Calculating the Impact of a Disaster on Your Business

In a recent CIO Magazine poll of more than 200 top IT executives, a 52% increase in business continuity/disaster recovery budgets was reported for this year. This increase in budget is a direct correlation to a rising awareness of the importance of disaster recovery. If your organization hasn’t devoted resources to disaster recovery efforts, now is the time.

Disasters aren’t just widespread weather events like hurricanes or earthquakes. A disaster can be a cyber-attack, a prolonged power outage, flooding, or equipment failure that impacts your organization’s ability to do business. If you aren’t prepared to get your systems back online quickly, productivity and sales will be affected. The impact of an outage – even if you are able to get your business back on track – can be devastating.

Below are some formulas used across various industries to help you roughly determine the financial impact of a disaster on your business.

Calculating Labor Costs = P x E x R x H


  • P = number of people affected

  • E = average percentage they are affected

  • R = average employee cost per hour

  • H = number of hours of outage

Calculating Lost Revenue = (GR / TH) x I x H


  • GR = gross yearly revenue

  • TH = total yearly business hours

  • I = percentage impact

  • H = number of hours of downtime

What you should also consider though as you build the case for investing in a solution is the damage sustained to your reputation and client loyalty. Consider lifetime value of negatively affected clients, investor impact, overtime required to make up for lost productivity, and attrition of sales to competitors who maintained operations while you were offline. These costs are difficult to fully gauge, but absolutely essential to consider.

Unfortunately, for most businesses, disaster readiness is not for if, but when an emergency scenario happens. Understand your risks and prepare for the worst to keep your business profitable and productive.

When you’re ready to get a plan in place, download this checklist to ensure you get started in the right direction.

Related Posts