If you’ve ever found yourself on the unfortunate receiving end of a risk made real, you know the headaches that come with returning to normal operations. Some problems require all hands-on deck, while others can be resolved with minor disruption. Regardless of the red tape that’s involved, your ability to bounce back boils down to one key element—how prepared you are.
What Is a Business Impact Analysis?
A business impact analysis (BIA) is a method for identifying risk, predicting the consequences of disruption to your business, and developing recovery strategies. Essentially, this allows you to examine your business as a whole and evaluate where risks might come from and then take steps to put solutions in place that help to reduce the potential for negative outcomes. Conducting a BIA requires you to don your best pessimist hat and start thinking gloomy thoughts about what could potentially take down your business.
Why You Need a BIA
The entire purpose of a BIA is to build resilience. A BIA takes business risk and translates it into action. It gives you the ability to keep moving when disruptions occur. But most importantly, it keeps your day-to-day operations running smoothly.
Here are the reasons you need a BIA:
- Ensure business continuity
- Meet compliance regulations
- Identify critical dependencies
- Define the risk around third parties
- Understand the cost of disruption
Your analysis lays the groundwork for a response plan. It allows you to tie risks and possible scenarios to actionable mitigation steps.
How to Conduct a BIA
Putting together a BIA is a process that requires collaboration, examination of your business operations, data analysis, stakeholder buy-in and continued iteration.
These are the general steps you’ll need to follow to conduct a BIA:
- Define your objectives and goals for conducting the analysis.
- Put together a team that includes stakeholders from across your organization, including HR, finance, IT, sales, marketing and anyone else with a stake in the game.
- Gather information and input from all stakeholders.
- Compile a BIA report which will serve as the guiding source for your strategy.
- Develop strategies for response and recovery.
- Test and update.
What Types of Risks Should You Prepare For?
As you prepare for your BIA, you’ll want to define where risks might cause disruption. Business disruption can rear its ugly head in multiple ways and can originate unexpectedly. Disruption is any problem that causes pauses or delays to operations or interruptions to revenue. These can be internal or external factors and will have varying levels of impact.
Risk falls into the following seven categories:
- Strategic
- Compliance
- Financial
- Operational
- Reputational
- Global
- Competitive
Those risks can manifest themselves in the form of various business disruptions. The following list provides some examples of common business disruption scenarios:
- Physical damage to buildings or equipment
- Impairment or breakdown of critical hardware
- Supply chain interruptions
- Utility outages
- Corruption or loss of data
- Absenteeism or loss of critical staff
- Interruption of voice communications
- Fraud, theft or loss of physical products
- Security breaches
- Regulatory changes
- Shifts in operational procedures
- Large changes to financial line items
- Product or service failure
- Competitor shifts
What You Need to Include in a BIA
A BIA can take many different formats. Regardless of what yours looks like; it should include the following details:
- Name the disruption.
- Define how long the disruption is likely to last. If it’s uncertain, you may want to define windows of time, such as between 8-24 hours.
- Identify the impact to your operations. What is the result of the disruption? Do you need additional staff? Will you need to cease production in certain facilities? Do you need to outsource help? List each possible consideration.
- Spell out the financial impact. Do your best to catalog what each operational consideration would cost you in monetary form.
- Outline mitigation tactics and recovery strategies. Document your action plan for each scenario and log any activity. Make sure to identify essential personnel in the event of critical failure.
It’s important to remember that no organization can be prepared for any and every disruption. The point is to create resilience.
BIA Best Practices
BIAs are not meant to achieve perfection. The entire process is simply about preparedness. To make sure you can achieve that, consider the following best practices.
Educate Your Staff
Understanding the immediate steps that need to take place is a critical first step. Make sure everyone knows what to do when an issue arises and who needs to be alerted. Timing is everything when it comes to disruption and knowing how to manage it can significantly reduce time to resolution.
Document, Write it Down, And Document It Again
It can’t be said enough. Make sure you document every part of your BIA, from the expectations of financial loss, down to the very fine details and step-by-step instructions for responding to a threat. Your documentation needs to be clear, actionable and accessible.
Test Your Strategies
Never assume that hypothetical strategies will solve your problems. You need to test. And test again. And then test over time to make sure your strategies are still appropriate as your business changes. Run through realistic scenarios and practice them as you would in a real-life situation.
Make Sure to Update
A BIA is never one and done. As your business grows, you’ll need to update your plans and make sure your technology dependencies are accounted for and new potential risks become part of your evolving strategy.
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