Fortunes on the Cloud

What is the potential financial impact of cloud outages on the Fortune 500?

Digital supply chains rely on connectivity and the Cloud, comprising vast private networks of third-party computers and software services. These networks support corporate activities ranging from e-commerce marketplaces to online document storage and editing facilities. Most modern business functions rely on the digital supply chain and cloud computing at least to some degree, and are therefore prone to financial loss when the provision of cloud services is interrupted. Typically, the longer the duration of the interruption, the greater the financial loss. 

The Fortune 500 is a group of companies assessed by Fortune Magazine to be the 500 largest in the United States when measured by total revenue. The Fortune 500 companies employ about 29.2 million people worldwide. The 2022 cohort, which has been analyzed by Parametrix, accounts for about two thirds of US GDP, has revenues of around $18 trillion, and boasts total market value of more than $20 trillion. The group provides a benchmark for the potential impact of a major cloud outage on the wider economy.

This critical group of companies is reliant on the Cloud, and is therefore susceptible to cloud outages. Now, for the first time, the impact of this reliance can be measured. Parametrix Insurance has developed proprietary technologies which have allowed us to: 

  • model the outage behavior of cloud services
  • scan organizations’ cloud usage 
  • model the cloud infrastructure of cloud-dependent companies
  • quantify and manage accumulation of cloud-risk exposures, and
  • simulate financial losses caused by relevant cloud outage scenarios.

The findings are valuable to the insurance sector because: 

1. Analysis of cloud-risk accumulation typically explores “doomsday” scenarios that consider multi-day global outages of all cloud services in all regions. While such a widespread outage is not inconceivable, it is extraordinarily unlikely. Instead we have considered more plausible, less extreme events which would cause significant pain to businesses and the economy.

2. Our analysis of cloud risk is made through a prism of risk-management utility, and refers to some of the building blocks and tools which can be used to manage the risk on a practical level.

3. Model assumptions surrounding financial losses incurred during outages are based on an ongoing dialogue between Parametrix and cloud users in various sectors. We continue to strengthen this loss forecasting approach by opening it repeatedly to challenge. 

4. By studying the impact of cloud downtime on companies broadly familiar to a wide audience, discussion of the modeling approach and the results obtained are more insightful and useful.


Next time: Cloud Adoption Amongst the Fortune 500

Parametrix’s analysis on the Fortune 500 provides a snapshot of cloud usage, and insights into navigating the landscape of cyber systemic risk. This post is the first in a series about identifying dependencies, monitoring performance, and managing accumulation. You can read more about it in the Parametrix report revealing the Fortune 500’s exposure to cloud downtime among the three major providers - Amazon Web Services, Google Cloud, and Microsoft Azure.

The Parametrix Team
View Profile
March 6, 2024