Consequences of Data Loss

Data loss usually occurs due to human error, which can be data theft and hacking and improper maintenance. Viruses including natural and manmade disasters also contribute to causes. Physical and logical errors constitute a small part of data loss failures. In fact, companies devote entire departments to study the possible causes of data loss. Accordingly data security measures and preventive methodologies are developed.

A company has to protect its two important assets of data and time. The two assets are inter-linked. The more time data loss prevails in a company, more overall tangible and intangible losses are incurred by the company. In short, losing access to data means losing time and profit. Thus, data security is paramount. The consequences of data loss are devastating. Tangible and intangible losses all lead to a dwindling of company profit. This may lead to permanent closure of the company.

Downward Trend of Production: Every company produces something, be it a good, service or knowledge. Thus data loss inevitably means that production slows down and eventually halts. The downward trend of production in the generation of knowledge, goods and services is dependent on the existence and modification of data. This data is the lifeline of the firm be it an engineering, a science centre or a fashion industry.

Data theft, a virus attack could lead to loss of business data. This means a loss of important presentations, profit and loss accounts, stock options and procedures. This loss indicates that the generation of data dependent on lost data also stops. The entire production cycle comes to a halt. When this happens, profits automatically start spiralling downward. On an average, by the 6th day of a major data loss, companies experience a 25% loss in daily revenue. By day 25 it is 40%.

Employee Work: Slowing of productions hits the employees, be it on the shop floor, supervisory or the managerial level. Loss of production limits functional capacity of man and machine. It leads to restricted employee working hours. This also includes a stoppage in job enrichment and enlargement functions. Thus, data loss affects employee work adversely. It also has a negative effect on their commitment and morale. Employee commitment goes down. Discontent increases as employees are left with no knowledge to speed production. The executive management cannot hold meetings to issue directives. This limits the future diverse growth of the company.

Invariably, profits swindle. The profit and loss ratio equalises. The company is forced to cut down on production goals. Employee turnover increases as employees start quitting in large numbers. Re-training and development initiatives also cease.

Loss of Market: The gradual decline in production also begins to have an effect on the market share of the company. Data loss makes private information public. The company ceases to have the edge over its competitors in the market. It is important to understand that every type of business survives by having a target audience. The company stops production diversity. Consequently, it begins to lose its niche market and reputable clients. The reputation of the company begins to go down. Another by-product of this loss is profits. As market share dwindles, company profit margins collapse. Investments begin to dry up. The company begins to head towards closure.

Financial Implications: Data loss also generates many negative financial implications for the company. As profits go down, the company finds itself with little or no self-investment. A consequent decrease in market share leads to a loss of faith and goodwill among financial players. The company finds itself short of investors. No financial institution is willing to take the risk. Even if it does manage to secure a loan, the company cannot meet produce enough to repay with interest.

Inability to pay the loan costs the company dear. It is forced into bankruptcy. Ultimately, the organisation shuts down. Everything boils down to monetary tangible losses. Even intangible losses of loss in number of working hours and loss in market share, invariably lead a company to produce less and earn less profit. Thus, the consequences of data loss can be described in the form of a vicious never-ending cycle.

The Data Protection Act of 1998 argues that every company has to protect its data. Thus, it makes no provision for a government disaster recovery plan. Data recovery is solely left to the discretion of the companies.