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Business Impact Analysis

Veracity | Business Impact Analysis

A business impact analysis (BIA) predicts the consequences of disruptions to a business function and process and gathers the information needed to develop recovery strategies. Potential loss scenarios should be identified during a risk assessment. Operations may also be interrupted by the failure of a supplier of goods or services or delayed deliveries. There are many possible scenarios that should be considered.


WHAT IS A BIA?  DIFFERENT USE AREAS


When answering, “What is BIA?” It’s important to know that the term is used in multiple areas of organisational operations and many different industries. For example, you will run across the BIA acronym during disaster preparedness planning as well as during organisational change management.

 

Businesses can be impacted by any number of different types of events, so a BIA and recovery time assessment are best done as needed for any of these various circumstances.


What is BIA needed for?

    • Gauge the impact of organisational change.
    • Prepare for natural disasters.
    • Mitigate potential technology disruptions.
    • Improve security for banks, governments, etc.
    • Proactive preparation for potential operational threats
    • Improve business continuity.

 

As you can see, there can be many different types of business impact analysis methodologies to match each specific use. People perform business impact analysis for information technology, use a business impact analysis template in project and change management, have a business impact analysis template for banks, and so on.

 

While a business impact analysis template for information technology may look slightly different than a business impact analysis template for banks, both will share the core features of identifying areas of potential impact on business from a particular event.


CONSIDER THE IMPACT



The BIA should identify the operational and financial impacts resulting from the disruption of business functions and processes. Impacts to consider include:

  • 1. Lost sales and income
  • 2. Delayed sales or income
  • 3. Increased expenses (e.g., overtime labour, outsourcing, expediting costs, etc.)
  • 4. Regulatory fines
  • 5. Contractual penalties or loss of contractual bonuses
  • 6. Customer dissatisfaction or defection
  • 7. Delay of new business plans


TIMING AND DURATION OF DISRUPTION


The point in time when a business function or process is disrupted can have a significant bearing on the loss sustained. A store damaged in the weeks prior to the holiday shopping season may lose a substantial amount of its yearly sales. A power outage lasting a few minutes would be a minor inconvenience for most businesses, but one lasting for hours could result in significant business losses. A short-term disruption of production may be overcome by shipping finished goods from a warehouse, but disruption of a product in high demand could have a significant impact.


CONDUCTING THE BIA


Use a BIA questionnaire to survey managers and others within the business. Survey those with detailed knowledge of how the business manufactures its products or provides its services. Ask them to identify the potential impacts if the business function or process that they are responsible for is interrupted. The BIA should also identify the critical business processes and resources needed for the business to continue to function at different levels.


THE BENEFITS OF A BIA REPORT


The BIA report should document the potential impacts resulting from disruptions of business functions and processes. Scenarios resulting in significant business interruptions should be assessed in terms of financial impact, if possible. These costs should be compared with the costs of possible recovery strategies.

 

The BIA report should prioritise the order of events for the restoration of the business. Business processes with the greatest operational and financial impacts should be restored first.


BUSINESS DISRUPTION SCENARIOS


  • 1. Physical damage to a building
  • 2. Damage to or breakdown of machinery, systems, or equipment
  • 3. Restricted access to a site or building
  • 4. Interruption of the supply chain, including failure of a supplier or disruption of the transportation of goods from the supplier.
  • 5. Utility outage (e.g., electrical power outage)
  • 6. Damage to, loss, or corruption of information technology, including voice and data communications, servers, computers, operating systems, applications, and data
  • 7. Absenteeism of essential employees


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Notice!!

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