Why is it difficult to justify an investment in business resilience when the risk and costs of downtime are so high? One reason is because the current business environment insists on clearly demonstrated financial returns on investment. The other reason is because the risks and costs are not well understood. Despite advances in infrastructure robustness, occasional hardware, software and database downtime is unavoidable. In fact, Dunn & Bradstreet reports that 49 percent of Fortune 500 companies experience at least 1.6 hours of downtime per week. That translates into more than 80 hours annually. How would your customers react to an 80-hour outage?
There are options for reducing total downtime, in some cases almost to zero, but none of them are free. Hence, organizations must determine whether these options are worth the cost given the financial impact of downtime. Put differently, each organization needs to decide what losses it is willing to accept due to outages and design a solution to avoid this worst case. Average downtime costs vary considerably across industries, from approximately $90,000 per hour in the media sector to about $6.48 million per hour for large online brokerages. Downtime costs also vary significantly within industries. Business size is the most obvious factor, but it is not the only one. For instance, companies that can revert to manual processing can continue to function when their systems are unavailable, although usually at an appreciably lower level of activity. In contrast, some companies, such as online retailers, cannot conduct any business during system downtime. Similarly, certain manufacturing businesses must destroy all of the work in progress (such as food and pharmaceuticals). To gain a firm understanding of the financial impact of downtime, examine the various subcomponents of downtime costs: revenue, human resources, regulatory and compliance, remedial and reputation impact.
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