System Failure
System Failure
Exposure overview
In July 2024, Crowdstrike, a leading cybersecurity company, experienced a significant IT outage due to a faulty software update. This caused widespread issues with Microsoft Windows systems, leading to crashes and disruptions across various industries worldwide.
The Crowdstrike incident highlighted that unintentional and unplanned outages of IT systems, where the cause is not a cyber-attack but a system failure, can result in significant financial loss. In addition, for many Australian businesses the incident underlined their reliance on third party IT platforms, e.g. Software as a Service (“SaaS”) and security, backup and database management platforms.
Scale of the problem
The estimated financial loss from the CrowdStrike event in July 2024 is around $5.4 billion. This figure primarily accounts for the direct financial losses experienced by US companies.
These system failure IT events are becoming more common due to the increased complexity of modern IT systems, the growing reliance on digital services and the internet, and the challenge for infrastructure to support evolving technologies.
Exposure Mitigation
To mitigate the exposure of a system failure, organisations should consider implementation of the following in conjunction with their wider security programme and the advice received from their IT security adviser:
- Maintain Regular Backups: Maintain regular backups of critical data and ensure they are stored offline or on a separate network to assist with quick recovery in case of data loss.
- Incident Response Plan: Develop and regularly update an incident response plan. This plan should outline the steps to take in case of a system failure, including communication protocols and recovery procedures.
- Monitoring and Alerts: Use advanced monitoring tools to keep an eye on system performance and detect anomalies early. Set up alerts for unusual activities or potential failures.
- Employee Training: Train employees on best practices for system use and security. Human error is a common cause of system failures, so awareness and training can significantly reduce risks.
Insurance Solution
Business Interruption causing Business Interruption Loss incurred during the Indemnity Period, caused directly by a System Failure.
