Oct 30, 2014
Organizations face an increasing number of threats to the smooth running of their operations, which is why implementing a disaster recovery plan is an essential part of business continuity.
A recent Deloitte report showed CEOs and senior executives must overcome both man-made and natural crises, including extreme weather, cybercriminals, economic fluctuations and political unrest.
The professional services firm said companies will become better at anticipating potential dangers and are already beginning to ramp up preparation and crisis simulation exercises.
According to Deloitte, financial fraud is showing significant growth, particularly in the area of cybercrime. Malicious online attacks cost companies approximately US$400 billion a year.
Last year, seven in 10 businesses were the victims of financial fraud, with revenue losses totalling approximately 1.4 per cent of earnings. Natural disasters are also a continual threat for many organizations, whether it's typhoons, bushfires, earthquakes, floods or even volcano eruptions.
A separate survey conducted by the firm showed reputational damage is the biggest strategic risk for C-suite executives and board members. In fact, respondents believed 25 percent of total market value for a company is based on its reputation.
"Clients are operating in an increasingly challenging global environment where a single mega event or a combination of events can significantly disrupt an organization's strategic objectives, reputation, and/or existence," said Jeremy Smith, Deloitte global crisis management leader.
Spotlight on Australia
Deloitte provided a snapshot of business continuity opportunities in Australia, with Asia-Pacific one of the most active regions for natural disasters in the world.
Chris Noble, the company's forensic risk services leader based in Queensland, said the estimated cost of extreme weather phenomenon in the country is over AU$6 billion (US$5.3 billion).
Unfortunately for businesses, these costs are only going to rise, with Deloitte predicting an average of $23 billion worth of damage by 2050. Post-disaster relief funding in Australia totals approximately $560 million annually, while just one-tenth of that figure is spent on resilience measures.
"However, natural disasters are just one crisis scenario for organizations, as cyber attacks, financial crime, technological or industrial threats, supply chain failure, reputation damaging fraud, disclosure issues and other events … trigger complex and potential crises," Noble stated.
"Responding quickly and effectively to minimize short- and long-term damage to companies is becoming a core capability."
Citing the Oxford Metric and AON Reputation Review, ex-CEO of the Queensland Reconstruction Authority Graeme Newton explained the risk of reputational damage for Australian businesses in more detail.
Newton said organizations have an 80 percent chance of losing 20 percent of their value in just a one-month period if they experience a crisis over any given five-year timeframe.
Minimizing reputational damage
Companies hoping to mitigate the risks associated with disasters will require comprehensive business continuity plans, including protocols for when mission-critical databases become unavailable.
Many modern enterprises rely on databases to run crucial online and transactional systems, with operations grinding to a halt when an unforeseen incident causes unscheduled outages.
For businesses that do not wish to experience the reputational and financial pitfalls of downtime, software that can create standby databases is an attractive option. The technology maintains multiple binary copies of important databases, which organizations can switch to when a disaster prevents the original system from functioning.
This allows companies to continue running key processes even in the most catastrophic of circumstances, providing peace of mind to business leaders and building confidence among suppliers, customers and other stakeholders.
Effective disaster recovery capabilities also save costs in other ways, such as minimizing the amount of time staff are left idle and protecting company share values.