A Business Impact Analysis is a crucial and continuous process that anticipates the occurrence of a disaster and the consequences that the disturbance would have on the subject business activities.
These disturbances could be anything from natural calamities to accidents. Following the revelations of the process, the BIA paves the way for establishing a recovery plan should such an event manifest in the future. Thus, the main goal of a BIA process is to enable continuity of business operations post-disaster.
A BIA is a continuous assessment that may be done annually or when a business hits milestones like expanding business. The BIA fulfills various purposes, such as establishing the types of impacts a business is at risk of, providing an appraisal of developing impacts as an unfortunate event continues to develop, and determining the maximum tolerable period of disruption (MTPD). In addition, the BIA guides the process of determining the recovery time objectives (RTO), which refers to the timeliness of resumption of affected operations and the strategies needed to realize the restoration.
By ensuring a continuous assessment of risks, a company tries to determine the operational and financial repercussions that would be caused by disturbance of business. These details encompass metrics such as losses caused by delays, a hike in expenditures, resulting in statutory fines, penalties caused by inconveniencing contractual agreements, and the impact of the loss of customers, including the negative reviews that may arise. A BIA also helps to quantify the impact of a disaster occurrence with respect to time and season. For instance, if a hailstorm destroyed a gift shop days to Christmas, the impact would be felt more than if it struck the same store in February.
For a BIA analysis to be effective, these assumptions have to be upheld:
- The health of each business operation depends on the continued, successful running of other business operations.
- Not all business operations are equal. Some call for more attention and allocations than others.
Following are some free downloadable templates for you:
Business Impact Analysis vs. Risk Assessment
Prudent businesses conduct both the BIA and risk management simultaneously. However, the two are slightly different in their capacities.
A BIA leans towards ensuring that a business continues to operate normally after the occurrence of an unfortunate event. This often means uncovering the level of damage that disruptions would cause and suggesting the allocation of resources to restore normalcy. On the other hand, a risk assessment serves as a prevention measure. It helps to uncover the imminent disruptions so that steps can be taken to reduce the occurrence of these events. The findings of a BIA may be brought into the picture when a business is conducting a risk assessment to find a direction for more accurate prioritization.
During a risk assessment process, the staff considers the main functions of the business, the level of importance of different activities, customers and other entities who heavily depend on the healthy running of these processes, and financial and non-financial impacts. The risk assessment process also describes the handling of information and the specific staff that will have to rise to the occasion to drive the prevention measures.
How to Conduct a Business Impact Analysis
Remember that while it is almost impossible to evade many disastrous events, a BIA helps reduce the impact these events would have on business operations. Due to the importance that the BIA brings to the table, the process needs to be conducted in an effective procedure to ensure continuity of business after a disaster.
The following are the necessary steps you need to follow in order to facilitate a successful BIA process:
The process of coming up with a BIA needs approval from the top of the leadership hierarchy. The perpetrators should present a list of objectives and the scope of operation so that they can be revised by senior staff for a go-ahead to be issued. Since the process involves complex decisions and evaluations, creating a team to collectively execute the duties to follow is advisable. If internal staff does not know how to conduct a reliable BIA, you can decide to outsource professionals who are experienced in this sector.
Scope the BIA
Scoping reveals the entirety of items that will be featured in the BIA. In order to successfully scope, the team should conduct a meeting to reveal information such as the reasons for taking steps to ensure business continuity, the things that the company is attempting to protect, the magnitude of business continuity required, and the team members to oversee the program. The initial meeting is very crucial as it consolidates the minds of the involved personnel and points them in one direction. This allows them to think together in setting the best parameters to make the BIA a successful endeavor. Most importantly, the meeting helps to discover the products and services involved in the scope of the BIA in question. Once all these are set, it becomes easier to include all relevant departments and personnel in the BIA build-up process.
Schedule business impact analysis interviews
Once the fundamentals have been established, the next step involves holding meetings with departmental leaders and other experts as it may apply. It would help if you let them know of the meeting objectives so that they prepare adequately. The attendees of this meeting should be aware of the business priorities as far as the BIA goes. They should bear a deep comprehension of daily departmental activities and the resources that go into the completion of these processes.
Execute BIA and risk assessment interviews to gather information
The interviews held earlier should deliberate on the roles of the involved departments in realizing the products and services featured in the scope. The next step should be to determine the functions that facilitate the achievement of each activity. This means describing the peak operation timeline and the impact that downtime could have on each activity. The impact should be clearly classified as to how the downtime could affect the business reputation, contract agreements, and operational practices. This step should also deliberate on the dependencies that go into the completion of these activities.
- The tools and equipment used
- The human workforce
- Facilities and applications
- Departmental interdependencies
- Suppliers and vendors
Once these have been documented, you should go ahead to expound on each of them in terms of the description, the alternatives, and the recovery time that would be needed if a failure occurred. Then, carry out a risk assessment using a scale of 1-10 to show the potential of failure of each dependency and the impact that this failure would cause. Finally, after the metrics have been collected, you can compute them to determine the risk rating associated with each dependency.
The staff driving the BIA process should be keen enough to ask about any departmental experiences that might have previously caused disruptions in the smooth execution of activities assigned to them. Any extra deliberations in accordance with this can warrant extra planning. If it helps, you may create charts to represent the information-gathering process.
Review information gathered
The BIA team can now sit down and analyze the collected information in order to determine the following:
- The most important activities that could ensure the continuation of operations. Come up with a list that could dictate what business parts to concentrate on before others in the event of a disaster.
- The critical manpower and technological advancements would be brought into play to restore the smooth running of the prioritized activities before business crumbles down. However, these resources need to be narrowed down in order to avoid misusing resources that could go to other areas.
The analysis should deliberate on the timeline required to restore operations. Ensure that you consider the practicality of things as well as the reaction pace and time of the team. The time should be geared towards minimal damage in terms of losses, both monetary and nonmonetary.
Some situations may call for recommendations that could put the business in a better position of surviving an incident. If, for example, the available resources can only manage to spring things back to normal in 48 hours whereas the business can only afford downtime of 36 hours, the recommendations could direct what needs to be done.
The results of this analysis stage should be a clear, prioritized list that the management can consult to determine what to concentrate on first if a disruption occurs. The list of functions should be a worthy guide even if the occurrence affected multiple departments.
Once the list of priorities is ready, personnel who contributed in the information gathering phase should go through the ready list to validate its content and check for missing details. To make the document even richer, senior personnel such as department heads, senior management, IT leaders, and financial managers should have a hand in preparing this list to ensure that it stands for the greater good of the company.
Documenting and creating BIA report
This step involves developing a professional and complete report based on the entire process and presenting it to the relevant leaders. It is this report that they will keep to help them with making the necessary decisions during a disaster recovery process.
To ensure the completeness of this report, ensure that you include the following:
- An overall summary
- Scope and goals of the BIA
- Methodologies used in the discovery phase
- Summary of all findings
- Comprehensive findings that carry the following information for every researched department: vital business processes, the influence of disruptions, the bearable downtime in case of disruption, the admissible losses (both monetary and nonmonetary), and the potential financial expenses as compared to the approximated expenditures for the deployment of recovery techniques.
- Any supporting documents to justify and root for the findings
- More recommendations for a successful recovery process
Given that the report is what the leadership will rely on to gear continuity of business in the event of a disruption, the task force preparing it should ensure it is easily understandable, well-articulated, and thorough.
Complete a BIA and risk assessment summary
It is your work to prepare a BIA summary that reflects on the whole company and a risk assessment summary for viewing by the managers. The summaries capture the crucial functions, resources requirements, and risks discovered during the departmental meetings held earlier. Further, the managers can utilize the summaries to establish recommendations for cubbing the identified risks.
While airing these results to the committee set aside for business continuity, cover the following:
- Recap the products and services that were discovered at the beginning of the process
- Verify the estimated recovery timelines and how they fall in line with the mentioned product and services
- Mention the risks associated with the plan and offer recommendations for going around these risks
By looking at the recommendation brought to them, the company’s leadership should find insights for arranging an effective resilience that can be realized through strategies to help recover both crucial resources and business activities.
How to Analyze the Results of a Business Impact Analysis
The analysis segment of a BIA process is to shed light on these items:
- Most important business endeavors that cannot be down for lengthy periods
- The human and material resources that go into the smooth running of these activities
When conducting an analysis, your report will need information such as an executive summary, methodologies utilized to collect information from various departments, and exhaustive findings. Exhaustive findings may be represented in charts, diagrams, and other visual aids to show the extent of monetary and nonmonetary losses. After the findings, a good analysis should offer recommendations that would facilitate a smooth recovery process.
Some of the other information that should be in an analysis report includes legal and statutory constraints, the acceptable downtime that would not wreak havoc, and a list of the RTOs and RPOs.
When the team is done, it should forward the analysis to the company seniors to check, approve, or recommend further reviews on weak areas. The leaders should ensure that the BIA process is a continuous process that remains updated, especially when the company makes major operational changes.
Implications of Not Performing a Business Impact Analysis
As we have seen, a BIA is a crucial preventive measure that could potentially mean the thin line between continuity and closure of business.
If a company were to ignore the process altogether, they risk the following:
- Dangerous confusion when it comes to prioritizing a recovery process: In the event of a disruption, a company would not have a guide to oversee the recovery process. Different departments would have diverse priorities. Such proceedings would potentially cause more problems to the company instead of healing it.
- A company would have a weak rationale around the recovery measures: A BIA cements the plan for recovery and wears off prejudice in the continuity plan. Without it, managers would not be in a position to justify if a course of action is the right move. On the contrary, a perfect BIA report would eliminate any uncertainties about recovery measures, the resources needed to implement the measures, and the positive impact they would have on business continuity.
- Misaligned scope of the recovery program and the risk of harmful gaps: A weak BIA review can expose your business to the risk of under-preparedness when disaster strikes. Also, a lack of priorities in terms of business functions and resource allocation may leave risky gaps in the ability of a company to coordinate a successful recovery, thereby causing harmful inefficiencies successfully.
Use a Business Impact Analysis Template
A BIA template is a centralized tool that a team can use to capture and keep data from a BIA process. The template, which can be in cloud-based layouts or spreadsheets, adds meaning to data and presents it in a simplified yet comprehensive and thorough way. In addition, a template bears state of the art organization that simplifies retrieval of analysis when the time to use it for recovery comes. Also, the template provides an easy way to handle all information pertaining to a BIA.
Some other advantages of using a template are:
- You can easily document and evaluate all information to realize the success of a BIA process
- They simplify calculations for metrics such as losses, minimum recovery time, and resource allocations.
- They simplify the creation of strategies aimed at avoiding too much disruption
Pros and Cons of Conducting a Business Impact Analysis
Here are the pros and cons associated with creating a BIA:
Conducting a continuous BIA presents crucial benefits to a company.
It is a useful tool in planning for disaster recovery
A BIA brings to light various vital information on recovery. It reduces the likelihood of failure by identifying crucial business parts and suggesting funds that would ensure continuity. Second, the BIA indicates the impact of a disaster in terms of monetary value and offers priorities, strategies, and requirements needed to recover.
It confirms the business continuity program scope
The BIA confirms all the crucial constraints that go into ensuring a company delivers its core purpose. It could advance how an organization fulfills its purpose to its clientele through providing additional activities that may not have been originally recognized. The BIA goes on to unearth the impacts of a potential disruption and recommends a list of things that need to be done, some of which may advance the program’s scope.
The BIA identifies legal, regulatory, and contractual obligations
More often than not, companies do not fully understand the legal surroundings of their operations, especially when dealing with a disruption event. But when a company takes time to develop a comprehensive BIA, they discover the legal, contractual, and regulatory ties that they are supposed to uphold, thereby keeping them on the right side of the law.
It clarifies business continuity strategy spend
By presenting various effects and strategies in terms of money, it provides an avenue for the company to make the right choices when it comes to strategizing the best procedures for recovery. Thanks to the justification it brings to the table, a company stands a better chance of spending the right amount of resources without being wasteful.
It captures preliminary plan content
Preparing a BIA involves determining specific content that would ensure business continuity in the wake of an unavoidable disruption. Then, using the gathered information, the business can commence actual preparations around the content to grant an easier time to the staff tied to maintaining these recovery plans.
The following are the cons associated with running a BIA process:
It is time-consuming
Creating a BIA is not a walk in the park but a complicated process that requires a lot of time to ensure accuracy. For instance, a lot of time is needed during the discovery phase as the team tries to capture the main activities associated with every subject department.
The challenge of inaccurate or unrealistic recovery time objectives
Sometimes, the team may fail to establish time-sensitive activities accurately due to inadequate justifications and an inadequate understanding of departmental core priorities. This may affect conclusions and recommendations later on.
BIA does not evolve as the organization evolves
A BIA does not follow in the company’s footsteps as it evolves through technological changes and the general progress of the business landscape. It could easily be outdated if the leaders do not take the initiative to make it a frequent endeavor.
BIA data is overwhelming to analyze
The team uses historical and newly collected data to tell the most crucial business activities, the acceptable thresholds for downtime, and the resources required to return to normal business. Unfortunately, sometimes there is too much data within the walls of the BIA scope.
Sometimes BIA data is useless or irrelevant
There are times when an organization may find itself wasting resources on collecting unhelpful data. The main cause for this occurrence is when an organization selects a BIA team that is inefficient and inexperienced. Another cause is when the team uses unworthy information-gathering methods during the discovery phase.
The challenge of disengaged executives
The top leadership of a company is responsible for overseeing the whole process and endorsing the results of the BIA, among other crucial functions. If the team working on the BIA fails to engage these leaders, there is a risk of coming up with a weak BIA report that may not measure up when the rainy day comes.
Frequently Asked Questions
Generally, you may update your BIA annually. However, there are scenarios, such as key organizational changes, that may require you to update more frequently. Therefore, it would help to look at the pace at which your company is changing in order to determine the best frequency for updating your BIA.
Different phases of the BIA process may call for different personnel. For instance, the involvement of departmental leaders is needed in the interviewing phase more than in any other phase. At the very least, the team should consist of a continuity steering committee, a program sponsor, and a program manager.
Surveys are alright, but the interview-based approach is better. The comprehensiveness it provides gives the depth and context required to realize more accurate conclusions and recommendations.
A BIA report captures the main activities of a department, a projection of the effects that would be experienced if these activities stopped, and the resources that would be needed to resume the activities. Other vital information featured in a BIA includes projected recovery time, company risks, and recommendations for reducing these risks.
The process of creating a successful BIA starts with determining the scope. The scope then guides you into completing the rest of the steps.
Small companies with a maximum of 15 departments do not necessarily require software to run a successful BIA. However, larger businesses may find the convenience and automation that software adds to the valuable process in many ways. For instance, the software could save a lot of time and manpower needed for manual follow-ups.
A BIA sheds light on the potential impact of a disruption event and offers strategies to ensure that activities would resume normalcy in the shortest time possible in order to prevent unbearable losses to the business.