Power Outages: Assess Costs & Risks before the Lights Go Out

Hurricane Harvey in Texas is a clear reminder that power outages are one of the leading causes of unplanned downtime for businesses, and that translates directly into lost revenue. So, taking steps to mitigate the impact of power outages should be considered an essential part of business continuity, and justifying the time and energy needed to address this challenge starts by understanding the costs associated with power disruptions and outages.

Like many other business decisions, coming up with an appropriate backup power protection strategy means assessing the risk of an outage as well as the cost of downtime. Let’s start with the last part of the equation first.

Estimating the cost of downtime means taking into account both direct and indirect costs. Direct costs are fairly straightforward, including:

  • Lost wages for employees who can’t be productive
  • Revenues that can’t be captured when systems are down, such as for retail establishments
  • Overtime wages to check or fix systems after the outage
  • Losses from damaged equipment
  • Time spent restarting equipment after an outage

The exact amount of the loss you might face will depend on various factors, including how much you pay employees, whether you use a lot of expensive equipment that may be damaged if not properly shut down and so on.

Indirect costs are a bit more difficult to quantify but include such things as:

  • Reduced customer satisfaction, as customers generally don’t like it when resources such as your web site are unavailable
  • Customers lost to competitors while your company was down
  • Damaged brand reputation
  • Negative public relations

You also have to determine whether the cost of downtime changes as the outage continues. For some companies, such as retail stores, the loss will continue at roughly the same rate for the duration of the outage. Others may experience little direct loss for a short outage because revenue is simply delayed, not lost completely. But those same companies may be subject to losses related to reduced customer satisfaction and brand reputation hits if the outage drags on.

With an assessment of the cost of downtime in hand, now you need to understand how probable it is that a power outage will occur at any given site, which represents your level of risk. The risk profile involves two variables: frequency and duration of events. The result of this exercise will help you determine how much power protection you need to help you ride through power outages of various durations without a significant business loss.

Make sure you’re not caught off guard when the lights go out. Visit the Power Outage Resources page now to find more information on what causes outages, their consequences, as well as strategies and solutions for protecting your most important business assets.

4 Comments

Felix Lopez, MBA, BA Science, Certificate in Advanced Power Quality

Great post. Additionally and just as important is need to understand the power quality aspects of the r the electrical system. Several years ago Jonathan Manson presented the results of a survey conducted by the European Copper Institute (ECI) into the consequences and need for better planning; the study shows that 15 industry sectors were losing 150 Billion in “wastage”. The call for action is made based on the conclusions drawn from the analysis. See here: https://www.youtube.com/watch?v=LPgytYuoAzg

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