Disaster Recovery Economic Impact of Thesis

  • Length: 15 pages
  • Sources: 15
  • Subject: Business - Management
  • Type: Thesis
  • Paper: #65796263

Excerpt from Thesis :

There is a modern emphasis, which has resulted from the experience of the economic impact of disaster, on a more extensive and 'distributed' mode of thinking about disaster recovery. This is an important factor that should be stressed as it has direct implications in terms of the economic aspects of disaster recovery planning in an increasingly networked and technologized contemporary working environment. This aspect is cogently expressed in a White Paper on this issue.

Many organizations have strong business recovery plans for their mainframe and mini-computer systems. but, as more and more critical applications are migrated to distributed systems, companies are becoming concerned about how they can protect these systems in the event of a disaster. Chances of a disaster increase significantly as systems are moved away from traditional central computer facilities that have hardened security and environmental controls.

(Disaster Recovery - a White Paper)

This emphasizes a cardinal issue in modern disaster recovery planning; namely, that almost all businesses and organizations depend on computer technology and various forms of data storage. This means that the economic consequences of even a few hours of disruption can be extremely costly. Furthermore, this fact implies that any disaster recovery planning must include measures for recovering both the functionality and data of the organization that has been determined to be of high value or critical.

This finding of a survey by the Symantec Corporation in 2007 underlines this important aspect.

…while 91% of it organisations carry out full scenario testing of their disaster recovery plans incorporating relevant people, processes and technologies, nearly 50% of those tests fail. This means that one in two UK organisations are not equipped to handle events, such as natural disasters, computer system failures and external computer threats.

(Companies Exposed from Inadequate Disaster Recovery Planning, Testing)

This has many implications in term of future planning. For instance, recovery plans must include the ability to replicate data offsite, as well as many other aspects and possibilities that are strictly outside the ambit of the present discussion. This also includes the increasing importance of virtual servers in the process of disaster recovery (Raffo, 2009).

Economic Implications

The importance of disaster recovery planning is emphasized again and again by various experts and pundits. As one pundit notes, "Aside from the legal ramifications of neglecting to safeguard vital data, disaster recovery planning is a business necessity. Simply put, business relies on computers more than ever before and will continue to do so" (Murphy, 1991, p.60). Murphy also states that, "It doesn't matter what you call it -- automated data processing or management information services -- the life of a business or organization is at risk without disaster management,." (Murphy, 1991, p. 60). This is of course linked to the dependence on data and databases by almost every modern organization. Other sources reiterate the pervasiveness of modern threats to valuable data.

Failure to identify every potential event that can jeopardize the infrastructure and data that your enterprise depends - in addition to the security and network threats -- viruses, Trojans, worms, etc. -- you need to identify any forces that are unique to your geography. Do you live on an earthquake fault, tornado alley, or in a flood zone? Does your region experience frequent power interruptions from storms or rolling blackouts?

(Disaster Recovery Business Continuity: Common Mistakes).

However, it is when one considers the financial and economic implications of a faulty or inadequate disaster response plan then the need for this planning becomes even more evident. On the other hand, the cost of actually implementing a thorough and comprehensive disaster recovery plan also brings into play various criteria that have to be taken into consideration. As Bielski ( 2002) states, "Day-to-day process-related work is hard to back up -- much of it isn't digital to begin with…Think of backing up all your e-mails or Word files. How much time would that take? Is it worth it? (Bielski, 2002).

The economic implications of inadequate disaster planning and management are on one level fairly obvious. As has been noted a number of times in this discussion, there is as general consensus that any company or organization cannot function when there is data loss or loss of networking functionality and if this is extended over time it will invariably lead to serious economic implications.

A serious possibility that can have dire economic consequences is the unplanned disaster or outrage. "Whether it is a severe weather incident that shuts down a city or region or a simple mistake like kicking a power cord loose causing a server to halt, every business is susceptible to some form of outage or disaster" (Rennels, 2006).

Experts state that even a short period of disruption and not being able to access data can have severe economic repercussions for the organization.

At best one could expect to incur some financial losses and have to smooth things over with some unhappy customers, but at worst, and far too often this is the case, businesses are unable to recover and are forced to close.

(Rennels, 2006)

An understanding of the economic implications of a disaster should also include aspects such as a decline in productivity, work stoppages as a result of no email activity etc. The following statistics serve to illustrate the above points. The research company Gartner states that "…40% of all SMBs will go out of business if they cannot get to their data in the first 24 hours after a crisis" (Rennels, 2006). This statistic becomes even more alarming in the light of the prediction that, " Another 35% are out of business within 3 years" (Rennels, 2006). Furthermore, the amount of lost revenue and productivity tends to increase rapidly if there is no fast and effective recovery planning and this "… does not account for the business and legal implications of lost data that could result in fines and even imprisonment" (Rennels, 2006).

The consequences of not having a disaster recovery plan are therefore extremely serious in the modern world. This fact is again stressed by a study conducted by the University of Texas, entitled "FINANCIAL and FUNCTIONAL IMPACTS of COMPUTER OUTAGES on BusinessES." The following are some of the most results of this study relevant to the present discussion.

85% of organizations are heavily or totally dependent upon computer systems.

On average, by the sixth day of an outage, companies' experience a 25% loss in daily revenue; by the 25th day it is 40%.

Financial and functional loss increases rapidly after the onset of an outage.

Within two weeks of the loss of computer support, 75% of organizations reach critical or total loss of functioning.

43% of companies that experience a disaster but have no business recovery plan in place never reopen.

(Disaster Recovery - a White Paper )

These finding tend to shed a glaring light on the financial and economic implications of not having a good disaster recovery plan; conversely they should also serve to motivate organizations and companies to make sure that a well thought out and comprehensive plan that is suited the assets and particular vulnerabilities of that organization is implemented. This is also reiterated by the finding from the above study that "…of companies that experience a disaster but have no tested business recovery plans in place, only one in ten are still in business two years later" (Disaster Recovery - a White Paper ).

The link between economics and disaster recovery planning is clearly emphasized in the conclusion of the above study.

Organizations which had prepared for an extended computer outage through insurance and/or a contingency plan reported significantly lower expected loss of revenues, additional costs, and loss of functioning. As a group, these organizations estimated that their revenue losses would be 2.5 times as severe if their contingency plans were not activated.

(Disaster Recovery - a White Paper ).

One the other hand those organizations that do not have a clear and comprehensive recovery plan will, in the event of disaster, also suffer from various intangible costs, in addition to direct revenue loss. This can include aspects such as "…cash flow interruption, loss of customers, loss of competitive edge, erosion of industry image, and reduced market share" (Disaster Recovery - a White Paper).

The implementation of a recovery plan also implies a business continuity plan. However, one should emphasize the difference between these two types of plans. A disaster recovery plan is usually referred to as being specifically targeted at it systems; whereas business continuity plan is considered the "…all-encompassing corporate plan that describes the processes and procedures an organization puts in place to ensure all aspects of business can resume and be recovered should a disruption occur" (Disaster Recovery - a White Paper).


Many contemporary views of disaster recovery refer to the importance of being more inclusive in the assessment of recovery possibilities. In other words, there is an emphasis on…

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