Digital risk trends 2008: hacking. Cyberwarfare. Identity theft. Ten years ago these risks were barely on the radar of most organizations. Today they are ubiquitous. With new threats appearing every day, Risk Management takes a look at some of the most frightening digital risks that have made headlines this past year

Risk Management, Oct, 2008

Sound Exchange's position is that since web radio can broadcast an unlimited amount of songs to its listeners at one time, its potential profit margin is higher than terrestrial or satellite radio that can only broadcast one song at a time through a limited number of channels. Just because web stations do not bring in enough revenue does not excuse them from paying their fair shares. Since many web stations like Pandora are free to use and have little advertising, it would seem that they are not taking full advantage of their financial potential. While its intentions may have been noble, Pandora is learning the hard way that even on the internet, "free" may not be a sustainable business model after all.

--MO'R

The Modern-Day Blackout

Too often, one technical glitch can shut down an entire system.

Netflix, with its more than 100,000 video titles and 8.4 million subscribers, single-handedly changed the movie rental industry. The company mails around two million DVDs each day in response to customer orders placed on NetFlix's user-friendly internet platform.

Since 1997, the system has worked almost seamlessly until March, when the company reacted to a one-day shipment interruption by giving all of its members a 5% discount on their monthly bill. Then, in August, a similar service interruption struck again, and millions of customers were left without DVDs--this time for several days. The company was unsure what caused the problem or when shipments would resume.

It turns out that the outage that prevented Netflix from returning to full capacity for two days was caused by an unspecified "key faulty hardware component." Technicians were forced to work around the clock to fix the system. "We've taken steps to fortify our shipping system with the acquisition of additional equipment and worked with our vendors to verify we're in good shape elsewhere," said Mike Ossier, Netflix' chief technology officer, Still; the shutdown cost the company around $6 million in third-quarter revenue, and it announced in August that it would again offer customers a courtesy discount on their monthly bill for the inconvenience. The fact that such a vulnerability could exist in the company's core function (processing and mailing shipments) in the first place, however, is a nightmare scenario for any company.

Two months prior, e-commerce giant Amazon suffered its own two-hour global outage that by some estimates may have cost the company up to $31,000 per minute and $3.7 million overall. Similarly, telecom industry leader Optus had to apologize to Australians for its third internet down-time in three weeks in July due to a software bug. In August, both California's 911 system and the popular Google Mail e-mail provider were also down for 90 minutes because of unspecified system glitches. The first was, of course, much more harrowing compared to the general annoyance caused to Gmail users, yet the mere occurrence of an outage for either represents a largely unexpected and reputationally damaging event. In the digital age, any moment of downtime is paramount to a headline-making "modern-day blackout" and, contrary to popular opinion, all publicity is not good publicity.