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Business continuity statistics: where myth meets fact

Get free weekly news by e-mailMel Gosling and Andrew Hiles explore the roots of various often quoted business continuity statistics.

In 2008, Continuity Central published an article by Mel Gosling entitled ‘The 80 percent myth…’ which looked at the business continuity profession’s ‘very own urban legend: the 80 percent statistic’.  This is the often repeated statistic that “80% of businesses affected by a major incident close within 18 months”; the source of which has always been elusive.

Following the article and subsequent reader comments by Andrew Hiles (amongst others), Mel and Andrew set out to track down the many similar statistics that exist and to detail their source. The results are published below.

Mel Gosling is managing director of Merrycon Ltd, which specialises in providing Business Continuity products and services. melgosling@merrycon.co.uk

Andrew Hiles is managing director of Kingswell International. ahiles@Kingswell.net

Continuity Central readers who know of other similar statistics or who would like to comment on those listed below, please email editor@continuitycentral.com

Note that some of the links are currently unavailable but have been left in the text as a record of where the information was originally available at.

 

Reference / Quotation / Source

Comment

1

Over 70% of businesses involved in a major fire either do not reopen, or subsequently fail within 3 years of fire.

Consider these odds: one out of two businesses never returns to the marketplace following a major disaster. Of those that do, half go bankrupt within three years. The ones that survive plan their response to a disaster before it strikes.

http://www.chubb.com/.... as at Oct 3, 2008

Chubb did not provide details of where this statistic came from. Mel contacted Chubb by email to ask for their source. A Chubb spokesperson responded: “This was something that was frequently quoted by the Arson Prevention Bureau in their Statistics pages. I have just revisited their site, having not been on it in the last 12 months, and noticed that they have now changed their wording to say: ‘Many businesses never entirely recover - losing orders, contracts, key employees or may go out of business resulting in lost jobs and services to the community’. So I think [we will] make changes to our website to reflect their change.

2

80% of businesses affected by a major
incident either never re-open or close within 18 months (Source, Axa)

Andrew: The AXA 2007 report was quoted by Bert van der Zwan in an article about SMEs and BC. The quote is here.

3

70 percent of companies go out of business after a major data loss (Source, UK DTI)
http://www.datacover.co.nz....

This company sells data retrieval insurance and is a secondary source, quoting the DTI. The DTI undertakes regular surveys regarding IT security, and despite there being a vast number of interesting statistics on the subject on their website, Mel could find no reference to anything like the quote.

Andrew: And elsewhere. Other sources attribute to Contingency Planning, Strategic Research Corp and DTI/PWC  (2004) and is widely quoted in Diana  Shepstone, National Data Awareness Project (2007).  I thought the most likely source was DTI / PWC Security Breaches Technical Report 2004, but could not find these figures. In the 2006 report it said: Only one in twenty large companies (and no very large ones) could operate their businesses without IT systems.  This rises to one in six small businesses that could continue their businesses without IT.
http://www.enisa.europa.eu/...
Also attributed to McGladrey and Pullen.

4

Within two years after Hurricane Andrew struck in 1992, 80 percent of the affected companies that lacked a business continuity plan failed (FEMA).
http://www.itaa.org/isec/i....

ITAA n is the Information Technology Association of America, a trade association, and is a secondary source, quoting FEMA.

FEMA is an agency of the US government tasked with Disaster Mitigation, Preparedness, Response & Recovery planning, and despite there being a wealth of interesting information on the subject of Hurricane Andrew on their website, Mel could find no reference to anything like the quote.

Andrew: Document listed (but unavailable) at  http://www.fema.gov/...

5

80% of businesses suffering a computer disaster, who have no disaster recovery plans, go out of business.
“A Bridge Too Far”, IBM Business Recovery Service & Cranfield, 1993

Mel  searched the IBM and Cranfield websites and was unable to find any reference to the source or quotes any sort of failure statistic following a disaster (but see Emerald below).

6

Research by IBM (Varcoe, 1993) showed that 80 per cent of organisations without relevant contingency plans who suffered a computer disaster went bankrupt ...
http://www.emeraldinsight.com/

Bob J Varcoe is referenced at ‘Not Us, Surely? Disaster Recovery for Premises’,  Property Management V11, 1993 n11, 11-16

Emerald Insight is a publishing company, and in searching for the paper written by Varcoe in 1993 all Mel managed to find was one by Varcoe in 1994 with the following abstract “An organization's facilities department must always be in a position to respond to any disaster whether man-made or natural. Seeks to identify some of the key issues for surviving premises-related disasters including provision of necessary accommodation by assessing available space resources. No time is available after a major disaster for this assessment, thus contingency plans must be in place to avoid as much disruption as possible. Identifies other ideas which can sensibly be implemented before the event to minimize the after-effects and concludes with the thought that gaining time before the event is very important for an organization to survive such disasters.” If the number 80 is added to the keyword search of “Varcoe computer disaster 1993 bankrupt”, the 1994 paper is not listed, which implies that the paper does not contain the 80% statistic.

7

A recent study from Gartner, Inc., found that 90 percent of companies that experience data loss go out of business within two years. (Written April 5, 2005)
http://www.nbnnews.com/

The website of the National Association of Home Builders quotes this in an article from CMIT Solutions (who provide IT products and services to SMEs).

Mel has searched Gartner’s website for any reference to a document written on or around April 5, 2005 about data loss, and has been unable to locate the study quoted. However, I sent Gartner an email asking for help in locating the source, and received the reply “We would like to inform you that we would not be able to locate the document that contains the below quote. And also, from the link that you have provided, it looks like a customized report for the client or it could be a quote from an analyst, which is not necessarily a part of any document on the Gartner website.”

Andrew: I doubt this is a recent survey – I think it goes back to the early 1990s.. It may be the article’s date, since it was published April 25, 2005.  Gartner may have purged old records

8

But when Gartner predicts that two out of five enterprises that experience a disaster will go out of business within five years of the event, companies might want to sit up and take notice.
http://www.itaa.org...

Andrew:  I think this was a PR teaser for a relatively recent the report.

9

According to the Association of Records Managers and Administration, about 60 percent of businesses that experience a major disaster such as a fire close within two years. According to Labor Department statistics, over 40 percent of all companies that experience a disaster never reopen and more than 25 percent of those that do reopen close within two years.
http://www.damicon.com/...
Also
http://www.davislogic.com/...

DAMICON provides Freelance Technical Writing, Disaster Response Planning, and Security Management services to firms throughout New England, and is a secondary source quoting the Association of Records Managers and Administration and US Department of Labor.

US Department of Labor – Mel has searched the US Department of Labor’s website for any reference to a document containing something like “over 40 percent of all companies that experience a disaster never reopen and more than 25 percent of those that do reopen close within two years”, and has been unable to locate the document quoted.

Andrew: this looks like the same as US Department of Labor above; Datapro at 12 below and Contingency Planning Research & Strategic Research Corporation at 14 below and McGladrey & Pullen at 25 below.

10

80 percent of companies without well-conceived data protection and recovery strategies go out of business within 2 years of a major disaster.
Source: US National Archives and Records Administration.
http://www.datmgm.com....

This company sells tape drives and is a secondary source, quoting the US National Archives and Records Administration.

Mel searched their website for any reference to a document containing something like “about 60 percent of businesses that experience a major disaster such as a fire close within two years”, and having been unable to locate the document quoted. However, he sent the organisation an email asking for help in locating the source and received the reply “The only similar statistic I know about from an ARMA publication is from the 1997 ARMA book Emergency Management for Records and Information Management Programs, which quotes another source: ‘A television broadcast, called “Information Technology Forum,” reported that two out of five companies that experience a disaster will not recover from the disaster, and one will fail within the next five years.’ The citation for this is: Leslie Butterfield, “What Matters Is Not What Happens,” Systems Management 3X/400 23, no. 4 (April 1995): 40. I will tell you that my efforts to find a current statistic about this from other sources, including the National Fire Protection Association, have been in vain. When I last checked a few years ago, the NFPA did not have any study about this, even though it has been frequently quoted as having one.’

Leslie Butterfield – Mel has been unable to track down the article “What Matters Is Not What Happens,” Systems Management 3X/400 23, no. 4 (April 1995): 40, but  it’s about the IBM System36, 38, and AS400

Andrew: They may have purged old records.                     

11

60 percent of companies that lose their data will shut down within 6 months of the disaster. 93 percent of companies that lost their data center for 10 days or more due to a disaster filed for bankruptcy within one year of the disaster. 50 percent of businesses that found themselves without data management for this same time period filed for bankruptcy immediately.
(National Archives & Records Administration in Washington)

Mel has searched the archives and can find no reference to the statistic quoted (interestingly, there’s not much in the archive on disaster recovery prior to 2005)

Andrew: They may have purged old records
See also 25 and 29 below.

12

Studies conducted for similarly developed societies show for example that 80 percent of companies having an extended disaster go out of business within five years (University of Minnesota); that 50 percent of companies having a disaster without a plan go out of business within two years (IBM); that from companies with a major disaster, 29 percent will close within two years while 43 percent never reopen (DATAPRO). After a major disaster an average company will lose at least 25 percent of the daily revenue in the first six days, while over 40 percent will be lost if a disaster last [sic] up to 24 days (University of Texas).” Source: Le Secretariat, La Convention Européenne, Bruxelles, December 2 2002 (05..12) CONV 444/02
http://register.consilium.eu.int/...

The actual quotation extract is: “It is…estimated that more than 80 percent of the largest firms in the US are totally or heavily dependant on technology and that, on average, a company would lose 25 percent of its daily revenue after the sixth day of its system breakdown, while this figure is closer to 40 percent for the  financial, banking and public utility industries.”
http://dspace.udel.edu:8080/...

University of Minnesota – Mel has searched the University of Minnesota’s website for any reference to the statistic quoted, and having been unable to locate a relevant document has sent the organisation an email asking for help in locating the source. Unfortunately, the University has yet to reply.

Datapro is a market research company subsequently taken over by Gartner. Andrew’s search of the Gartner web site failed to find the report. The quotation is also cited at
www.infosecwriters.com/text....
http://www.optimumlight...

www.healthiaconsulting.com/...
www.globalmedia.com/Easy...

The report was in 1990.

University of Texas report also cited at http://iosafe.com/industry-stats
The report was written by Paucant, Mitroff and Weldon in 1990 and cited in Datamation, June 14, 1994.

13

Companies that aren't able to resume operations within ten days (of a disaster hit) are not likely to survive. (Strategic Research Institute)
http://www.pctracker.info/....

PC Tracker – this is a company that provides PC anti-theft software, and is a secondary source quoting the Strategic Research Institute (They also state that according to the Home Office Computing Magazine, 30% of all businesses that have a major fire go out of business within a year, and 70% fail within five years)

14

According to Contingency Planning Research & Strategic Research Corporation: 43% of U.S. companies experiencing disasters never re-open, and 29% close within 2 years
http://www.meganet.net/pdfs...

Strategic Research Institute – this organisation creates, produces and manages conferences covering industry specific business-to-business topics, and Andrew could not find any information on their website about disasters, Mel sent them an email asking for help in locating the source. Unfortunately, the Institute has yet to reply.

Andrew: The same statistics are quoted by the US Department of Labor and Datapro.

15

30 percent of all businesses that have a major fire go out of business within a year. Seventy percent fail within five years. (UK Home Office Computing Magazine)
http://www.dscorp.net/...

Mel found a number of references to articles published in this magazine on the web, but it doesn’t seem to have a website.

16

According to Aveco, 20 percent of companies will suffer fire, flood, power failures, terrorism or hardware or software disaster. Of those without a DRP:
* 80 percent will fail in just over a year
* 43 percent will not even reopen
* 93 percent that experience a significant data loss are out of business within five years.
http://cincinnati.biz....

Business Courier is a business paper in Cincinnati.
Aveco – this is either a Czech company providing products and services in TV automation systems or a Missouri based non-profit organization which provides education and training to certifying officials through workshops, newsletters, and online. The Czech company does not have a web search facility, and as Mel hasn’t been able to connect to the Missouri organisation’s website (www.aveco.org)

17

For any business, large or small, the worst thing that can happen is an unexpected event that stops you trading or drives your customers away. Some 80% of companies that suffer a major disaster and don’t have any form of contingency planning go into liquidation within 18 months.
http://www.lloydstsb...

Lloyds TSB published a six page business guide headed “What can go wrong will go wrong – so plan ahead” that has in its opening paragraph the, by now, famous “Some 80% of companies that suffer a major disaster and don’t have any form of contingency planning go into liquidation within 18 months”, but fails to mention where it obtained the information

18

Oxford Metrica claim that, over 5 years, companies stand an 80% chance of an
impacting hitting share value by 20%.
www.mhec.org/pdfs/....
http://www.marketingpilgrim...

During the next five years, 83 percent of companies will face a crisis that will negatively impact the profitability of a company 20 and 30 percent, according to new research by Oxford-Metrica, an independent adviser on risk, value, reputation and governance (Aon, 2006).
http://www.answers.com/....
www.oxfordmetrica.com

Andrew: Secondary sources. I have not been able to find these quotes on the Oxford Metrica website. In ‘Risks That Matter’ a report sponsored in 2002 by Ernst & Young it states: There is a 40% chance of experiencing a negative value shareholder shift of over 30% (relative to the market) within a 5-year period. Two fifths of the global portfolio lost 30 percent of their value in their worst month.

I have searched this report on 80, eighty, 20 and twenty and cannot find the source of the quotations.

19

IDC claimed that 90% of business that suffer total loss of a mission critical facility and do not have BCPs go out of business within 2 years.
https://www.sun.com/products....
http://www.petroleumrx.com/....  dates this as September 2004

Andrew:
I was quoting this in 2003 and had been for some time before that. Not sure where I got it from.

The same figure is attributed to the Texas Research Centre on Information Systems in the source cited.

A search on www.idc.com identified several documents for purchase containing key words from the quote – all were for purchase; none seemed very relevant.

A Google search failed to find it attributed to IDC.

20

According to KPMG….forty percent of companies that suffer a major business disruption go out of business within two years…
http://www.tmac.ca/chapters... and cited at
http://www.nframe.com/....
www.workingfromanywhere....

Andrew: an article written in or after 2000 by Felipe Alonso, Risk and Advisory Services, KPMG, ‘Managing Business Continuity Part 1’, at http://my.advisor.com... says:
Researchers with KPMG say 40 percent of businesses that suffer a disaster go out of business within two years.

21

The American Red Cross estimates that as many as 40 percent of small businesses that experience a disaster never reopen.
http://www.optimumlightpath.com...

Andrew: Source identified as “Business and Industry Guide: Preparing your Business for the Unthinkable (undated)” The quote starts: ‘While reports vary, 40 percent….’ No sources are attributed.

22

According to a recent Touche Ross study, the survival rate for companies without a disaster recovery plan is less than 10%!
http://iosafe.com/industry-stats
www.hoc.co.uk/....
http://www.telcheck.co.uk/..../

Andrew: A number of sources quote the same words. Touche Ross became Deloitte Touche in 1990 and Deloitte Touche Tohmatsu in 1993! Hardly a recent survey.
Searching their web site, I found the following unattributed quote at
http://www.deloitte.com/dtt... updated 2 April 2008, Australia:
Historically 50 percent of businesses without an effective business continuity plan ultimately fail in the wake of a major disruption.

23

A recent survey of U.S. insurance companies is illustrative.  It found that 90% of these firms, which are dependent on data processing, would fail after a significant loss or disruption of the EDP system (Carter, 1988)
http://www.jstor.org/pss/249574

Andrew: The source is cited as Carter, R . "Dependence and Disaster - Recovering from EDP Systems Failure” at
links.jstor.org/sici?....
At books.google.fr/....
The reference of the above paper adds: December 1988, pp.20-22

24

70% of small businesses that experience a data loss go out of business in a year.
http://www.score.org/pdf/....

Andrew:
Sources given as Contingency Planning, Strategic Research Corp and DTI/PWC  (2004) and is widely quoted in Diana  Shepstone, National Data Awareness Project (2007).
I thought the most likely source was DTI / PWC Security Breaches Technical 2004, but could not find these figures. In the 2006 report it said:
Only one in twenty large companies (and no very large ones) could operate their businesses without IT systems.  This rises to one in six small businesses that could continue their businesses without IT.
http://www.enisa.europa.eu/...

25

Researchers McGladrey and Pullen estimate that a shocking '43% of businesses who lose electronically held data never reopen, and 29% close within two years'
http://datarecoveryequipment...
www.span.com/... and many others

McGladrey and Pullen 2001 survey found that companies who are unable to get their data back within 10 days never fully recover, and 43% go under as a result!
http://www.ict-teacher.com/...

Andrew:  McGladrey & Pullen is a US accounting firm. http://www.mcgladrey.com/
4 Oct 2008 I actually came across their article on Google with these statistics but failed to make a note of the reference and have so far been able to relocate it: which annoyingly proves the point that, because you can’t find it doesn’t mean it’s not there!

It looks to be an unattributed reference to the IDC study, often misquoted (or it could be that they commissioned the IDC report) – the same as US Department of Labor at 10; Datapro at 13 and Contingency Planning Research & Strategic Research Corporation at 15 above. Some secondary sources say that only 29% survive within 2 years while others say 29% fail in 2 years  – only 1% difference, but sloppy.

26

An estimated 25% of businesses do not reopen following a major disaster.
Source: ‘Open for Business’, the Institute for Business & Home Safety (IBHS)
http://www.ibhs.org/docs/... referenced by
http://www.score.org/...

Andrew: IBHS is a not for profit organisation. The IBHS reference is not available. A search identified an ‘Open For Business Toolkit’, with a 2006 copyright, with the quote: Each year disasters such as floods, tornadoes, hurricanes and wildfires cause thousands of businesses to close.  But even more common incidents, such as building fires, cause the same result.  Our research shows at least 25% of those businesses that close following events such as these do not reopen. Many that do struggle to stay in business.
http://www.ibhs.org....

27

Business Analysts Meta Group recently concluded that 59 percent of companies that suffer from a catastrophic fire, flood or earthquake never reopen or close within two years.
http://www.kpmg.fi/...

Andrew: Meta Group was taken over by Gartner December 2004. I have so far been unable to trace the source document.

28

Someone once measured businesses impacted by the first World Trade Center and a Californian earthquake.Small to Medium” businesses (under 500 users on site) experienced a 50% rate of going out of business if they could not get to their data.

http://www.thic.org/pdf/...

Andrew: The closest I found was in the DRJ:

For example, the 1992 floods which plagued Chicago’s business district forced hundreds of workers from their office buildings for days. Following the World Trade Center bombing, certain businesses relied on business interruption insurance to cover the losses and decided to suspend operations until the primary site was viable again. As these examples illustrate, businesses can suffer the repercussions of a disaster for months or even years. In fact, statistics indicate that 50% of businesses which sustain interruptions of a week or more due to problems at the primary site never recover.

Recent media reports also indicate that an estimated 25% of the companies stricken by the California earthquakes were forced to close their businesses.
http://www.drj.com/index.php....

29

A company that experiences a computer outage lasting more than 10 days will never fully recover financially. 50 percent will be out of business within five years. ("Disaster Recovery Planning: Managing Risk & Catastrophe in Information Systems" by Jon Toigo)

Andrew:
This book was published in 1989. The implication is that it is a secondary source and the statistic predates the book.


Conclusions

  1. The earliest source is 1988 and some of the statistics go back to the early 1990s. Some have been heavily recycled, possibly without attribution to the original source.  The more recent statistics seem to be less ambitious. 
  1. The basis for the statistics is not always clear – e.g. ‘our researchers found…..’. Maybe these are quotes from earlier more detailed surveys; maybe it’s just sloppy.
  1. There is little consistency in the periods over which disaster-struck companies went out of business. If 25% never re-opened after a disaster, how many then failed within 5 years, and how does this compare to the normal business failure rate?
  1. The statistics are not consistent in dealing with companies with (or without) DR/BCPs – they are a mix of both.
  1. Some sources cannot be found.  Maybe they existed, or maybe not.  Some we cannot find but we know existed. Perhaps documents have been lost or culled in mergers, takeovers or simply purged as being out of date.
  1. Secondary sources sometimes differ (but on this evidence, not substantially) in their statements, rounding up or down or getting the interpretation slightly wrong.
  1. Statistics differ in specifying whether or not companies that failed had a DRP/BCP and those that specified companies without a BCP/DRP do not identify how many companies who had one, failed.
  1. Is the 80% Myth busted? I’m less confident than I was, but still not sure. Even secondary evidence has some value. Certainly a new, objective and disciplined survey would help.

•Date: 24th April 2009• Region:World •Type: Article •Topic: BC statistics
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