Question

A financial services firm relies on a SaaS trading-analytics platform. During a 14-hour provider outage, the firm lost an estimated $2.3 million in trading opportunities. When the firm reviewed the signed contract to recover damages, it found the SLA guaranteed 99.9% monthly availability with a remedy of 'service credits equal to 10% of the monthly fee for each hour of downtime beyond the commitment.' The firm's risk committee is frustrated that recovery is limited to a few thousand dollars in credits. From an enterprise risk management perspective, what is the MOST important lesson for the firm's future cloud vendor negotiations?

Accepted Answer

SLA service credits are typically the sole and exclusive remedy and do not indemnify the customer for consequential business losses, so residual outage risk must be treated through other controls such as insurance or contractual liability negotiation

Answer

The firm should demand a 100% uptime SLA in all future contracts to eliminate availability risk entirely

Answer

Service credits automatically scale to cover documented business losses once the customer submits evidence of damages

Answer

SLA availability percentages are legally binding guarantees that the provider will never breach, transferring all outage risk to the provider