Fortune 500 Vulnerabilities to Third-Party Cloud Risk Could Result in $20B Loss

November 17, 2023

New research indicates members of the Fortune 500 could suffer direct financial losses in excess of $20 billion due to a partial outage of third-party cloud services, according to Parametrix.

The findings highlight how the disruption of third party cloud services could impact some of the largest businesses and focuses on the risk costs in light of a lack of insurance coverage for these types of losses.

There were 44 insurers listed within the Fortune 500, with 41 noted to be cloud users. The cloud adoption rate for insurers was 93.2%.

The “cloud region” relied upon by the largest number of Fortune 500 companies (accounting for two thirds of U.S GDP) is Amazon Web Services (AWS) “us-east-1,” with more than one third solely reliant upon it. A 24-hour outage of this region’s mission-critical services would cause a projected direct revenue loss of $3.4 billion to those companies, and a 48-hour outage, $7.8 billion.

Using proprietary cloud monitoring technology to determine when a particular cloud region is operating or interrupted, while tracking services being delivered, and at what speed, a hypothetical 24-hour halt affecting multiple AWS regions could cause a loss of $9.5 billion, a single-day risk accumulation high for the Fortune 500, while a 48-hour outage would cost $20.2 billion, said Parametrix, a provider of cloud risk solutions and monitoring services.

In contrast, the MS Azure region “westeurope” is used by 10% of the Fortune 500, and loss exposure is much smaller. A 24-hour outage of this region’s services would cause projected direct revenue losses of $200 million, the report found.

The Fortune 500’s use of cloud service is high, the company said, with more than 90% of the 2022 cohort (accounting for more than 400 companies) relying on the cloud for at least some of their activities.

In 10 of 18 industrial sectors, 100% of Fortune 500 companies are cloud-reliant.

The impact of outages becomes disproportionately more severe for some sectors as downtime duration increases, the report found.

The report offers examples of outage scenarios, such as how a 24-hour outage of AWS us-east-1 would hit the Healthcare Services and Retail sectors hardest, but if the outage was 48 hours, Manufacturing would be the hardest hit.

“Our research shows that companies in the Fortune 500, like a great many organizations, are precariously vulnerable to cloud outage risk,” said Yonatan Hatzor, co-founder and CEO of Parametrix. “Small outages are an inconvenience, but longer periods of time without cloud access could be seriously costly, causing billions in direct revenue losses, but the ripple effect would make the loss even bigger. The Fortune 500 are the largest providers of goods and services in the world. If just one of them ceases to function due to a break in the digital supply chain, the knock-on effect is felt almost immediately by their clients –and by consumers –in the form of lost productivity and reduced output. That cost is immeasurable.”

“The extent of the risk we have identified and measured is significant, but fortunately for companies in the Fortune 500 and all major corporations, it is easily transferred to the insurance market under cloud downtime policies,” he said.