What is a Business Impact Analysis? Our Complete Guide for 2023

By Chris Flinders April 21, 2023

As a society, our reliance on technology and IT services to run our businesses and our day-to-day lives has reached a new summit. However, your business and its needs to manage those day-to-day operations can change yearly, quarterly or even daily. It’s important to be flexible and be open to constantly evaluating what works, what doesn’t and what you can do to prepare for unexpected factors that may affect your future success.

What Scenarios Call for a Business Impact Analysis?

Disasters that impact business operations can come in many forms, including natural weather events, loss of power and other utility services, cyberattack, fire/water damage, failure of facility/IT equipment, human error, trains and more. (Yes, I said trains! I once participated in a Disaster Recovery scenario where the threat was a train derailment that impacted facilities along a train rail.) These types of events are very rarely in our control, making it important to regularly review and rank the probability and impact of each of the unique risks to your business.

In addition to disasters, there are also some issues that don’t appear as instantly that can impact your business. Fluctuations in the economy, emerging competitors and new market trends all greatly affect the way you run your business, and it can send many leadership teams back to the drawing board after creating their original business plans.

This is where Disaster Recovery and Business Continuity plans come into play. These documents combine strategies, policies, procedures and technologies that dictate how an organization should respond to or adapt to an incident. Whether it’s a threat or unforeseen circumstance, it’s crucial to understand how to minimize potential negative impacts.

What is a Business Impact Analysis?

A business impact analysis helps determine how disruptions may impact an organization. It weighs factors of the disruption, like timescales and intensity, to understand the impact on important products and services, as well as the processes in place to support them. It helps promote business continuity and create visibility into long-term effects on the organization.

When conducted regularly, BIAs provide a number of positive outcomes for organizations, including establishing recovery time objectives, strategies for incident response and identifying how tolerant your organization is against different impacts. It can also clarify and justify business continuity spend and draw attention to legal, regulatory and contractual obligations. Gaining this kind of knowledge and applying it accordingly is paramount in a sustainable approach to protecting your business.

What’s the Difference Between Business Impact Analysis and Risk Assessment?

Though they’re often discussed together, a business impact analysis differs from a risk assessment in several ways. While a BIA focuses on business continuity requirements, a risk assessment is focused on the likelihood and severity of a disruption, as well as establishing resources for risk treatments that limit future disruptions. Risk assessments are often conducted based on the potential threats while business impact analyses are based on failure modes. Though they have different intentions, the two exercises align well and are often most valuable when completed together.

Why is a Business Impact Analysis Important?

Business impact analyses are an important asset in helping minimize risk. They help organizations stay one step ahead of business disruption, whether it’s the result of a cyberattack, utility failure or natural disaster. Prioritizing and planning ahead are two key reasons businesses decide to employ a BIA. Ultimately, a company will never regret doing their due diligence before executing on a plan, and taking the time to complete a BIA helps justify those extra precautions.

“Give me six hours to chop down a tree, and I will spend the first four sharpening the axe.” – Abraham Lincoln

What are the Elements of a Business Impact Analysis?

Conducting a BIA takes time and thoughtful execution. There are four elements of a business impact analysis to derive the most value:

  1. Business activity affected
  2. Potential operational loss
  3. Potential financial loss
  4. Minimum time required to recover operations

These elements provide a comprehensive view of the different areas that could be harmed in the case of a disaster, and they each provide a quantifiable metric for the impact of the event. Being able to place a dollar amount or business disruption time on a disaster makes it much easier to justify taking the steps to prepare.

How to Conduct a Business Impact Analysis

Step 1: Scope Out Your Business Impact Analysis

The first step in completing a BIA is understanding the intention behind completing one and ensuring your team has all the resources necessary to be successful throughout the process. It’s important to have direct answers to what you’re trying to protect, how “much” business continuity the organization needs and who all should be involved in the BIA process. It’s also important to establish that this is not a check-the-box activity, and that the results will be directly turned into action.

Step 2: Gather Information From Interviews, Questionnaires & More

Interviews and questionnaires are a key component in any BIA. The insight they provide is invaluable, and they can be presented in a number of ways.

One common mistake that an organization can make in the early stages of the process is assuming that DR/BC planning and the BIA are strictly an IT project. A BIA may be facilitated by IT, but it should be a company-wide effort. IT may not always have the full picture of how a tool is used, the workflows used by other departments, what workarounds exist during downtime and the financial impact when those services are not available. This makes it crucial to incorporate representatives from other areas of the business.

Step 3: Evaluate the Data

The information collected during your BIA interviews will be critical to assist you in assigning priority and tiering your applications/services for a recovery order. Your DR/BC program should also include a cadence for reviewing and updating your BIA and DR/BC plans as your environment changes. With our ever-increasing reliance on technology services, the US government has published a site with numerous emergency and disaster planning resources, including an outline of a business impact analysis and a BIA questionnaire to assist you with your interviews.

You can check out some of these resources below:

Once you have completed your BIA interviews, assessed the unique risk to your business and developed a recovery order, you can now begin the solutioning process. The solutioning process is where you will review and select the proper technologies that will allow you to reduce impact and meet your companies defined Recovery Point Objectives (RPO) and Recovery Time Objectives (RTO).

Step 4: Create a BIA Report to Document the Findings

The structure of BIA reports may differ between organizations, but most adhere to the following format:

An interesting side effect after a BIA report is completed, while the report is crucial for DR planning, is it can actually be a valuable tool for IT and other business units to understand how services are consumed, the criticality and how other business units connect. This knowledge can be useful in day-to-day operations and provide for a better level of service. Buy-in from executive leadership and stakeholders is an important first step as you embark on creating or updating your current BIA.

Step 5: Present Findings to Senior Management

Now that you’ve put resources into research and spent time looking at your organization from every angle, it’s time to share these findings with the people who can turn them into action. Be sure to share a summary of the key activities, resource requirements and risks identified to get the conversation going. From there, dive into a more thorough analysis of what these indications mean and the long-term effects they may have on the business. You can also make risk treatment-related recommendations at this point in the presentation.

When presenting your BIA findings to senior management, it’s important to remember a few key pointers.

What Are Common Challenges That Occur During a Business Impact Analysis?

Despite the great value BIAs can provide, there are also some challenges with the process. For starters, conducting a business impact analysis is a time-consuming exercise, and that extra time may be difficult to justify to leadership. The process includes hours of data gathering and reporting, as well as engaging in interviews across the organization. Without context, this time can sometimes be viewed as a distraction from work or a disruption within itself.

Another common challenge with a business impact analysis are recovery time objectives being assigned without adequate business justification. This can lead to frustration when an inaccurate or unrealistic recovery time is expected, but not achieved. To help alleviate this issue, it’s important to confirm that department subject matter experts provide all relevant impact information, business continuity requirements reflect leadership-defined priorities and that any dependencies meet business requirements.

One major challenge that can be detrimental in conducting a BIA is disengaged executives. Without executive buy-in, the whole process may feel like a fruitless effort. This is why it’s important to provide clear intentions and value propositions before beginning the BIA process and effectively engaging top management throughout. Step 5 in the BIA process is also extremely dependent on supportive leadership who can help take the findings of the BIA and turn them into sustainable, actionable items to be implemented in the near future.

How Often Should a Business Impact Analysis Be Performed?

Business impact analyses provide the most value when performed regularly. This timeline may vary depending on the business, but typically BIAs should be performed on an annual basis. Some organizations may be fine with a semi-annual refresh, but it’s best to follow industry standards for your specific business and market. However, if your organization experiences significant changes often, whether it’s your leadership team, strategic initiatives or dependency shifts, you may want to consider conducting a BIA refresh on a more frequent basis.

Business impact analysis documents are never complete, but rather serve as living documents that must be reviewed and updated on a frequent basis as your infrastructure, technology and business needs change.

Learn How ivision Can Help

ivision is equipped with the expertise and experience to aide you in your disaster recovery needs. Our Disaster Recovery as a Service (DRaaS) offering provides your team a secure, consumption-based, fully managed model with the option of using a variety of failover targets. It helps reduce failover time and disruptions in IT operations to help you stay focused on keeping your business operational rather than constantly worrying about the next disaster to strike.

In addition, we have extensive experience helping businesses bounce back and quickly adapt in unforeseen circumstances, including the 2020 pandemic that drastically affected everyone’s business continuity. Along with our wide network of partners and clients, we evaluated ways to efficiently move operations to employees’ homes without compromising security, productivity or innovation. Check out these lessons learned from Jay Ferro, EVP and Chief Information, Technology and Product Officer at Clario, to learn more about our approach for navigating unprecedented times.

You can also visit our website to learn more about ivision’s disaster recovery solutions and other services, and contact us to get started.