The Effect of Data Loss on Financial Institutions

Data may be lost either due to theft, or problems related to hardware or software. One study reports that an organisation which experiences a computer outage that lasts more than 10 days will never completely recover. 50% of such companies will be out of business within 5 years.

Theft is, of course, a far more worrying scenario because it will lead to credit card fraud and loss of customer loyalty, and will affect future attrition.

When the customer database is lost, there is no way for these companies to communicate with their customers since all information resides on computers these days. This means the company’s sales will be affected.

The situation would be disastrous if the data cannot be recovered. Even if hard copies of this data are available, the information will have to be keyed in and this cannot be done till computer systems are working again.

In cases of data theft (the most common cause of data loss today), computer forensic experts will have to be called in to try and stop cyber criminals in their tracks before they inflict too severe a damage on customers. Too many computers that carry such sensitive information are being stolen in transit or robbed straight from the premises.

Some companies may not be able to survive data loss. This is because many organisations have no data backup policy. If a computer with this sort of sensitive information is stolen and the data is not backed up, the information is lost forever.

The High Cost of Data Recovery

If the organisation has its own data recovery specialist, the cost could be reduced. The cost should be calculated by taking into account both the number of hours required for the recovery, and the cost of hiring the specialist. The average specialist is estimated to earn $28.10 an hour. The time taken depends on whether a data backup is readily accessible, in which case, it will be short. Six hours of recovery time would cost about $170, but if the data is corrupted on the hard drive, recovery will take several days. In case the company does not have an in-house specialist, it could cost a minimum of $340 to recover the data using the services of a data recovery expert.

While the recovery process is going on, employees cannot use their computers and this will affect the organisation’s sales and profitability. Sources suggest that people who use computers earn an average of about $ 36.20 an hour, which means that six hours equals approximately $217.

However, the highest cost could be incurred by the failure to retrieve critical data, and this happens in 17% of data loss incidents. The re-keying in of data could continue for hundreds of man-hours which could cost thousands or even millions of dollars. Although the value of data varies (and in a financial institution, the value of data is extremely high indeed), sources indicate that a 100 MB of data is valued at about $ 1 million which means $10,000 for each MB of lost data!

In the case of a permanent data loss, the costs could go up to $20,557. Such losses are multiplied in a networked environment that a financial institution essentially is. Research conducted in 2001 by Contingency Planning Research revealed that for most organisations the average cost of computer network downtime exceeds $50,000 an hour.

Guard Customer Loyalty

In case your organization is hit by data breaches, don’t keep it secret from your customers, or you will lose their loyalty. Make it a point to personally inform them about the breach and possible safeguards via the telephone or personalized emails.

How to Prevent Data Loss

A sound data backup plan is essential especially for financial institutions. The plan should include computer anti-virus software, backing up to off-site data centres, or continuous online backup, and data encryption. Moreover, computers should be password-protected to deter theft. Backing up on tapes is not a smart option. In 2005, the Bank of America had its data tapes stolen in transit.

You can protect your financial data yourself by keeping a detailed record of all your transactions and password protecting these files. Make sure you tell your bank or insurance company that you’d want your financial data locked, encrypted and guarded correctly whether in use or in transit.

Sustainable Living Articles @ http://www.articlegarden.com 

Please Rate The Above Article From The Data Recovery Category
Title: The Effect of Data Loss on Financial Institutions

5 out of 54 out of 53 out of 52 out of 51 out of 5 
Not yet Rated

AUTHORS! Bookmark This Article to del.icio.us

Email to Friends

Copy & Paste html for your website or blog