Risk is not optional. If you own a business, chances are, you will confront risks at some point. What’s more, as your business grows, potential business disruptions will increase in both frequency and harm potential. It’s not possible to foresee every risk. Nonetheless, a business impact analysis can help you plan for and mitigate the potential impact of unforeseen events threatening your organization.
So what function does a business impact analysis serve for your business? For starters, it presents a clear picture of the impact a crisis will have on your day-to-day business processes. In particular, a business impact analysis allows you to take a look at processes across departments, get a big-picture overview of how these processes interact, and decide which of them are most vital for keeping your organization afloat should disaster strike.
A business risk assessment is a crucial component when conducting a risk assessment and an important piece of any good continuity plan
A business impact analysis is not a security requirement, in terms of compliance with laws and regulations. Yet, it is a crucial component when conducting a risk assessment and an important piece of any good continuity plan. At the end of the day, your organization’s ability to bounce back from a disruption—e.g., a cyber security breach, natural disaster, or public relations blunder—will preserve or harm your company’s reputation.
Finally, a business impact analysis gives you a firm foundation to stand on by helping you plan for threats presenting legal and ethical challenges. By understanding how a disruption impacts your business across all levels, you will be in a better position to quickly implement recovery strategies when it strikes.
So while it’s clear that conducting a business impact analysis is crucial to the well being of your business, we have yet to define the concept, which will begin our discussion of 4 crucial things to know about business impact analysis.
Let’s get started.
1. What is an impact analysis?
We’ll start by defining business impact analysis.
The term describes the method by which businesses plan for and predict how risks will negatively impact operations. Data associated with processes and systems is leveraged to devise useful strategies for recovering from disruptions to business operations.
You typically start by identifying and considering how various scenarios could disrupt operations. For instance, having lived through a pandemic, retailers may begin anticipating a second one, considering how they would pivot to online and/or touchless platforms.
It’s essential for businesses to develop a thorough understanding of the risk landscape in order to assess risk. By considering the myriad risks facing your business, you can begin investing resources into a recovery plan. By doing so, you will be in a strong position to bounce back should disruptions occur.
We’ve now defined business impact analysis.
Let’s explore the next of the 4 crucial things to know about business impact analysis.
2. How do you define business impact?
We’ve seen how a BIA is defined, but what exactly is meant by impact? For starters, consider the amount of strain a potential risk will place on your operations. Broadly speaking, we can consider financial and operational impact.
Financial impact is the amount of money that is lost either amidst a crisis or after it has happened. For example, consider a natural disaster. Damage from the disaster itself will result in financial losses due to property damage. But you also have to consider money lost during the recovery period–it may take substantial time to reopen your doors.
Operational impact describes disruptions in business processes and systems. Consider a cyber attack that forces you to add additional layers of security to your online retail business. Given your vulnerability, you pause operations while the digital infrastructure is updated.
Of course, financial and operational impact are not mutually exclusive, and when one is impacted, it’s likely that the other will be as well. That’s why you must plan for these potential impacts when conducting a BIA.
Now that we’ve defined impact, we’ll consider number 3 on our list of the 4 crucial things to know about business impact analysis.
Let’s check it out.
3. What is the difference between a BIA and risk assessment?
At first glance, it may seem that a risk or threat assessment and BIA are two sides of the same coin. After all, both are intended to plan for and mitigate risk. However, each procedure measures a unique dimension of your business’s crisis management plan.
Risk assessment involves surveying the global risk landscape and identifying the most probable risks facing an organization. For instance, you might start by considering your geographic location, digital presence, and susceptibility to crime. Next, you would identify risks based on those various factors.
Conversely, as we discussed above, a business impact analysis considers how various risks produce outcomes associated with financial and operational impact.
Putting it all together, you’d first identify a handful of probable threats based on a risk assessment. Next, you would consider which aspects of your business would be most impacted by those risks. Finally, you would quantify and plan for that impact during your BIA.
So we’ve considered the third item on our list of the 4 crucial things to know about business impact analysis.
4. What are the five elements of a business impact analysis?
Finally, we will bring it home and describe the five elements comprising a business impact analysis.
- Planning – You’ll start by assembling a team to carry out the BIA. This team can either consist of employees within the organization or experts from an external source. This team will work closely with leadership, defining the scope of the project and a timeline to carry it out. Finally, each team member’s role and responsibilities need to be defined.
- Data Collection – Next, you’ll need to collect data about the various processes and systems in place. This step can be completed using either a standardized survey or a series of interviews. The information gathered should include the name and function of various processes, the people involved, the resources required, and the information flowing in and out of the processes.
- Data Analysis – After enumerating the various processes, you can begin your impact analysis. This involves identifying the processes most essential to operational success. For instance, you would identify the processes that would need to be operational immediately following a disruption and those that are secondary. Identify the team members needed to maintain that operation and the timeline for returning it to full functionality. From this step, you will have a list of processes ordered by their relevance to operations and a timeline for getting them up and running in the event of a crisis. These data will inform your resource allocation process.
- Deliver a Report – Now that you have a thorough understanding of the process data, you are in a position to synthesize that information in a BIA report. This report will be delivered to senior management, who will then respond in a manner consistent with the goals identified therein. It’s essential to deliver this report, which provides leadership with a clear understanding of the most essential processes and how they will be maintained in the event of a crisis.
- Interpret the Findings – Ultimately, senior management allocates resources in preparation for crises. However, it’s important that they have a clear understanding of the results of the BIA so that they can act decisively to maintain the most important business processes. Therefore, a clear and succinct interpretation of the BIA report must be delivered in addition to the report itself.
That concludes our discussion of the 4 crucial things to know about business impact analysis. I hope that you see that, when done properly, a business impact analysis can help your business prosper by minimizing uncertainty about the future.
As a business owner, risk is an inevitable part of life. As we’ve seen with this year’s pandemic, the future is anything but predictable. Nevertheless, as an executive, you can take preemptive action to reduce the damage associated with a crisis. Consider implementing a BIA as a component of a broader risk management strategy.
On the other hand, you may feel unequipped to deal with risk, and that’s okay. At Chesley Brown, we understand that planning for risk can be a daunting task. That’s why we’ve built a framework that enables businesses to anticipate and navigate risk before it becomes a crisis. We are here to manage risk so that you don’t have to.
For industry-leading guides and analysis sign up for our blog below.
Maximizing safety for students and employees If you’re anything like me, keeping your family safe is your number one priority. During the Covid-19 pandemic, this means minimizing social contact to reduce the chances of infection. …Read More
Why your business should be transitioning to touchless tech right now As a business owner in the retail industry, adjusting to the Covid-19 pandemic is a huge challenge. Nevertheless, you’ve crossed your t’s and dotted…Read More