ROI of Having a Good DR Plan
Jay Pillai, Ph.D. Posted on December 2, 2015
A good DR plan is something every business needs, but hopes it would never have to be used. It is like an insurance policy against unforeseen disasters, which lead to loss of production. Since a good DR plan will cost time and money to implement, a balance has to be struck, between the upfront expenses and the overall benefit.
Unlike taking out an insurance policy, where one is able to judge what the requirement is with a fair degree of accuracy, the expenses of formulating a DR plan is against some improbable event in the future. Small businesses do not have deep pockets and even the loss of a day’s revenue can have serious financial implications.
Let us take the hypothetical case of a small business that has daily revenue of $1000. They suffered flooding due to a natural calamity and it took twenty days to restart operations from their usual office. However, they had a good DR plan, which was put into action. They restarted their operations from a pre-determined alternative site, using leased equipment, after twenty four hours.
Let us look at the financial implications of their DR plan and see what ROI is brought to the firm.
Expenses incurred in having a DR plan : $5000/year
Revenue loss for 20 days : $20000
Revenue loss for 01 day : $1000
Revenue saved due to DR plan : $19000
ROI of the DR plan : [19000 – 5000] / 5000 = 280%
Though the ROI calculated shows 280% and such calamities may never occur again, the point to note is that without the DR plan, the business may have folded. This makes a strong case of having a DR plan and it applies to all businesses, both big and small.
Categories: Disaster Recovery Planning, DR Plans, Insurance