While our interconnected world has opened the door to new possibilities, it has also introduced new threats and vulnerabilities that can be costly to organisations."Disaster recovery and business continuance is continually one of the top IT spending priorities for many businesses," said Ian Rogers, Subject Matter Expert, IBM Business Continuity & Resilience Services, Global Technology Services, ASEAN. He was speaking at an executive briefing organised by CIO Asia Magazine in Singapore.
The year 2011 was a year with the highest economic costs ever, according to Swiss Re, a global reinsurance company. Claims from natural catastrophes totalled US$103 billion, compared to US$43 billion in 2010; while total economic losses due to disasters added up to US$350 billion in 2011, in contrast to US$226 billion in 2010.
The levels of systemic risk are higher than ever before, with an increasingly interconnected world. In fact, Asian countries are most susceptible to risks of economic loss as a proportion of GDP per unit area. This is due to complex global supply chains and use of just-in-time (JIT) manufacturing methodology in the region, said Rogers.
JIT manufacturing opens businesses to a number of risks, notably those associated with the supply chain. With no stocks to fall back on, a minor disruption in supplies from just one supplier could force production to cease at very short notice.
"JIT may be good for business, but it increases risk," said Rogers. "A major car manufacturer had great business continuity plans but didn't have resiliency in place. Business was impacted during the recent Thai floods because of its reliance on a third party supplier for a tiny piece of circuit board shared across all its models."
Brand image can also be affected if an organisation like a mobile phone provider has a three-day outage. "It won't be just three days of lost data. Loss of service can translate into massive brand damage," he noted.
"A small disaster can have a big and massive impact," warned Rogers. "Business continuity planning is among the top five concerns of board-level decision makers, according to a Gartner Group survey."
Rogers pointed out that around 43 percent of firms hit by a major disaster never re-open, while 29 percent of those that do re-open, close within two years, according to research by Infonetics Research's report, The Costs of Enterprise Downtime.
In some industries, customers are insisting that their suppliers have viable business continuity plans in place as a prerequisite to entering their supply chain. It has also become increasingly common for a business continuity/disaster recovery framework to be mandatory in order to attain financial regulatory compliance.
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