One of the questions you get served when your investment profile is determined is this one: "how would you define an exception? Is that event that occurs 1 out of 50 times, 1 out of 100, or …:"
Not only when dealing with investments, but also for a service level you are dealing with exceptions.
And then the question is; what will happen? How long will I be out of service? What is the (quality) level of this service?
The best service provider is "always up and running." But in practice this is not feasible. A service is a provision of any kind to third parties. And such a service is important because it enables others (individuals and companies) to do their work.
If the service is not functioning, others have a big problem, because having no service will inhabit them to continue their (own) work.
And therefore a service level agreement is important to manage this level with the third party that provides you the service. A service level of 98% percent, for example could then be a figure that you both agree for the service. This would be fair.
All depends on your requirements for the service. If you are exploiting an internet business, your website will not be available when the service provider is dealing with a problem.
If this problem takes 2 hours to resolve, after which everything is OK again, the service level has been limited by X-percent.
To calculate this (X) percentage, take a month as a reference. In this month there are (in august) 31 days, with each 24 hours. In total there are 744 hours that month.
A "down-time" of 2 hours will decline the service level by 0.3% (2 divided by 7.44), leaving the level for that month (if nothing else happens) 99.7%. A downtime of 7.44 hours will diminish the service level by one percent, leaving the level up to 99%.
This is only one month and one incident. Is this exceptional? You should check you service level agreement, if the calculation is not done per year. And what they understand as an exception, 1 out of 50 probably – a service level of 98%. Let's hope it's enough.
© 2006 Hans Bool