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How do companies store passwords?

Secure business password management is paramount for preventing data leaks and associated damages.

There are several ways to guarantee the secure storage of passwords, and there are just as many to leave them exposed. Currently, storing passwords in a third-party cloud-based password vault is the easiest method applicable to most enterprises. However, the most prominent brands with the most valuable corporate secrets prefer developing their own solutions.

In this article, we'll explain how businesses store passwords, discuss the potential risks of these methods, and share our best practices for doing it safely.

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Methods companies use to store passwords

How do companies store passwords? There are several different methods. A business password manager is the most popular method to store usernames and passwords securely. Professional password managers use advanced encryption algorithms and hash functions and deploy strict zero-knowledge protocols to safeguard them from unauthorized access. The latter ensures that passwords are accessible solely to their owners and nobody else.

Yet, as NordPass research reveals, numerous prominent companies use easy-to-guess passwords that are susceptible to hacking. The lack of a dedicated management tool results in employees reusing the same weak passwords, sharing them over Slack or social media, or storing them in a notepad, none of which is safe.

You may have noticed employees storing passwords in databases with weak encryption, like an Excel sheet, or no encryption at all, like a text document. It is extremely risky if your business accounts store personally identifiable information that could be used for identity theft and credit card scams.

Storing passwords in unencrypted plain text is the least secure way, and it goes against GDPR data safety recommendations. Cybercriminals can immediately use them to access corporate accounts, causing all sorts of trouble. Furthermore, if such a breach results in consumer data theft, like phone, credit card, and social security numbers, it can end in a costly lawsuit.

Reusing the same password is susceptible to a hacking technique called credential stuffing. Cybercriminals use stolen username and password combinations from one account on a different one, hoping that it would match. If employees use the same password for multiple business accounts, then breaching one can compromise all others.

Why is it important to store passwords securely?

Insecure password management is one of the main reasons for corporate data breaches, and it can be extremely costly, with significant collateral damages. For example, ransomware groups often exploit weak passwords to breach business networks and then encrypt targeted data to stop the operations and demand a ransom.

Compliance is another crucial point. If your business deals with personally identifiable information (PII), such as names, addresses, phone numbers, etc., you must ensure data safety. Otherwise, affected clients can file a lawsuit, and the damage to the brand's reputation will be long-lasting.

The best password managers also positively affect workplace comfort and productivity. Employees can securely store passwords in an encrypted database without memorizing them or worrying about safety. They only need a single master password to enter the vault and quickly grab the required password, saving time. Simultaneously, workplace network administrators can quickly issue access privileges and monitor accounts, enhancing risk management.

What are the best tools to keep companies’ passwords safe?

The most secure way for a company to store passwords is to use a professional business password manager. Instead of memorizing dozens of complex passwords or storing them in a notepad or spreadsheet, with a password manager, you’ll get a secure encrypted vault protected by a single master password. This way, employees only need to remember one password to unlock the vault.

Noteworthy password managers offer a form-filling feature that automatically inputs the password without manual typing. A password generator allows the creation of passwords up to 60 symbols long, with capital letters and numbers to protect against brute-force attacks. Some also offer security dashboards with information on password strength, access privileges, and data leaks.

Another valuable feature is a data breach scanner. It is particularly useful because of real-time alerts if your confidential data appears on illegal online marketplaces or stolen credential compilations. This allows you to immediately change stolen passwords before cybercriminals access compromised accounts.

However, there are more account authorization methods you can utilize. Large companies whose employees manage dozens of online accounts prefer single sign-on (SSO), which allows logging in to multiple accounts with a single app. Whenever you log in to online services using your Facebook or Gmail accounts, you’re using SSO technology. However, it has a significant setback, as it compromises all business accounts if cybercriminals hack the SSO authenticator.

Alternatively, software development enterprises often rely on secret management tools. This specialized software is designed to secure API and database access points, SSH keys, and certificates. Because they are tailored for software developers, they offer dedicated features like integration with DevOps platforms but may be overwhelming for less tech-savvy employees.

Tips for keeping company passwords safe

Subscribing to a business password manager is highly beneficial, but there are still some steps to consider. Here's how companies store passwords that are nearly immune to hacking attempts:

  • Regularly updating passwords. Regularly changing passwords ensures stolen ones cannot be used to access corporate accounts and protects them from rogue employees. However, this practice requires a password management tool, without which employees will often choose the most basic new password, risking security.
  • Using MFA. Multi-factor authentication (MFA) is widely accepted as one of the best account protection tools. Once enabled, it demands a second authentication step, like an authentication app, email verification, or passcode. Even if cybercriminals manage to steal your passwords, they cannot complete the second verification step and take over the account. But remember that MFA does not replace password protection benefits and should be used alongside a password manager whenever possible.
  • Monitoring. Monitoring account access privileges is paramount for risk management. Whenever cybersecurity specialists notice suspicious behavior on a specific account, they can check access logs to identify which employee used it at the time of the incident or whether it was breached from outside. Choosing password management software that includes a dashboard with a monitoring section is best.
  • Ensure password complexity. Enterprise accounts should never have "password123" or "qwerty321" passwords because cybercriminals use these first. Furthermore, they use rainbow tables filled with username and password combinations to target hundreds of accounts simultaneously, increasing the chances of a takeover. Instead, it's best to use a password generator that provides passwords up to 60 symbols long, with numbers and capital letters.


The most secure way for a company to store passwords is by using a business password manager. Most of them are cloud-based, providing account access wherever the employee is residing. Simultaneously, advanced encryption, hashing, and zero-knowledge protocols reserve access privileges to the sole owner, preventing takeovers.

Some enterprise password managers, like NordPass, go further and include additional benefits, like a data breach scanner, SSO support, a security dashboard, and a dedicated manager for seamless onboarding. After concise training, your employees will use different and complex passwords for each company account, ensuring all of your business passwords stay secure.

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