Optimizing disaster/recovery (DR) investments requires a consensus on two metrics up front: (1) the business cost of a disaster's impact; and (2) the risk that the disaster will occur. From this information, an estimate of the likely scope and scale of disaster-related losses can be created.
Calculating each of these two metrics can be relatively easy. For example, business costs include lost revenue, destruction of assets, reduction of brand luster, etc. The challenge, however, is to reach the degree of consensus across multiple different operating groups and expertise centers required to forge a successful investment strategy.
Triangulating different estimates from multiple, credible sources often is an essential step in process of building a consensus DR business case. Four different sources for the triangulation process are gaining favor among professionals responsible for building DR investment strategies. First, DR planners almost always aggregate internal, "bottoms up" estimates of the scale and scope of disaster impacts. Second, occasionally DR planners solicit estimates for the costs of covering losses from the disaster from insurers, using these policy costs as a reasonable approximation of likely disaster costs. Third, government regulations in many industries (e.g., financial services) use standard methods to calculate reserve levels required to cover the impacts of a disaster. Finally, some creative firms are approaching investment bankers to render a valuation opinion in terms of a disaster (i.e., if this disaster should occur, what would be the effect on our stock price); this approach often draws significant executive attention, given that most executive compensation plans are closely tied to stock prices.
Each of these approaches forms a reasonable baseline for building a DR business case. Taken together, they will facilitate a quality consensus in an otherwise politically charged decision making environment.
Action Item: Garnering cost and risks assessments from as many credible sources as possible produces better estimates and strengthens DR investment consensus. To optimize DR investment decisions, organizations must factor cost and risk estimates from professionals (who sit atop their own expertise networks) in the business of pricing risk.
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