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Understanding the True Cost of Downtime to Your Business

Any interruption in computer information services can cause your organization large economic losses and loss of valuable human resources. This is true whether the interruption is due to poor computer software design, hardware malfunctions, fire or other destruction of buildings and equipment, or cyber-attacks.

Every company and organization should anticipate business interruptions, have strategies to minimize financial losses, and have plans to get operations running again quickly.

A few items businesses should have in place are:

Even with good plans in place, the company will still likely suffer financially. In order to plan for economic losses, as well as to prove the value of these losses to recover insurance, the company must understand how to identify each type of business loss and how to quantify those losses.

Typical Losses

Most every business, large or small, will suffer the following damages due to business downtime:

  •       Repair and replacement costs. Computer hardware and software that is damaged needs to be fixed or replaced. The more servers, workstations and other hardware a company has on its property, the greater the cost to fix or replace the hardware. If there are not proper backups of the software programs that run the business programs, or if the programs themselves caused the interruption, the software has to be fixed or repurchased. Hardware and software costs can be substantial.
  •       Lost overhead expenses. While information systems are unable to be used, mortgages, leases, utility bills, insurance premiums, and other expenses still need to be paid.
  •       Lost human resource expenses. When computer systems are not operable, the people who run those systems cannot perform their jobs. Salaried employees still have to be paid. Freelance employees may move to other companies, necessitating costs to research and hire new workers.
  •       Lost business expenses:

o   Inability to complete past contracts and commitments. Without the necessary computer systems, contracts may not be completed on time or at all. The company may then be required to pay customers interest and penalties for delays in service. Worse, the company may be required to pay for the customer to obtain replacement services.

o   Inability to enter into new sales. Every minute the business is without its computer operations can mean the loss of new customers.

o   Loss of goodwill reputation. If customers become aware of the interruption of services, they may switch to companies they believe have more secure systems in place. This is especially true if there is a threat of damage to their own customer data.

Ways to Quantify Business Losses

Some losses can be directly determined. The cost a company pays to fix and replace its computer systems is calculated by adding up all the checks and payments that are written to pay the bills that are presented.

Other losses, such as lost revenue, can be more difficult to calculate. Itemizing each contract loss or lost customer can be problematic in many respects. Instead, companies may use different accounting methods, such as looking at past profits based on tax returns or other statements, to calculate these damages.

In order to substantiate an insurance claim, companies need to have proper accounting records of their inventory, their regular earnings, their expenses, and other financial matters. One additional reason to consider an effective disaster recovery plan is to ensure that these records are protected too. It does a company no good if the records are kept accurately but are unable to be recovered when the disaster happens.

Make the call to Volico today to plan for disaster recovery

Proper planning can help minimize the cost of business downtime, and effective strategies can help determine the exact amount of downtime loss. At Volico, our staff understands disaster recovery. We work with individuals, organizations, and businesses to develop a plan to minimize downtime so you can work on your business instead of worrying about how to recoup your losses in the event of a disaster.

Ready to See How Volico Data Center Can Help You?

Got questions? Want to talk specifics? That’s what we’re here for.

Have one of our friendly experts contact you to begin the conversation. Discover how Volico can help  you with your disaster recovery and backup needs.

•  Call: 888 865 4261
•  Chat with a member of our team to discuss which solution best fits your needs.

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