Disaster Recovery Economics and How the Poor Get Poorer

When disaster strikes, the poor are typically worse off afterwards. Although statistics for enterprises are harder to come by, a recent survey by The Pew Charitable Trusts indicated that 63 percent of Americans (individuals) would not be able to pay for their own recovery from a $500 emergency.

Take another indicator that suggests many (or even most) small businesses are technically insolvent at any given time, and you might find that a large percentage of businesses would be unable to afford even a modestly sized disaster, like a hard disk crashing without adequate data backup.

Before diving into more detail, we should warn about the commonly quoted “statistic” that “80% of businesses never survive a data disaster” or similar. While this statistic is often used, nobody seems able to provide the data to support it(!).

However, there are other factors to compound the probability that businesses with borderline finances will be at greater risk of disappearance in times of IT disasters. For example, the greater a disaster, the rarer the disaster is. In turn, the less historical data exists about the nature and frequency of such disasters. Thus, the biggest hurricanes, regional floods, lightning strikes or any other major catastrophe that could destroy your IT systems can only be modelled (i.e. estimated) when hard historical data is lacking.

However, models often assume the present is the same as the past, and underestimate the probability or extent of extreme events. Enterprises therefore under-prepare – especially those already in financial difficulties – and are more likely to be caught out or even go under.

Is there a solution? In the longer term, the answer is to become more profitable and have a bigger budget for better disaster recovery planning (easy to say…). In the short term, the answer is to at least use affordable solutions (or possibly free or at no marginal cost), like cloud backup, to reduce the risk of being annihilated by the next accident.

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