principles
Firms are moving toward identity-first security measures – with more than 86% adopting zero trust models. Zero Trust means never assuming someone should have access just because they're inside your network.
Every access request gets verified. Every user, device, and application needs to prove they are who they claim to be, every time they try to access something.
The Identity Governance Challenge for SMEs
Now here's where things get interesting for growing businesses. A new wave of innovation from established and new IGA players has changed the economics of IGA, allowing rapid application onboarding, simple administration, and delivering IGA operations at a relatively attractive total cost of ownership. I predict IGA adoption will take off in mid-sized enterprises in 2026.
Identity Governance and Administration (IGA) used to be something only large enterprises could afford. But that's changing. New solutions are making it practical for smaller businesses to properly manage who has access to what, when they should have it, and when that access should be revoked.
If you are a midmarket enterprise who previously shied away from IGA, your IGA perceptions may be dated. There is plenty of enterprise value and rapid deployment without requiring an army of consultants.
The key is starting simple:
- Regular access reviews (who has access to what?)
- Automated onboarding/offboarding processes
- Clear approval workflows for new access requests
- Monitoring for unusual access patterns
Start with a simple access audit. List every system your business uses, then document who has access to each one. You'll be shocked at what you find - former employees who still have access, contractors with admin rights they don't need, shared accounts that nobody owns.
Planning for AI Agents and Non-Human Identities
Here's something most businesses haven't thought about yet: I expect 2026 will see AI agents touching core business processes, and some high-profile data breaches and fraud originating from those AI agents.
As you start using AI tools for customer service, data analysis, or process automation, those AI agents need their own identities and access controls. For the identity teams out there, start thinking about holistic identity security for AI agents including visibility/observability, access control, governance, and lifecycle management. A high-profile breach will eventually occur, and then executives will want to understand how your organization can avoid being the next headline. Now is the time to get ahead of the problem with a focus on solutions that work today rather than roadmaps for tomorrow.
Think of it this way: if you're giving an AI agent access to your customer database to answer queries, what happens if that agent gets compromised? What data could an attacker access through it?
Practical Next Steps for Your Business
Ready to actually do something about this? Here's your action plan:
This Week:
- Enable MFA on all administrative accounts
- Conduct an access audit - who has access to what?
- Review your offboarding process - are you properly removing access when people leave?
This Month:
- Implement MFA across all user accounts
- Start regular security awareness training
- Set up monitoring for unusual login activity
- Review and update your incident response plan
Next Quarter:
- Evaluate SSO solutions to reduce password fatigue
- Implement automated access provisioning/deprovisioning
- Consider moving to passwordless authentication for key systems
- Plan for non-human identity management as you adopt AI tools
Remember, 46% of SME leaders turn to outside industry experts for guidance on improving their organisation's cyber resilience. Don't try to become a cybersecurity expert overnight - get help from people who do this for a living.
The reality is that identity security isn't optional anymore. The direction of travel is clear. Cyber security in 2026 is ongoing, identity-focused, and tied closely to how organisations actually operate. Businesses that only tick technical boxes will find things harder.
Your customers trust you with their data. Your employees rely on your systems to do their jobs. Your business depends on maintaining that trust. Getting identity security right isn't just about avoiding fines or preventing data theft - it's about building a foundation that lets you grow confidently in an increasingly digital world.
The threats are real, but so are the solutions. Start with the basics, build incrementally, and don't wait for a breach to force your hand. Your future self will thank you.
Ready to secure your business properly? Contact us to discuss how we can help you build identity security that actually works for your business, not against it.