Small firms seriously underestimate disaster costs

Telecoms giant BT said its study of 1,400 companies found that one in 3 reckoned they would not be hit by any extra costs if they were caught out by a disaster. One in 10 estimated that a disaster might cost them up to £5,000, but the real cost, according to Government figures, was between £8,000 and £17,000.

Bill Murphy, managing director of BT Business, said: "It's an issue that many small companies just don't address until disaster strikes, but by then it's too late and they are picking up the pieces. It's clear that they also seriously misjudge the potential financial impact on their business of a major incident."

Small firms said the greatest threat to them was an IT and communications system shut down. Just under half (45%) said they had experienced an incident that affected them for more than a couple of hours, but despite this only half had a business continuity plan covering IT.

Nick Starling of the Association of British Insurers (ABI), commented: "Last summer's devastating floods highlighted the importance of contingency planning. Insurers handled more than 25,000 claims from firms whose livelihoods were put at risk by the floods.

"It is essential for all businesses to have adequate insurance cover, and a thorough business contingency plan in place, so that if the worst happens they can get back on their feet as quickly as possible."

Hardware failure

Meanwhile, it was revealed today that computer equipment failure accounted for over a third of business IT "disasters" last year.

A report from SunGard Availability Services claimed that hardware failure remained the "most serious threat" to business continuity in UK firms, with 35% of its customers' disaster declarations or "invocations" arising from such events.

The report also showed that the proportion of flood-related invocations grew dramatically in 2007, up from 6% in 2006 to 12% in 2007 - hardly surprising given the widespread impact of last summer's flooding. One of the biggest problems was "denial of access" to buildings, according to the report.

The second most common reason why SunGard was called upon to provide business continuity assistance last year was power-related disruptions - responsible for 22% (down from 31% in 2006). Overall, the company said that the total number of invocations in 2007 was marginally less than in 2006.

Keith Tilley, SunGard Availability Services managing director said: "Hardware failure can be potentially devastating in terms of business impact, but is relatively straightforward to plan around."

SunGard released the findings of its research at this week's Business Continuity Expo event, at London's ExCel centre.