What Is a Business Impact Analysis (BIA)? Conduct Your Own in 4 Steps
You probably have an idea of the kinds of threats your business might face, but do you know what kind of damage they’ll cause? That’s where BIA comes in.
Some things in life are unavoidable. From natural disasters to acts of violence to the reliability of power grids, there are a host of external factors out of our control that can significantly impact vital business processes and operations. And while we can’t necessarily prevent these events from occurring, we can better understand, and thus better limit, their impact.
How? With a business impact analysis.
A business impact analysis is one the most important elements of any emergency response strategy. It helps organizations define the critical processes and operations that must be recovered as quickly as possible if a disaster strikes. In a true emergency, it can be hard to know where to start. The downtime resulting from a widespread utility outage or IT failure, for example, can have far-reaching effects across many mission-critical business processes. With a business impact analysis, you can gain clarity on how to prioritize your recovery efforts to minimize the losses from a major business disruption.
In this blog post, we’ll explore what a business impact analysis is, why every organization needs one, and how you can conduct this assessment to inform your disaster recovery, business continuity, and emergency response plans.
What Is a Business Impact Analysis (BIA)?
A business impact analysis or business impact assessment (BIA) is a structured process that organizations use to determine how critical various business activities and resources are to continuing normal business operations.
The various organs of a business have different goals, dependencies, and resources that determine how they function. A business impact analysis… well, analyzes these organs and determines what happens to the rest of the business when one of them is disrupted or fails.
With these insights, businesses can develop business continuity and disaster recovery strategies to limit potential losses.
BIA vs. risk assessment
While a risk or threat assessment determines the types of threats a business is most likely to face, a BIA looks at the business consequences. For a BIA, the cause of the business disruption is less important. It could be an accident, natural disaster, cyberattack, or something else. A BIA only considers the business impact of the disruption, prioritizes resources, and determines the best approach to disaster recovery.
Unlike a business threat assessment, BIAs are concerned with the results of disruptions rather than the causes of those problems—though both processes are complementary to your business continuity strategy and work well in tandem.
A BIA identifies the financial and operational impacts resulting from the disruption of business functions and processes. Operational impact analysis may include:
- Lost or delayed revenue
- Increased expenses
- Regulatory fines and legal fees
- Contractual penalties
- Brand and reputational damage
- Customer churn or dissatisfaction
Of course, the business impact depends greatly on the duration and timing of the disruption. A 30-second power outage will have less impact than a 24-hour IT outage. A fire in a remote and partially empty warehouse will be less of an interruption than a fire in an active manufacturing facility. For a retailer experiencing an ecommerce site outage, the impact is obviously greater if it occurs during a big sale or seasonal event like Black Friday compared to a slower period.
By analyzing different possible disruptions and their effect on critical business processes, a business impact analysis prepares organizations to more readily handle any emergency. A BIA is also a critical step in developing an effective business continuity plan (BCP).
How BIA Fits Into Business Continuity Planning
A BIA lays the foundation for your business continuity plan. It ensures your organization has a clear plan of action and the resources required to recover from critical events efficiently and with minimal disruption.
With the ability to recover quicker, organizations can reduce costs, optimize employee productivity, and maintain customer trust. A business impact analysis gives business leaders more confidence in their decisions when responding to critical events. It also enables organizations to determine—well in advance of a crisis—what mitigation strategies and tools it can utilize so it’s not left scrambling when disaster strikes.
From severe weather and natural disasters to cyberattacks and workplace accidents, all businesses will experience a disruptive event sooner or later. To mitigate the bottom-line impact of these threats, every business should perform a business impact analysis as part of their business continuity and disaster recovery planning efforts.
4 Key Business Impact Analysis Steps
There is no one-size-fits-all template for how to conduct a business impact analysis; every company has unique methods and organizational structures. But there are some common elements that should go into the creation of every BIA.
Here are four essential steps in any organization’s BIA process:
Step #1: Build your business impact analysis project team
Before conducting your business impact analysis, you’ll first need to assemble the project team. A BIA team should include the following roles:
- Project Leader: Primary contact responsible for conducting a successful business impact analysis.
- Executive Sponsor: Executive champion responsible for providing strategic input and guidance.
- Business Process Owners: Representatives from different business units, such as IT and Finance, who will provide insights into relevant business processes and help implement BIA recommendations.
Here’s what your business impact analysis project team may look like, along with each team member’s responsibilities:
Responsibilities: Provide overall project management responsibility, working with business owners to deliver the business impact analysis.
Responsibilities: Provide strategic input, support problem resolution, and give executive signoff on critical activities.
Responsibilities: Analyze the IT applications and software systems to determine if current IT disaster recovery (DR) arrangements enable recovery of these within specific recovery time objectives (RTOs).
Responsibilities: Consider regulatory requirements, contractual obligations, fines, and legal liabilities that may come up during business disruptions.
Responsibilities: Determine the key business risks, define the risk threshold, and help develop the impact parameters.
Responsibilities: Supply financial data and advice on direct and indirect financial impacts.
Responsibilities: Provide information on critical supply chain dependencies, production-related activities, and operational impacts.
Responsibilities: Consider duty of care obligations, compliance, and employee health and safety.
Responsibilities: Supply information on facilities, utilities, alternative recovery work locations, etc.
Step #2: Gather and evaluate business process information
With your all-star team assembled, it’s time to roll up your sleeves. As you begin to gather information, send a BIA questionnaire to survey managers and others within the business. You’ll also want to personally interview those with detailed knowledge of how the business manufactures its products or provides its services. With these insights from business process owners and key stakeholders, you’ll be able to understand the potential consequences better if a particular business function or process is interrupted.
In your BIA interviews and surveys, you’ll want to capture information about various business processes such as:
- Name of the process
- Where it is performed
- Inputs and outputs
- Resources and tools used
- Any process interdependencies
- Impact of disruptions (financial, operational, regulatory, etc.)
- How the timing and duration of a given disruption affects its impact
Once you have collected all of the information needed about each business process, the impact analysis can begin. Consider these four questions:
- Which functions and processes are most important to business continuity?
- What resources (people and technology) does each process need?
- What is the recovery timeline for bringing each process back to normal operation?
- What is the recovery point objective (RPO)? In other words, what is the timeframe for when services/data need to be restored?
When Memorial Health System found itself the victim of a “hive”-style cyberattack that infected all of their servers and computers, they ran into the usual problems. Critical medical information systems, such as diagnostic machines, including MRIs, were unable to send out their results. Digital records became useless, and old paper backups had to come out of storage.
Other issues ensued, like how their vendors’ servers refused to communicate with Memorial’s contaminated ones, further hampering operations. Payroll was impacted; even the cafeteria cash registers lost internet connectivity, which resulted in many a free employee lunch.
Lori Price, the Emergency Management Coordinator at Memorial, told this story on our podcast to share the importance of understanding the interconnected functions of any business.
Since they had already analyzed and prepared for the ways in which one cybersecurity problem can summon many in its wake, they were able to adapt to this disruption and continue offering their lifesaving care to patients. But any business that hasn’t performed proper analysis would have been far worse off.
Step #3: Prepare a BIA report to aid business continuity and disaster recovery
Once the information gathering and analysis phase is complete, it’s time to prepare a business impact analysis report. This report will allow you to communicate your findings and recommendations to senior management, as well as guide the development of your business continuity plan.
The BIA report should document the potential impacts resulting from the disruption of business functions and processes. It will also provide the order of response priorities for restoring normal business operations. Business processes with the greatest financial and operational impacts should be restored first.
If there is a critical production process that needs to be up and running within 24 hours, but your current resources can only get it operational within 48 hours, for example, be sure to address it and outline resource requirements in the BIA report.
Step #4: Implement recommendations to address continuity vulnerabilities
Once your team has conducted the BIA and outlined disaster recovery strategies, the final step is to implement the recommendations from the business impact analysis report. Buy-in and support from your executive sponsor and business owners are critical to ensuring recommendations are implemented across each of the critical business functions identified.
Also, be sure to regularly revisit your business impact analysis to update it as new processes are implemented, the organization’s structure is reshuffled, or available resources change. Your business isn’t static—and neither is a business impact analysis. With your organization constantly growing and evolving, the BIA should be regularly reviewed and modified as needed to ensure it’s still valid.
Adopting Mitigation Tools and Strategies
Once the BIA is complete, business continuity and disaster recovery leaders can use it to help implement mitigation strategies and tools to reduce the impact of various threats. And one such tool is a modern emergency communication solution.
During disruptive events, communication is a lifeline. Being able to relay information and instructions to employees is critical to a fast, efficient emergency response. Emergency communication systems with integrated threat intelligence allow businesses to more rapidly identify threats, visualize the people and locations that are impacted, and facilitate an organized response using multichannel communication—all from a single platform.
Threat intelligence capabilities allow you to recognize critical situations before they happen, giving you the benefit of alerting and organizing your audience in advance. It provides the organization with “always-on” monitoring to identify potentially disruptive incidents as quickly as possible. This helps mitigate losses by improving readiness and accelerating response times.
BIA Means Constant Vigilance
When it comes to emergency preparedness and your disaster recovery plan, speed is everything. How quickly can you identify potential threats? How quickly can you communicate with employees? How fast is your response? How long does it take you to restore business operations? Your organization’s ability to rapidly respond to and recover from business disruptions is directly related to the effectiveness of your business continuity management. And every effective business continuity plan is rooted in business impact analysis.
While there are many ways organizations can improve emergency preparedness—from developing comprehensive preparedness plans to regularly conducting tabletop exercises—the world’s most resilient organizations are constantly looking for ways to accelerate how they detect, validate, and respond to any threat to their people or business. With a business impact analysis supported by modern emergency communication and threat intelligence technology, organizations can maintain organizational resilience, protect the bottom line, and keep business operations running as smoothly as possible during unexpected disruptions.