With the advancement in technology, the number of glitches and other technical problems has also increased. So, before adopting any technology, companies should also be aware of its consequences. One such technical glitch is a server outage or server down.  You must have heard this term most probably in the bank or cyber cafe. Financial companies often fall victim to these server outages,  mostly the bigger giants. In this blog, we put a bean on what server outage actually is and why big finance firms are facing this issue. Let’s get started. 

Big finance firms can face server outages for a variety of reasons, such as hardware failures, software glitches, cyberattacks, and high traffic volumes. These outages can cause disruptions to critical financial operations, such as stock trading, banking, and payment processing, which can have significant economic consequences.

What is server outage? A brief introduction

A server outage or downtime is when a server stops working or fails to work properly. It is just like when the power goes out in your house, you cant access the electric appliances. In the same way, when the server is shut down, you can’t access that website or app. There are several reasons for server outages including hardware failure, exceeded bandwidth allowance, cyber-attacks, etc. Downtime impacted businesses badly and sometimes results in huge financial losses. 

Why big finance firms are facing server outages?

In the financial industry where data processing and transactions happen every second, technology plays a very important role there. Financial firms heavily depend on complex computer systems to manage large amounts of data, make accurate calculations and perform transactions. 

In this scenario, where a high percentage of financial work relies on technology, server outages can have a huge impact on financial firms. It results in errors, delays, and sometimes huge losses. It can affect business operations and disrupt the financial market.  For example, if a stock exchange has a server outage during trading hours, it results in a huge loss of revenue for traders and investors. You may have heard often in banks that the server is down which causes disruption for customers to access their accounts, make transactions and receive money. 

Overall the impact of server outages on the financial farms cannot be overstated. financial firms must take proactive measures to prevent or minimize service outages. for example- investing in robust technology infrastructure, conducting regular cybersecurity assessments, and implementing disaster recovery plans. 

Some major impacts of server outages on financial firms:

• Disruption to critical financial operations.
• Loss of revenue and profits due to missed trades, transactions, and customer interactions.
• Damage to the reputation and credibility of the finance firm.
• Legal and regulatory consequences.
• Increased cybersecurity risks.
• Operational and administrative costs associated with remedying the outage.
• Negative impact on the wider financial industry and economy.

Factors that can cause server outages in the financial industry. 

1. Hardware failures: Sometimes hardware fails due to overheating, aging, power surges, and several other issues. These hardware failures can cause a malfunction or crash to the entire server. 

2. Software bugs: Code errors can lead to a server crash or function improperly. These software bugs are difficult to detect and fix. 

3. Cyberattacks: Cybercriminals can target servers and disrupt or seize control of them using a variety of methods, including DDoS attacks, malware, and ransomware. Data breaches, the loss of confidential information, and server infrastructure damage are all possible outcomes of cyberattacks.

4. Human error: Server outages may be caused due to human error such as incorrect installation of software, misconfiguration, unintentional deletion of important data, etc.

How server outage affects the financial firm?

Server outages can have several consequences on financial firms, which affects their financial performance, reputation in the market, and regulatory compliance. Let’s have a look at all of them.

1. Financial losses: Server outages can result in missed trading opportunities, delayed transactions, and lost revenue for financial firms. For example, in 2019, a server outage at Deutsche Bank reportedly cost the firm around $50 million in revenue. Similarly, a 2020 server outage at Robinhood led to missed trading opportunities for customers, causing significant financial losses.

2. Reputational damage: Server outages can also harm the reputation of financial firms, eroding customer trust and confidence in the firm’s ability to provide reliable and secure services. For example, in 2017, a server outage at TSB, a UK-based bank, led to widespread customer complaints and negative media coverage, damaging the bank’s reputation.

3. Regulatory penalties: Server outages can also result in regulatory penalties, fines, and legal liabilities for financial firms. For example, in 2018, the SEC fined Citigroup $10 million for a server outage that affected the firm’s trading system and violated regulations on market access. Similarly, in 2019, Capital One was fined $80 million by regulators for a data breach that exposed the personal information of millions of customers, which was caused by a misconfigured server.

Overall, the consequences of server outages can be severe and far-reaching, affecting not only the financial performance of firms but also their reputation and regulatory compliance. Therefore, it is essential for financial firms to invest in resilient server infrastructure, effective cybersecurity measures, and proactive risk management strategies to prevent and mitigate server outages.

Several measures to prevent and mitigate server outages and ensure business continuity:

1. Redundancy: To make sure that critical systems and applications remain accessible even in the case of server failure, financial firms are putting redundancy measures in place. This includes using backup power supplies, internet connections, and network components in addition to redundant servers, storage systems, and other network elements.

2. Load balancing: Financial firms can minimize the risk of server overload and failure by using load-balancing solutions. It includes utilizing load balancers, which divide incoming network traffic among numerous servers based on factors like server capacity and network availability.

3. Disaster recovery plans:  To ensure that critical business operations can continue in the case of a server outage or other disruptive incident, finance firms are creating disaster recovery plans. This involves defining crucial corporate processes and systems, setting up backup policies and timelines, and regularly testing and training employees.

4. Proactive monitoring and maintenance: Financial firms are employing proactive monitoring and maintenance procedures, to identify and prevent server problems  The use of performance monitoring tools, regular system updates and patches, and the installation of security technologies like firewalls, intrusion detection systems, and anti-malware software are all examples of this.

5. Cloud-based solutions: Finance firms are also exploring cloud-based solutions, which can offer high levels of scalability, redundancy, and resilience. Cloud-based solutions can provide on-demand access to computing resources, enabling finance firms to quickly respond to changing business needs and reducing the risk of server outages.

6. Offer tips for consumers and investors: Provide some practical advice for consumers and investors on how to protect themselves during server outages. For example, suggest using multiple payment methods, having backup trading strategies, and staying informed about potential outages.

Conclusion!

To stay in this competitive environment, we leverage technological advancement at its best. But it is also a fact that the adaption of any technology comes with the risk involved. Just like big finance firms have server outages which lead to severe consequences. As big finance firms are involved in a large amount of data transfer every second, we can’t prevent the use of technology. But one thing we can do is to minimize the possibility of server outages with several measures like redundancy, load balancing, disaster recovery plan, etc. 

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