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The Importance of a Business Impact Analysis

Wouldn’t it be nice if we could predict the future? You would know what stocks to invest in, what sports team was going win, and what lottery numbers to play. It sure would make life easy, wouldn’t it?! Well, unfortunately we can’t, so we are going to have to keep working hard, researching the best investments, and doing a lot of guessing, hoping, and praying.
Business Continuity Planning has some similarities. We must research and work hard to develop a BCP that protects us if something that can negatively impact our organization should take place. We also will be doing a lot of hoping and praying that a disastrous situation does not occur. The difference with Business Continuity Planning is that we do have the ability to predict the future!

A Business Impact Analysis (BIA) is a process that allows us to identify critical business functions and predict the consequences a business analyst internships disruption of one of those functions would have. It also allows us to gather information needed to develop recovery strategies and limit the potential loss.

Completing a BIA will assess the risks of a disaster on the organization. It will allow for each department within your organization to explain and discuss how an unexpected event would affect their business function. This will then help your organization prioritize specific functions through the use of Recovery Point Objectives (RPO) and Recovery Time Objectives (RTO).

Recovery Point Objective (RPO) describes the interval of time that might pass during a disruption before the quantity of data lost during that period exceeds the Business Continuity Plan’s maximum allowable threshold or “tolerance.”
The Recovery Time Objective (RTO) is the duration of time and a service level within which a business process must be restored after a disaster in order to avoid unacceptable consequences associated with a break in continuity. In other words, the RTO is the answer to the question: “How much time did it take to recover after notification of business process disruption?“

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 duration 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 Business Impact Analysis (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.

Business Impact Analysis (BIA) Report

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

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

Understanding a Business

Generally, a business begins with a business concept (the idea) and a name. Depending on the nature of the business, extensive market research may be necessary to determine whether turning the idea into a business is feasible and if the business can deliver value to consumers. The business name can be one of the most valuable assets of a firm; careful consideration should thus be given when choosing it. Businesses operating under fictitious names must be registered with the state.

Business Impact Analysis most often form after the development of a business plan, which is a formal document detailing a business’s goals and objectives, and its strategies of how it will achieve the goals and objectives. Business plans are almost essential when borrowing capital to begin operations.

It is also important to determine the legal structure of the business. Depending on the type of business, it may need to secure permits, adhere to registration requirements, and obtain licenses to legally operate. In many countries, corporations are considered to be juridical persons, meaning that the business can own property, take on debt, and be sued in court.

Business Sizes

Business sizes range from small owner-operated companies, such as family restaurants, to multinational conglomerates such as General Electric. Larger businesses may issue corporate stock to finance operations. In this case, the company is publicly traded and has reporting and operating restrictions. Alternatively, smaller businesses may operate more independently of regulators.

Business Industries

A company may describe its business by communicating the industry in which it operates. For example, the real estate business, advertising business, or mattress production business are industries in which a business can exist. Because the term “business” can be interchanged with day-to-day operations as well as the overall formation of a company, the term is often used to indicate transactions regarding an underlying product or service. For example, ExxonMobil transacts business by providing oil.

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