Murphy’s Law states, “Anything that can go wrong will go wrong.” Problems, disruptions, and setbacks are inevitable. While we can’t prevent problems from occurring, we can take steps to mitigate the effects of a disaster or other troublesome events.
Businesses need this approach as well—in fact, even more so. A disrupted or crippled business potentially affects hundreds if not thousands of people and can cause significant disruptions in supply chains and economies.
That’s why, in the interest of contingencies and continuities, every company needs a business impact analysis. This article will explain what it is, why it’s needed, how it’s conducted, and what skills or tools you need to carry out a business impact analysis.
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What is Business Impact Analysis?
Business impact analysis (BIA) identifies critical and time-sensitive business operations and predicts or evaluates the effects of disruption or interruption on those operations. The disturbances can be a result of either man-made or natural disasters. Team members use the information to create business recovery strategies, as we’ll see in the next section.
There are two types of BIAs. They are:
Basic Business Impact Analysis
The Basic BIA is a shortened version of a Comprehensive BIA and is done for less critical systems and applications, meaning it can be restored later than 24 hours after the disaster hit.
Comprehensive Business Impact Analysis
The Comprehensive BIA is the full business impact analysis conducted for all critical systems or applications, meaning that they must be restored within 24 hours after the disaster occurs.
Business impact analysis is like risk assessment, and the two are often discussed together. While it’s easy to confuse the two, remember that a BIA emphasizes business continuity requirements, resource dependencies, and justifying the identified business requirements by showing how downtime will impact the organization. Risk assessment, on the other hand, identifies potential disasters and setbacks (cyber-attacks, fires, IT/network failure, natural disaster, supplier failure, utility outage, etc.) and identifies areas of vulnerability.
Business analysts typically conduct a BIA before a risk assessment.
Once the responsible team concludes the BIA, the findings are made available through a business impact analysis report.
What is the Purpose of a Business Impact Analysis?
Although we’ve touched upon why BIAs exist, let’s expand on the reason we conduct them. The purposes of a business impact analysis are to:
- Identify what steps and resources are needed for a company to deliver its most essential services and products
- Identify the company’s contractual, legal, and regulatory obligations
- Estimate the extent of impacts as they relate to downtime
- Focus business analysts’ efforts in collecting data to create business continuity plans
Furthermore, the BIA shows how the different parts of the business depend on each other to perform operations. The analysis helps grade each part’s importance, thereby helping determine resource allocation priorities.
A properly conducted BIA helps organizations develop a sound continuance plan, helping a business deal with and lessen whatever setback-related impacts may result from a crisis.
What Kinds of Business Impacts Are We Talking About Here?
Although the average business faces its share of pitfalls, the most common impacts include:
- Contractual penalties or loss of bonuses associated with contracts
- Customer dissatisfaction or loss
- Delays in the implementation of new business plans
- Expense increases (e.g., overtime, outsourcing, expediting costs, etc.)
- Lost sales and income
- Regulatory fines
Many of these impacts are associated with a handful of likely business disruption scenarios. The most common problems include:
- Physical damage to the company’s building
- Equipment, machinery, or systems breakdown or damage
- Restricted access to a necessary site or building
- Supply chain interruption, including supplier failure and disruption of goods delivery from the supplier
- Utility outage, especially power
- Corruption, damage, or loss of information technology (IT) assets, including applications, computers, data, networks, operating systems, servers, and voice and data communications systems
- Essential employee absenteeism
What Are the Obstacles to Conducting a Good Business Impact Analysis?
Anything worth doing invariably brings challenges with it. Here are the problems associated with holding a BIA.
It Takes up Too Much Time
The workweek is busy enough with having to dedicate additional hours to gathering the relevant data and distilling it into a shareable, actionable report.
Unreasonable or Outright Wrong Recovery Time Objectives
Business leadership often has vastly different notions of what’s doable and what time frame those things get done. Recovery objectives must jibe with reality.
The Business Grows and Evolves, but the BIA Doesn’t
Business impact analyses aren’t one-shot endeavors. As the business changes and grows (or shrinks), so must the BIA.
There’s Too Much BIA-Related Data to Analyze
Rather than focusing on the organization’s relevant products and services, the analysts cast too wide a net, resulting in a data glut.
The Data is Irrelevant or Useless
If the analysts gather data from the wrong sources, the information won’t help the BIA.
Without engaged executives, there is no strategic direction or the ability to make needed organizational changes.
Who Conducts Business Impact Analysis?
Many organizations outsource their work to a third-party consulting provider that specializes in business impact analysis. Businesses that prefer conducting their BIA in-house should employ a business continuity manager and/or representatives from IT or related groups, such as a business analyst. Business analysts are particularly valuable since they have many useful business analysis techniques at their disposal.
The process should also ideally include the business owner or a representative, the technical application manager, and individuals who have the relevant system or application expertise, presented from a business or technical perspective. These analysis team members are referred to as subject matter experts (SME).
List of Business Impact Analysis Steps
All business impact analyses follow a set series of steps. Most BIA steps follow the same flow, although there is room for variation, depending on the business staff or the third-party consultants performing the BIA. In general, though, here’s how a business impact analysis usually unfolds.
Meet With the Management or Their Representatives
Many executives are skeptical of things like BIAs, so you need to get their support. Inform them of what the BIA will do, why it’s needed, and what your team will be doing.
Identify the BIA’s Scope and the MFEs
Determine which units or elements of your business will be focused on. Identify the experts you will be interviewing.
Recruit an IT Representative to Sit in at Each Interview
Information technology is a big part of any successful business impact analysis effort.
Establish the BIA’s Operating Parameters
What kind of data will you be collecting? What are the financial and non-financial categories to be assessed, and what are their weighing factors?
Schedule the BIA Interviews
You need to allocate time, between two and two-and-a-half hours, to talk to each participant regarding the processes they perform and how it would impact the company if the operations were interrupted. Set up the interviews.
Research the Business Units Beforehand and Prepare Your Questions
Collect data on each business units’ processes and systems, department overviews, hours of operation. Use the information to better frame your questions.
Conduct the Interviews
Use the questions you came up with to understand better each unit’s required systems and applications, critical processes, and critical and non-critical requirements and dependencies.
Send Each Participant the Complete Analysis
Ask each interviewee to review the BIA, prompting them for updates, comments, and revisions. Assign a deadline of one week.
Bring All the Data Together, Analyze It
Bring all the information together, determine what’s essential from a business unit and a process perspective. Look for anomalies and resolve them.
Generate Your Management Report, Send It to Senior Management
The report should include a general BIA process overview, business process critical ranking, an action plan, additional findings, supporting information (e.g., interviewees, information tables), and a conclusion.
Create Recovery Strategies
Work on designing recovery strategies and solutions for your company’s most critical systems. Base these plans on recovery point objectives and recovery time objectives.
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