Every business should prepare for the chances of things going wrong, but accepting the possibility of a disruption is not enough; a company must also be ready to respond to those disruptions. Part of this preparation includes conducting a business impact analysis (BIA).
A BIA is a formal analysis of how disruptions or emergencies could affect your organization. It yields valuable information to help you develop mitigation or contingency plans to deal with these events. A thorough BIA includes information about impact types and helps to articulate your organization’s tolerance for different impacts.
This guide provides an in-depth overview of BIA, including its purpose, benefits, and the various steps. To set up a solid foundation for a BIA program, we recommend reading this guide from cover to cover. If you only need information about specific areas of a BIA, you can navigate to that section using the below table of contents.
What Is the Purpose of a Business Impact Analysis?
An effective BIA is less about preparing for specific emergencies and more about knowing what to do if critical operations are interrupted due to an emergency. It helps you identify the most crucial activities to maintain day-to-day business operations.
If a disruptive event should occur, you need to know which processes and activities to focus on first, so the business can keep moving forward with as little loss or damage as possible. Here’s where a BIA comes in.
The BIA process is critical for all organizations because it enables you to think logically before an adverse event, rather than improvising a response after the event amid disaster and chaos.
Identifies Possible Disaster Scenarios Before They Happen
A BIA predicts the possible consequences if potential loss scenarios are realized. It aims to understand what might happen if a business function or process is disrupted, gather the information required to analyze the potential impacts, and develop prevention, mitigation, and recovery strategies.
These scenarios include:
- Breakdown of systems, equipment, or machinery
- Physical damage to premises
- Supply chain interruptions
- Utility outages
- Sudden access restrictions to a building or site
- Corruption, compromise, or loss of IT resources
- Employee absenteeism or churn
Anticipating what might happen in the future is the first step to preparing for emergencies and implementing plans to minimize any possible damage.
Provides Clarity on the Impacts of a Disaster or Disruption
Disruptive events could affect your organization in many different ways. Without a proper BIA, it’s impossible to understand, quantify, or address those effects. The BIA identifies the various possible implications of a disaster or emergency, such as:
- Lost or delayed sales and income
- Increased costs or expenses
- Regulatory fines or other penalties
- Contractual penalties
- Legal costs
- Customer dissatisfaction
- Customer churn
- Delays in implementing new business plans
In sum, the BIA identifies the operational, financial, contractual, legal, regulatory, and reputational consequences resulting from the disruption of one or more business processes. Further, the timing and duration of an adverse event can significantly affect the losses your business suffers. The BIA considers both aspects to guide you in your impact assessment and mitigation strategies.
Creates a Plan for Disaster Recovery and Business Continuity
A BIA helps define business objectives for disaster recovery and business continuity. Recovery time objectives (RTO) and recovery point objectives (RPO) are critical parameters for senior management to define and discuss when preparing the BIA.
The RTO is the amount of time within which a process must be restored after a disaster or business disruption to avoid unacceptable consequences. It answers the question: “How much downtime are we willing or able to tolerate?”
The RPO specifies the maximum amount of data loss that an organization can tolerate. It is expressed in amount of time and determines how often you need to backup your data. The harder it is to recreate or recover the data, the shorter your RPO should be. In a transaction-heavy environment, like banking, you would have a near-zero RPO, requiring real-time backups.
Determining the RTO and RPO for an organization is crucial in the BIA process because those decisions will significantly influence how disaster recovery, data protection, and business continuity plans (BCP) are designed and resourced.
- Create a disaster recovery plan and business continuity plan
- Confirm the scope of these plans
- Create an appropriate budget for business continuity
- Implement the capabilities to meet the RPOs and RTOs identified in the BCP
- Maintain business and operational continuity
- Adequately recover from a disaster or other disruptive incident
Short RTO and RPO parameters will require broader scopes, and likely, more expensive recovery solutions.
Collect Data for Business Continuity Plans
When performing the BIA, you will collect various pieces of information that will go into your BCP, such as:
- Existing controls and recovery strategies
- Resource and staffing requirements to maintain continuity
- Contact information for internal and external stakeholders
Once you collect this information, you can create a new BCP or modify an existing BCP. Regular BIA will yield valuable up-to-date information to help you maintain a valid BCP plan.
Clarifies Legal, Regulatory, and Contractual Compliance Needs
The BIA will highlight your legal, regulatory, and contractual obligations and the potential impacts of a failure to meet them. With a BIA, you can better understand your obligations and implement the necessary controls and strategies to assure consistent compliance with them.
Business Impact Analysis vs. Risk Assessment
A BIA is not the same as a risk assessment (RA), although the two concepts are often used synonymously. Don’t fall into that trap.
The objective of a risk assessment is to find vulnerabilities and potentially threatening events that can happen to your organization, as well as their probability of occurrence and likely impact. The risk assessment report usually identifies and lists risks in many areas, including:
- IT or telecommunications failures
- Geopolitical incidents
- Terrorist attacks
- Natural disasters
Simply put, a risk assessment identifies specific risk factors. It also includes a risk treatment plan to minimize the damage from such incidents.
A BIA focuses on the effects of a potential disruption to critical business processes. It is about analyzing the impacts of identified risks. It also identifies how quickly recovery is required to avoid even more extensive damage.
That said, both analyses are about assessing disruptive events. Use both tools in conjunction with each other to bolster comprehensive disaster recovery and business continuity plans.
Important Considerations of a Business Impact Analysis
Your BIA should examine any event that could possibly interrupt normal business functions and processes. Don’t focus only on events with enormous potential impacts such data breaches and natural disasters. Consider other risks, too, such as:
- Supply chain delays
- Power outages
- Equipment wear and tear
- Unavailability of key employees
Ideally, do the risk assessment before the BIA to better understand which risks your business is exposed to and the likelihood of occurrence. If possible, choose the asset-based approach for the risk assessment since this will make it easier to identify all the resources for the BIA.
What Should a Business Impact Analysis Include?
An effective BIA consists of multiple elements that work together to help you predict the consequences of a disruptive event. It provides the information necessary to take action and mitigate the damages from those events. These elements are as follows.
Get executive backing and support before starting the information gathering step of the BIA. Stress the importance of the BIA in maintaining business as usual and achieving financial objectives in the event of a disaster.
Without the support of senior management, you won’t be able to conduct a thorough BIA. You also need executive sponsorship to allocate resources to design and implement the mitigation strategies necessary to assure business continuity after a disruption.
BIA Scope and Critical Business Functions
The BIA identifies the critical business activities so you can continue to function. Here, “critical” means that a failure to perform these activities would cause unacceptable or irreversible damage to the company. The BIA also articulates the financial and operational impacts of a disruption to these activities.
A list of critical processes is incomplete without a list of essential personnel who perform them. Gather information about various vital roles and any interdependencies among them. For example, if one impact of a data breach is that the company must inform regulators how the breach happened, that typically would mean the legal team contacts the regulator – but the legal team can’t make a useful disclosure without help from the CISO’s team explaining how the breach originated.
In addition, identify strategic suppliers and service providers, and how you will continue to do business with them (or without them) in case of a disruption. Wherever possible, identify alternate vendors to assure business continuity.
When identifying the business-critical processes and functions, specify any dependencies required to perform them. The BIA should identify and document all these types of dependencies:
- Personnel: due to segregation of duties regulations, multiple roles might be required to perform some transactions from start to finish
- Facilities: access to some facilities may be limited for some employees
- Equipment: special training or certifications may be required for specific equipment
- Third parties, such as suppliers and vendors, that provide crucial goods or services to business operations
Once you complete your review of the business and critical processes, you will need BIA software, as well as tools like:
- Organizational charts
- Questionnaires and surveys
- Data flow diagrams
These tools help you gather and organize the data necessary to analyze the potential impact of a disaster and create the plans to minimize it.
BIA Findings and Report
Present your BIA findings to executive leadership in a user-friendly format to get their approval on business recovery strategies. The business impact analysis report should include these components:
- Executive summary
- Analysis scope
- Key objectives
- BIA methodology and approach
- Impact measurement approach
- Business process criticality ranking
- Recovery timeframes for all evaluated processes, including critical processes
- Critical process dependencies
- Regulatory, legal, or compliance objectives or obligations
- Unexpected areas with broad exposure to risk
- Action plans to maintain business continuity
- Report summary
- Supporting information
- Process details
- Survey participants
- IT systems categorized by recovery times
- Historical data, if available
Business Impact Analysis Steps
The BIA will help you:
- Assess risks to business continuity
- Create and implement feasible disaster recovery and business continuity plans
- Identify and fine-tune response and recovery strategies
- Provide assurance to key stakeholders about your organization’s preparedness in case of a disruption
A BIA is critical to your organization’s operational continuity and resilience, so it’s essential to do it systematically and follow a robust process.
Step 1: Get Organized
To begin, get the support and approval of upper management, the C-suite, and the board. Talk to the various department heads or business units to get their support and cooperation. Securing that support is easier when you can give them clarity on the what, the why, and the who:
- Why are we doing the BIA?
- What are we trying to protect?
- Who should be involved in the project team?
Keep in mind that every department will likely consider its own operations to be business-critical, so make sure to get their advance agreement on the BIA’s goals and priorities.
Step 2: Gather Information
Create a survey or BIA questionnaire and distribute it to department heads. These personnel should have a good understanding of the organization’s key priorities, their department’s day-to-day business activities, and any relevant resource dependencies.
Ask these leaders or subject matter experts to articulate:
- Critical business processes and resources needed for the organization to continue functioning with minimum damage
- Inputs and steps required to complete each process
- Peak operation times (times of the day, month, or year)
- Specific risks in their department
- Potential financial impact of these risks and any resultant downtime
Identifying the critical processes, products, services, and personnel will help you create an effective BCP that will actually work if disaster strikes. For this, it’s essential to talk to the right people and perform comprehensive data collection and data analysis from the information gleaned from these meetings.
Step 3: Assess Disruption Scenarios
Identify the various disruption situations that your organization could face and the potential impact of each. Assess scenarios that could lead to significant business interruption and financial impacts. Compare these impacts with the costs of possible recovery strategies.
Step 4: Analyze the Data
Use information from the BIA survey or questionnaire to determine which departments or processes should be prioritized to minimize financial losses. The BIA should narrow down the most essential operations, allowing the business to operate with minimal resources. That’s why identifying the business-critical aspects of the entire organization is crucial.
Step 5: Prepare a Risk Assessment Summary
Summarize the various risks you have identified, along with the key activities and resource requirements. Assess their seriousness and articulate your recommendations related to risk treatments.
Step 6: Prepare the BIA Report
The BIA report should document the various disruption scenarios and their possible impacts and costs. It should also prioritize the order of events required to restore business continuity. The processes with the most significant operational or financial impacts should be restored first.
Add your insights and recommendations – for example, about RTOs and RPOs – to assure that the report is actionable. Prioritize these recommendations so actions can be scaled to the resources allocated.
Once the report is ready, present it to senior management and the board. You could also distribute it to those who contributed to the BIA, such as department heads or subject matter experts.
Step 7: Create the BCP
Once the business impact analysis is complete, you have the necessary information to develop a business continuity plan. This plan should clarify what to do if any one of the identified disruptive events occurs and how the organization will get back to business as usual in the shortest possible time.
Your BCP should (ideally) include all of these elements:
- Who is in charge of the BCP process
- Critical resources and where they should be allocated
- Mitigation plans to minimize damages
- Internal and external communication procedures
- Restoration procedures
- Training procedures for staff, management, and leaders
- Auditing procedures to maintain the plan’s effectiveness
Make Reciprocity ROAR a Part of Your BIA Plan
For an effective business impact analysis or risk assessment, you need a centralized platform to leverage templates, store data analysis, manage questionnaires, and drive task workflows. Reciprocity ROAR is an integrated, “single source of truth” platform to address compliance requirements, streamline risk management, and simplify audits.
Policies and procedures are revision-controlled and easy to find in the document repository. Workflow management features offer easy tracking, automated reminders, and audit trails. Insightful reporting and dashboards provide visibility to gaps and high-risk areas.
Leverage Reciprocity ROAR to see evolving threats and changing risks across your organization, consolidate policies and procedures, minimize loss events, and implement business continuity and disaster recovery plans.
Schedule a demo today to see why dozens of organizations make Reciprocity ROAR part of their BIA plans.