A business impact analysis (BIA) is a systematic process to determine and evaluate the potential effects of an interruption to critical business operations as a result of a disaster, accident or emergency. An organization will often use the data from a BIA when developing a business continuity plan (BCP) or disaster recovery plan (DRP).
The BIA process results in a report that documents the BIA's findings. The report contains an exploratory component describing potential threats and vulnerabilities specific to the organization being studied. It then provides a planning component that describes strategies for minimizing the impact of unplanned events. The analysis operates under two basic assumptions:
The International Organization for Standardization (ISO) offers guidelines for implementing and maintaining a formal and documented BIA process. The guidelines are published in ISO/TS 22317:2021, Security and resilience -- Business continuity management systems -- Guidelines for business impact analysis. ISO/TS 22317:2021 is a technical specification (TS) available to any type or size organization, which can adapt the guidelines to its own circumstances.
ISO/TS 22317:2021 does not define a uniform process for performing a BIA, so methodologies often vary from one organization to the next. Even so, the process commonly includes the following steps:
The BIA team, managers or other designated individuals should review and update the BIA data at least annually, as well as whenever a significant change in business operations occurs.
A business impact analysis serves many purposes. It identifies the business functions, systems, staff and technology resources most crucial for operations to run optimally. It also describes the effects or consequences of an interruption to critical business functions, and it attempts to quantify the financial and nonfinancial costs associated with the disaster. In addition, a BIA estimates how long it should take to recover each business function to avoid any significant impacts on operations.
Each BIA is unique to its specific circumstances. For example, a BIA for an IT department might start by identifying the applications supporting essential business functions. It will then describe the interdependencies between existing systems, possible single points of failure and the costs associated with system outages. The BIA examines IT-related risks and prioritizes uptime requirements, using metrics such as RTO, RPO and MTD.
Conducting a BIA is not without its challenges. For example, it can sometimes be difficult to determine the full revenue impact of a business disruption or quantify the long-term consequences of losses in market share, business reputation or customers. A business disruption might impact an organization in a variety of ways, including the following:
Despite these challenges, a BIA can still be a valuable tool for a wide range of organizations, especially as they prepare their BCPs and DRPs. However, BIA reports must be comprehensive and highly accurate, which is why many organizations turn to resources to help with the process, such as:
A disaster recovery plan is a structured document that describes how an organization can quickly resume work after an unplanned incident disrupts normal operations. The DRP typically incorporates data from a BIA, including the costs associated with operational disruptions. The costs can reflect situations such as loss of cash flow, equipment replacement or salaries paid to catch up with work backlogs. They might also include loss of profits, staff or data.
The BIA data used in the DRP quantifies the importance of business components and suggests appropriate fund allocations for protecting them and the technology supporting them. Possible disruptions are often assessed in terms of their effects on specific business concerns, such as safety, finances, marketing, reputation, legal compliance or quality assurance.
Where possible, impact and recovery are expressed monetarily for purposes of comparison. For example, a business might budget three times the normal amount for marketing to rebuild customer confidence after a disaster. The BIA should assess a disaster's impact over time and establish recovery strategies, priorities and requirements for resources and time. All of that information can then be used in the DRP.
An organization often conducts a BIA to provide data for both a DRP and a BCP. A business continuity plan is a document that contains the critical information an organization needs to continue operating during an unplanned event. It identifies business functions, which systems and processes must be maintained, and how to go about maintaining them.
The BCP often uses data from a BIA. The data identifies the organization's critical business processes, the technologies needed to support them, the personnel necessary to recover the business and the facilities required to support the business -- information that is essential to developing a comprehensive BCP. Ideally, the BC and DR plans should complement each other, unless, for example, management wishes to focus on protecting the technology, with less concern about business processes.
A risk assessment is sometimes confused with a BIA, but the two are fundamentally different. An RA identifies inherent business risks and how to reduce the impact of these risks on business operations.
Risks can include natural disasters (such as hurricanes or earthquakes), fires, supply chain failures, power or other utility outages, cyberattacks and much more. The RA describes the key areas of vulnerability and points of weakness.
In contrast, a BIA focuses on the organization's critical business processes and the resources needed to support them. Both the RA and BIA are essential to developing comprehensive and accurate BC and DR plans.
Some organizations perform the BIA before the RA, while others prefer to carry out the RA first. In either case, they both precede the BCP and DRP. Together, the BIA and RA serve as a starting point for the larger BC and DR efforts. They can be instrumental in analyzing the impact of RTOs and RPOs and identifying the resources and materials needed for business recovery and resumption.
Learn more about risk assessments, and get a free, downloadable risk assessment template.
23 Apr 2024