4 Steps To Performing a Business Impact Analysis
In this post, we discuss the importance of conducting a business impact analysis and how to use it to improve business continuity planning and overall emergency preparedness.
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 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 a business impact analysis to inform your disaster recovery, business continuity, and emergency response plans.
What Is a Business Impact Analysis (BIA)?
A business impact analysis (BIA) is a structured process that organizations use to determine how critical various business activities and resources are to continuing normal business operations. Industry research firm Gartner defines BIA as follows:
A business impact analysis (BIA) is the process of determining the criticality of business activities and associated resource requirements to ensure operational resilience and continuity of operations during and after a business disruption. The BIA quantifies the impacts of disruptions on service delivery, risks to service delivery, and recovery time objectives (RTOs) and recovery point objectives (RPOs). These recovery requirements are then used to develop strategies, solutions, and plans.
Essentially, a business impact analysis enables organizations to identify critical business functions and assess the consequences of a disruption to one of those functions. With these insights, businesses can develop business continuity and disaster recovery strategies to limit potential losses.
While a risk 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 not important. It could be due to an accident, natural disaster, cyberattack, or something else. A BIA considers the business impact of the disruption, prioritizes resources, and determines the best approach to disaster recovery.
A BIA identifies the financial and operational impacts resulting from the disruption of business functions and processes. These impacts 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 the critical first 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 Steps To Conducting a Business Impact Analysis
There is no one-size-fits-all template to performing a business impact analysis; every company has unique business processes and organizational structures. And although there isn’t a single business impact analysis method that will work for every company, there are specific 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 project 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 apply during business disruptions.
Responsibilities: Determine the key business risks, define the risk threshold, and help develop the impact parameters.
Responsibilities: Supply financial data revenue figures 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 the information gathering process, use 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 business process information such as:
- Name of the process
- Where the process is performed
- Inputs and outputs in the process
- Resources and tools used in the process
- Any process interdependencies
- Impact of a process disruption (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 three 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?
In the end, you should have a list of critical processes and a prioritized recovery sequence. This will allow your business to quickly determine where to put your attention first during any type of business disruption.
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. The most important deliverable resulting from your business impact analysis, the BIA 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 should 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 business impact analysis and outlined disaster recovery strategies, the final step is to implement the recommendations from the BIA report. Buy-in and support of 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 software with integrated threat intelligence allows 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 also 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 ensure potentially disruptive incidents are identified as quickly as possible. This helps mitigate losses by improving readiness and accelerating response times.
Optimizing Your BC/DR Strategy With BIA
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 plan. 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.