Insights: Mitigating the risk of business interruption from cloud downtime

Learn about the December 7th AWS cloud outage that disabled thousands of websites and left millions of users unable to reach them.

Q3 2021 earnings were tremendous for the three largest public cloud vendors - AWS, Azure and GCP. Revenue from their cloud operations grew 37% YoY, with the next ten largest cloud providers hitting the 28% YoY mark.

The main driver of growth is obvious. More and more businesses are opting for the convenience and affordability of the cloud and its endless array services, including hosting, computation, analytics, machine learning, networking, and more.

But as more businesses jump on the bandwagon, they need to be aware of the risks, and update their contingency plans accordingly.

The cloud is down. Now what?

The advantages for businesses migrating to the public cloud are tremendous. They save money, they no longer need to purchase, house and maintain expensive, sophisticated hardware. And mostly, the strategy promotes efficiency, innovation and scale.

The downside is that data and services are now managed by someone else; you’re entirely dependent on the internet for access. And while Amazon, Microsoft and Google have endless resources and an unmatched expertise in safeguarding data and processes, if the system goes down there’s little you can do.

For businesses that rely on the cloud to sell products and services, outages are particularly painful. A crash will send them scrambling to contend with customer churn and a tarnished brand reputation.

Businesses that rely on the cloud for day-to-day operations have plenty to worry about as well. Employees may lose access to mission-critical tools like the website, email server, the CRM, and support systems. Developers can lose access to their tech stack. In essence, downtime can bring the entire workplace to a screeching halt.

A false sense of security

The first cloud services were launched over a decade ago. In 2008, the entire public cloud services market was worth around $5B, according to Statista. By the end of 2021, the net value is expected to reach an astounding $445B.

With such a sweeping effect on businesses, it’s no wonder some processes are lagging behind. For example, risk management currently does not match the new infrastructural reality.

Today, cloud downtime risk is often addressed by Cyber policies (even though cloud downtime is rarely a result of malicious attacks) and Error & Omittance policies. But the coverage is not conducive to the fast rebound needed after the business interruption.

For starters, most policies kick in only after 12 hours of downtime. These policies offer no damages for shorter, equally damaging outage events. The second problem is that these policies mandate a tedious claims process in which businesses must prove damages in order to collect on the policy.

Taking a look at outages over the past several years, very few businesses would qualify for payouts under Cyber and E&O policies. And if any did, they’d be faced with large deductibles, proving damages, and a lengthy, resource-intensive claims process.

Mitigate your risk

Accurate risk assessment is a prerequisite for any business’ success. It involves identifying and finding ways to overcome any foreseeable obstacles.

A cloud outage lasting several hours can seriously harm sales, mandate compensation for breached SLAs, or require a diversion of resources to mend brand damage.

Parametrix Insurance pioneered a new policy that provides coverage for the risks associated with cloud downtime. Our coverage reflects the prevalence of dependency on the public cloud in today’s business world.

  • It suits your business needs
    You determine the coverage amount based on your own assessment of the fallout from cloud failure.
  • It’s easy to understand
    Triggers are clear and set in advance. You won’t need to prove damages if the cloud services and servers denoted in the policy fail.
  • Payouts are speedy
    You will be indemnified within 15 business days and can use the funds to help resume operations and mend damages fast.

Make sure your business is ready

Business continuity is critical to every business, and cloud downtime is a threat to seamless operations. Still, 3rd party cloud failure should not be perceived as threatening or crippling. Like all risk factors, it must be acknowledged, accounted for, and properly managed.

There are many measures a business can take to manage this particular risk.

The first: bolster data integrity and accessibility through server configurations, like redundancy across regions.

The second: understand that downtime happens, quantify the fallout, and ensure you’re equipped to manage and overcome it in the rare event that you’re disconnected from customers, data and services.

The Parametrix Team
View Profile
November 16, 2021