How will your clients get funding and prioritization for their business continuity management systems and programs once the acute crisis ends? It’s a question well worth asking. And the answer won’t surprise you: get your clients thinking about the ROI of their business continuity management programs.
How the ROI of business continuity management depends on the top business risks your clients face
The easiest way to do so is to calculate the estimated cost of the program (including associated tools and resources) subtracted from projected revenue loss risked if a disruptive event were to occur without proper business continuity safeguards.
But not just any disruptive event. Clients must determine which risks pertain to their business.
Those risks, likely to change over time, will be based on factors such as geography, industry, political and regulatory climate, customer base, etc.
Generic risk indicators are a good place to start. For instance, the most recent Allianz Risk Barometer (2022) amassed the following list of the top global risks:
- Cyber incidents
- Business interruption, including supply-chain disruption
- Natural catastrophes
- Pandemic outbreak
- Changes in legislation and regulation
- Climate change
- Fire, explosion
- Market developments
- Shortage of skilled workforce
- Macroeconomic developments, e.g., monetary policies, austerity programs, commodity price increase, deflation, inflation
How the cost of unplanned downtime factors into the ROI of business continuity management
Of course, executives don’t just want to know what’s likely to happen. They’ll demand to know how much the unplanned downtime from that disruption is likely to cost, as well.
Here, costs are likely to vary by industry. Unplanned interruption in heavy industry, for instance, entails higher machine costs than in education.
Cross-industry estimates, though, will get clients thinking. Practitioners can feed data, such as the following, into ROI calculations.
- Server downtime. The hourly cost of server downtime tops $1 million for 44 per cent of enterprises.
- Data breach. In 2021, the cost of a data breach was $4.24 million, representing a 10 per cent jump in two years. Lost business (including increased customer turnover, lost revenue due to system downtime and the increasing cost of acquiring new business due to diminished reputation) constituted 38 per cent of the total, or $1.59 million.
- Among other business interruption incidents, Allianz estimates that:
- The average value of a fire/explosion-related insurance claim comes in around $6.7 million.
- The average value of a storm-related insurance claim comes in around $4.4 million.
- The average value of an earthquake-related insurance claim comes in around $1.6 million.
- The average value of a machinery breakdown-related insurance claim comes in around $.62 million
- The average value of a water damage-related insurance claim comes in around $.55 million
Executives will ask for more precise data, requiring forensic analysis. But trend lines are important, too.
And those lines point to the fact that the cost of unplanned interruption is going up – precipitously.
Investing in business continuity strategies will lower costs to the business – often even to put money back into the business when business continuity interventions identify expensive deficiencies before disruptions occur.
The only way to do so, though, is for client to get the right digital business continuity management software.
Indeed, not all platforms enhance ROI. Clients, with your help, will have to do due diligence to scout out the platforms that automate key business continuity management functions, to make business continuity planning and management easy.
What other capabilities matter? Download our guide, Calculating the ROI of Business Continuity Management: Digital strategies and software to get your money’s worth, to find out.
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