Businesses don’t operate without risks.
But it’s possible to avoid the destructive consequences with proper preparation.
Stakeholders must be vigilant in checking business disruptions. These can vary from a global pandemic changing the market to a new technology rendering existing products useless, like moving to streaming services from DVDs.
Conducting a business impact analysis (BIA), also called business impact assessment, conditions organizations for worst-case scenarios.
Business impact analysis is a process of predicting the organizational and financial impact of business disruptions. It collects relevant data to aid businesses in creating the fastest recovery strategies to get companies back to normal after inevitable consequences.
Many companies use business continuity management software to identify and address potential interruptions in operations.
BIA also addresses the timing of a disruption. For instance, if your e-commerce website gets hacked right before Black Friday, the loss will be much higher than if it happens the week before Thanksgiving.
Therefore, BIA equips businesses with the tools necessary to sustain potential disruptions and enables them to allocate resources based on the potential impact.
BIA is an ongoing process that guarantees operational resilience and continuity during and after a business disruption. It predicts how a disaster will happen and identifies the possible consequences. BIA quantifies the impact of disruptions in the form of risk management elements like maximum tolerable downtime (MTD), recovery time objectives (RTOs), and recovery point objectives (RPOs).
MTD is the maximum duration your business can remain down without making irrecoverable losses. RTO is how long you think you can handle the disruption after considering all functions and interdependencies. RPOs indicate the maximum data loss your business can endure. The harder it is to recover data, the shorter the RPO should be.
In a word, the output of BIA is concerned with prioritizing the business functions that will restore the order of operations as quickly as possible. Identifying MTD, RTO, and RPO enables businesses to portion out resources exactly where needed.
Business impact analysis operates on two assumptions. First, each business component depends on the operational continuity of other components. And second, some components are more important to organizational efficiency than others, requiring more resources during turmoil.
You may already be familiar with some common scenarios of business disruption and their immediate effects.
While they both analyze and assess business risk, there’s a slight difference between BIA and risk assessment.
Risk assessment evaluates internal and external factors to calculate the likelihood of potential business risks. It focuses on developing measures and strategies to reduce the occurrence of potential disasters.
On the other hand, business impact analysis focuses on when a disruptive event might occur and how long a business can endure the impact. It identifies resource dependencies and provides solutions for business continuity by ensuring survival and recovery from disasters.
Businesses choose between two types of business impact analysis based on the urgency of restoring a system post-disaster.
1. A comprehensive BIA targets critical applications and systems. The goal is to restore them within 24 hours following the disruption.Before conducting a BIA, you have to know what it takes to execute your efforts successfully.
Five elements make up a business impact analysis.
The business impact analysis process will vary per company, process, and requirement. However, here’s a general guideline for conducting BIA.
1. Define objectives, goals, and scope: Know what you're aiming to achieve.
2. Assemble a team: Review the roles and responsibilities of all team members.
3. Prioritize business processes: Create a BIA implementation plan for essential functions.
4. Gather data through questionnaires: Create a clear consensus for your action items.
5. Review collected data: Prioritize processes based on the data you collect.
6. Create a BIA report: Consolidate the BIA results for management approval.
7. Develop recovery and continuity plans: Create a recovery and continuity plan.
8. Modify as needed: Periodically review the BIA for continual improvement.
Businesses must be clear about their reasons for conducting an impact analysis. Think of it like any other project that requires planning and allocating resources.
Creating a well-defined plan will help figure out which stakeholders are necessary, as well as determine the scope and objectives of the risk analysis. This is also an excellent time to seek management approval to keep things running smoothly going forward.
Once you’ve ascertained the objectives and scope of the project, it’s time to assemble the dream team. People working with you should be experienced enough to take on the responsibilities of your BIA process.
In case your company doesn’t have the right people, consider outsourcing this work to find a team with the proper skills.
With your goals and team in place, the next step is to pick and prioritize business processes. Identify departments performing essential and high-risk functions that your business can’t survive without.
A questionnaire is a standard BIA tool for gathering information from key stakeholders. It ensures consistency and creates a clear consensus for your action items. You can also collect information through interviews.
These sample questions can help you create a BIA questionnaire.
Once the results of the questionnaire are in, document and review the collected data before analyzing it. You can do it manually or through an automated system, whichever works more efficiently for your team.
Your task here is to identify the most common answers and patterns to create a prioritized list of processes and subsequently find the resources to maintain their optimal level. Evaluate the actual areas of concern and establish a recovery timeframe.
You need to create a BIA report to communicate your findings from the questionnaire with upper management. The BIA report lets leadership establish data-backed recovery strategies.
A BIA report should contain the following details:
At this stage, you’ve seen the necessary input from all departments and have analyzed results through the BIA report. The next order of business is to use the BIA report to develop a process recovery and business continuity plan.
Your plan should include key points like delegating responsibility during the recovery process, determining the communication channels, allocating resources, and conducting employee training and audits to measure effectiveness.
Over time, as your company introduces new processes, the results of your BIA are bound to change. Unknown risks can emerge while older ones are subdued. So tracking and reviewing your business impact analysis report is critical. Make modifications periodically to ensure the business workflow is optimal.
The template for a business impact analysis depends on your company's needs, but this overview details standard components.
When you begin your business impact analysis, study your processes and recognize the essential, critical systems.
| Business process | Description |
| Pay per vendor invoice | The process of binding funds, issuing payment, and accepting receipt. |
Understand which categories are most prone to the impact of disruptions and figure out how severe the impact could be. Cost is a common example of an impact category.
| Business process | Impact category | Impact value |
| Customer service | Cost | Moderate |
Businesses need to assess the downtime that might occur due to a turbulent event. This includes calculating the MTD, RTO, and RPO for business processes.
Note: Use specific time frames as input values.
| Business process | MTD | RTO | RPO |
| Back office | 48 hours | 24 hours | 12 hours |
Itemize the resources needed to run the processes identified above. These resources include hardware, software, and data files.
| Resource | Available operating system | Description |
| Web server one | macOS X server | Website host |
This table orders resource recovery and predicts the expected replenishment time after a worst-case scenario.
| Priority | System resource/component | Recovery time objective (RTO) |
| 1 | Primary production line | 12 hours |
Completing a business impact analysis results in successfully assessing all the potential threats your company should be prepared to overcome. BIA also brings many other benefits to your business such as:
The impact of any potential loss should be measured to determine the kind of disaster recovery plan it needs, but it isn’t always a straightforward process. Some common challenges businesses encounter when conducting impact analysis are:
BIA is a valuable tool for addressing disruptions and managing downtime through disaster recovery strategies when executed correctly. Some of the best practices to keep in mind are simple but effective.
If great nations can decline and recover, your company can, too. Business impact analysis empowers businesses to plan for possible disasters and mitigate their damage to daily operations.
A thorough BIA clarifies to businesses which risks they’re most likely to encounter, resulting in targeted resource allocation and planning. By conducting an in-depth BIA, companies learn to practice informed decision-making backed by data from process experts, improving their chances of a quick recovery.
Create the most effective recovery plans to restore your business systems and infrastructure to their original state with the best disaster recovery software solutions.