One-Third Ignore Disaster Planning
Despite losses from last summer's Northeast blackout, a third of businesses do not have risk management or disaster recovery plans in place and don't plan to make investments to deal with power outages and other catastrophes, a recent study found.
More than 66 percent of the 142 businesses that replied to a survey said they lost a full day or more of business in the blackout, with 25 percent saying they lost two or more days. For 22 percent of the firms, the losses amounted to over $50,000 per hour in downtime costs.
One of the surprising results of the survey is that there has been so little movement toward improving risk management operations despite Sept. 11, the blackout and a recent onslaught of computer viruses. "It is a surprise that so many businesses operate without a plan in risk management or disaster recovery process in place," said Mark Slavick, risk practice leader of Mirifex Systems, LLC, a Strongsville, Ohio, consulting firm, and an author of the survey report.
The lack of planning seems to be primarily among smaller corporations. He speculated the reason may be that the heads of such firms may be too busy growing the business' value to understand the cost benefits from risk management and business recovery planning.
Close to 52 percent of those surveyed said they would not be investing more in their risk management, business continuance or disaster recovery planning.
"It is one thing [for them] to be told in magazines and articles that there could be $400,000 per day in losses, but few companies have taken that and assessed it against their cash flow and their brand image," Mr. Slavick said. "At what point does $400,000 per day mean I am going to have to file for Chapter 11 bankruptcy? I think that is the connection they have not drawn. They have not internalized the risk to their organization."
Mr. Slavick said he hoped the report would help raise the need for risk quantification among businesses.
A full copy of the report is available at: www.blackoutsurvey.mirifex.com/blackout_2003.cfm or www.weatherhead.cwru.edu/rei/inthepress.asp.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, March 12, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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