A business impact analysis (BIA) is the process of assessing the effects of disruptions to critical business functions and determining how to continue operations during and after disturbances. These interruptions to business operations could be due to natural disasters, third-party failures, cyber attacks, and other potential risks.
By performing a BIA, organizations can prepare for business disruptions, helping them minimize negative consequences and recover faster.
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Business disruptions can come in many forms, and companies have to prepare for most if not all of them. BIA aims to help organizations cope with the impact of different interruptions, including:
- Damage to a company’s information technology (IT) infrastructure, which includes servers, applications, data storage devices, and computers
- Physical damage to an organization’s building due to a fire, a storm, or some other disaster
- Failure of a vendor or supplier to deliver goods or services
- Disruption in the transportation of goods or services
- Electrical power and other utility outages
- Absenteeism or turnover of critical human resources
- Failure to comply with regulatory requirements
Factors to Consider in Business Impact Analysis
When creating a BIA, organizations must examine every business process and function. An important question is, “If this specific function is interrupted or gets delayed, how would it impact the business?” When answering this question, two significant factors must be considered.
Kind of Impact or Risk
The disturbance of different business functions may have varying types of impact on an organization. These should be clearly identified during the BIA. For example, failure to process pertinent business papers could result in regulatory penalties or even reputational damage and business closure in worst-case scenarios.
A physical store experiencing a power outage could fail to serve its customers well, resulting in income loss and customer dissatisfaction. The same impact would be felt by an online store whose IT infrastructure gets damaged due to a natural disaster. But if a cyber attack caused the downtime, the company may also suffer from reputational damage.
A manufacturing company that can’t reach its target output because a supplier failed to deliver product parts on time could spend more on overhead costs, such as overtime hours and utility expenses. Failure to provide could also result in contractual penalties.
Duration of the Disruption
Another crucial factor to consider is the duration of the disruption since it could blow up the impact. For instance, an hour-long power outage could cause minimal disruption to a store, but one that lasts for hours could result in a significant loss in sales and income. By recognizing these factors, organizations can prepare for such scenarios. They would put up power generators and ensure that these can last the whole duration of their business hours.
A denial-of-service (DoS) attack could cause hours or even days of downtime, depending on how prepared the victim is. By acknowledging this risk, companies can prepare by employing DoS protection systems and securing their data backups so they can continue operating even while an attack is ongoing.
Difference between Business Impact Analysis and Risk Assessment
Upon knowing the answer to “What is business impact analysis?,” you may think that it is the same as risk assessment. While they have similarities, the two processes are quite different.
BIA looks at each business process to determine how a failure to complete it could damage the company. On the other hand, risk assessment begins with a list of possible threats that a company could face.
BIA is part of a company’s business continuity plan. It is a critical process that differentiates successful businesses from those that are only thriving. In reality, successful companies often experience setbacks, but they come through because they are well-prepared and have a recovery plan.