Business Impact Analysis: Meaning And Examples

Having a solid business continuity plan in place is significant for the survival of every business. Not only that, the plan should be customized and flexible. It’s important to conduct a business impact analysis (BIA) before making a business continuity plan. Let’s delve deeper into what a BIA is and what it means for business continuity management systems.

What Is Business Impact Analysis?
Conducting A Business Impact Analysis
Business Impact Assessments
Business Impact Analysis Examples
Endnote

What Is Business Impact Analysis?

Business impact analysis is the cornerstone of business continuity management systems (BCMS). It’s the process by which businesses aim to examine the impact of disruptions on the organization. They minimize risks by identifying critical business operations and resource requirements. The consequence of the disruption is anticipated and a thorough analysis is carried out to formulate recovery and mitigation strategies. Competent business impact assessments are usually expensive and stretch over one or two years.

Businesses function in a dynamic environment, which makes it imperative for the adoption of management systems. From safeguarding the business against poor customer feedback, financial losses and minimizing the duration of the disruption period, business impact analysis is one of the most significant energy response strategies. To devise a plan of action at the eleventh hour can lead to a longer recovery time, shatter customer trust and confidence and widen associated costs and risks.

Here are a few important terms that will explain business impact analysis to you:

Business Continuity Management System: This is a systematized framework highlighting the exposure of an organization to threats, both internal and external. It involves management of the crisis, recovery from a disaster and planning contingencies
Business Impact Assessment: This is a process that determines the ability of an organization to spring back to normalcy during and after a disruption in a business transaction
Recovery Time Objective (RTO): This refers to the amount of real time a business requires to resume its usual functioning after a disaster to minimize heavy financial setbacks
Recovery Point Objective (RPO): This is the maximum level of data loss a business can afford after a disruption, expressed in temporal terms

Having understood the terminologies associated with business impact analysis, let’s look at the steps involved in the process and some business impact analysis examples.

Conducting A Business Impact Analysis

You can’t throw caution to the wind when it comes to devising a speedy recovery strategy. The business sphere is dynamic, leaving no room for a standardized method of performing impact analysis. The process of business impact analysis varies from one organization to another, resulting in a distinct impact analysis method for every business. However, certain elements are indispensable for a sound business impact analysis.

Here are four essential business impact analysis steps in the business impact analysis process of an organization.

Assembling A Team

The first task is to put together a project team that includes a project leader, who manages the project, and an executive sponsor, who gives strategic inputs and decides critical activities. The team must also have IT, risk management, operations, human resource, finance and facilities leaders.
Evaluating Information

The next step in a business impact analysis is the preparation of a questionnaire. A BIA questionnaire comes in handy after assembling your project team. An interview with persons with insights on the manufacturing processes enables a better understanding of potential disruptions. The result is a list of critical processes and a prioritized recovery sequence that facilitates a comprehensive understanding of the focal points during a business upheaval.
Preparing A Report

After putting all the relevant information together, a BIA report must be prepared. This report details the impacts of business disruptions and guides authorities on the development of a continuity plan. A business process that requires immediate assistance must be highlighted in the BIA report to minimize financial setbacks.
Implementing The Action Plan

Once the team has devised a sound action plan, successful implementation is all that’s left. This brings us to the last business impact analysis step. Here it’s important to update the BIA regularly as resources and organizational structures alter. As an organization is in constant flux, reviewing the BIA ensures its validity.

Business Impact Assessments

Business impact assessment is another significant task to be undertaken. It serves several objectives:

It provides a heads-up on the magnitude of impact, underlining its causes
It serves as a management tool that facilitates informed production decisions
It proves beneficial for stakeholders seeking information on project impact
While a risk assessment shows you what risks your business faces, a business impact analysis tells you how soon you must get business processes up and running after a mishap for maximum damage control

The aforementioned business impact analysis process is necessary for the instant recovery of a business.

Business Impact Analysis Examples

A business could face innumerable interruptions. To devise and put into action a plan for every such disruption is improbable. Having a decent understanding of the impending risks through relevant business impact analysis examples serves as a good reference point. The wisest decision is to develop and implement a course of action focusing on the most common loss scenarios or those capable of enormous impacts on your business. Here are a few such scenarios in which business impact analysis is useful.

A manufacturing component business is likely to face setbacks that result in accidental losses. From fires and burst pipes to malfunctioning machines and power cuts, there may be numerous disruptions in the business process. If your organization requires customer relationship management, a readily available application becomes the top priority of your engineering team. Adopting a system capable of withstanding possible failure ensures minimum damage. In case of a disruption that causes a financial hitch, an all-engaging defense resolves the issue capable of maximum loss.

A stitch in time saves nine. You can greatly minimize damage from a disaster you’ve prepared for. The common loss scenarios highlighted as examples for business impact analysis include major and minor business emergencies, such as malfunctioning production servers, late supply, labor disputes, utility failures and loss of valuable human assets. Preparations from natural calamities are equally important. Safeguarding your storage facilities, offices and other crucial sectors from disasters, both natural and man-made, is paramount.

Endnote

Senior management in an organization usually sets the wheels for BCMS in motion. A manager should possess project management and interpersonal communication skills and be flexible and adaptable. These attributes help managers coordinate efforts across departments to conduct a business impact analysis.

Do you wish to cushion your business against financial losses by equipping your management with the requisite skills for good BCMS? Harappa brings you the perfect solution with its Creating Solutions course. The course teaches you to take calculated risks, enhances decision-making and helps you navigate ambiguity during crisis management. The course facilitates better problem-solving by guiding you to ask the right questions when faced with a problem. The AQR framework precedes the analysis and deals with research types and the evaluation of data. The Synthesis Technique aids in drawing actionable insights. Lastly, the S-O-R model enables effective communication of solutions to stakeholders.

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