Cost of business interruption

Cost of business interruption

Cost of business interruption – Calculating the impact and cost to an enterprise of a disruption of service is difficult.  It is a necessary planning step that needs to be re-visited on  an annual basis. Some of the factors need to be considered:

  • How will your clients, customers, and users react a disruption? Will they react in a way that will be more or less disruptive to the business and its operation?
  • Will the disruption have an impact on other activities? For example your sales force may still be able to make sales call but the distribution arm of the company may be at a standstill.
  • How will the event impact the overall reputation of the enterprise?  Will there be an adverse media or social networking publicity?
  • Once the event is over how quickly will you company be able to catch up and get back to business as normal?
  • During the outage and how much revenue will your company lose?
  • Will there be any contractual or legal penalties that will be imposed and how extensive will they be?
  • If the event impacts items that will need to be repaired or replaced, will the repair parts, maintenance staff, and replacement equipment be available?  At what cost?
  • If you activate other services, overtime, or incur other expenses what will the cost of that be?

To address those issues we have found that a speadsheet like the one below will help to summarize the information that you will collect and present.

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Author: Victor Janulaitis

M. Victor Janulaitis is the CEO of Janco Associates. He has taught at the USC Graduate School of Business, been a guest lecturer at the UCLA's Anderson School of Business, a Graduate School at Harvard University, and several other universities in various programs.