Back to Glossary Home | Business Impact Analysis
Business Impact Analysis
What Is a Business Impact Analysis?
Enterprise IT organizations are responsible for maximizing uptime and availability for mission-critical applications and services. When an unplanned event or IT incident disrupts a critical application, the results often include revenue loss, poor customer experience, contractual fines, regulatory penalties, or reputational damage.
A Business Impact Analysis (BIA) is a standardized process for evaluating the potential impact of an event or incident that disrupts an IT organization’s ability to provide critical applications and cloud services to its customers.
The ultimate goal of a BIA is to inform the IT organization’s business continuity planning and support the development of disaster recovery protocols to effectively recover operational systems following an unplanned service disruption.
Conducting a BIA process helps IT organizations answer questions like:
- What are the most critical applications, products, and services we provide?
- What processes and activities are needed to support our critical applications and services?
- What people, technology, and facilities are required to support our critical applications and services?
- What delivery requirements, SLAs, or legal/compliance requirements are tied to our critical applications and services?
- What would be the impact or consequences of an unplanned service interruption that disrupts the availability of a critical application or service?
- How much downtime can we afford for a critical application or service before the consequences are considered unacceptable?
- How much data loss can we afford from a critical application or service before the consequences are considered unacceptable?
Completing a BIA is essential to business continuity planning and a crucial step in formulating a cost-effective and reliable disaster recovery strategy to avoid unacceptable data loss or downtime in the event of a service disruption.
Business Impact Analysis vs. Risk Assessment - What’s the Difference?
Business Impact Analysis and Risk Assessment are both tools that IT organizations can use to enhance disaster recovery and business continuity planning. But while they might sound similar and sometimes be used interchangeably, they aren’t quite the same thing.
Risk assessment focuses on analyzing potential threats or sources of risk to the business and assessing their likelihood of happening. During risk assessment, IT organizations identify potential hazards or threats, analyze the risks associated with those threats, and develop or implement strategies to control or eliminate risk when possible.
On the other hand, Business impact analysis focuses on measuring, estimating, or predicting the potential impacts of a disaster that causes a service outage.
While a risk assessment tries to identify and mitigate potential causes of unplanned service interruptions, a BIA tries to quantify what would happen to the business (both operationally and financially) if a service outage actually occurred.
Both BIA and risk assessment are essential and uniquely valuable elements of business continuity management.
Business Impact Analysis vs. Business Continuity Plan - What’s the Difference?
A business impact analysis is not a Business Continuity Plan (BCP).
A BCP is a formal document that conveys critical information an organization needs to continue operating during a disaster or unplanned event. A BCP should identify critical systems and processes within the business and provide details on how to maintain those systems in case of an unplanned business or IT disruption.
IT organizations should conduct both a risk assessment and business impact analysis to inform the development of a business continuity plan that allows the business to continue operating successfully after an unplanned event.
Business Impact Analysis vs. Disaster Recovery Plan - What’s the Difference?
A business impact analysis is not a disaster recovery plan.
A disaster recovery plan is a formal document containing detailed strategies, tactics, and protocols for effectively responding to unplanned incidents (e.g. a natural disaster, power outage, or cyber security incident), minimizing their impact, and restoring normal business operations following a service disruption.
A disaster recovery plan is similar to a business continuity plan. But while a BCP tries to ensure that a business can continue operating after an unplanned event (even if that means switching to less efficient back-up systems, for example), a disaster recovery plan focuses on specific and actionable steps for recovering normal operations (such as restoring application workloads back to the normal production environment) following the disruption.
Business continuity and disaster recovery planning are both essential aspects of an organization’s overall preparedness to survive, mitigate, and remediate unplanned events that impact the availability of mission-critical applications and services.
Why is Business Impact Analysis Important?
Identifying Compliance Obligations
In the course of conducting a business impact analysis, IT organizations will clearly identify and document any contractual, legal, or regulatory obligations associated with critical applications and services. This allows the IT organization to effectively strategize and allocate resources to ensure those obligations are met and avoid costly contractual fines or regulatory penalties.
Exposing Application Dependencies
Conducting a business impact analysis reveals application dependencies, helping IT organizations better understand the scope of impact for unplanned events or disasters.
Understanding the Cost of Downtime
Unplanned operational downtime can result in revenue loss, reputation damage, or customer dissatisfaction, depending on which applications or services are affected. Conducting a BIA helps IT personnel understand the cost of downtime for specific applications and prioritize keeping those applications available for customers.
Enabling Effective Business Continuity Strategy and Planning
Conducting a business impact analysis helps IT organizations understand the potential consequences of service disruption, especially with respect to mission-critical or customer-facing applications. This information allows the IT organization to effectively prioritize and efficiently allocate the human and technical resources needed to ensure business continuity and recover operations after a service disruption.
How to Conduct a Business Impact Analysis
Project Planning and Approval
IT organizations can apply project management methods to business impact analysis, especially when the BIA will be treated as a project with its own resources, budget, and a defined start and finish. The project planning stage can include steps like:
- Defining a scope for the BIA process or determining which applications, services, or departments should be included,
- Communicating expectations,
- Establishing roles and responsibilities for the BIA team,
- Creating a project plan or timeline, and
- Allocating project resources.
It’s also crucial to secure participation, buy-in, or approval from executive management as needed to ensure the project is effectively prioritized and seen through.
Service Discovery and Data Collection
The next step in conducting a business impact analysis is process discovery and data collection. The IT organization should start by conducting a thorough discovery process and creating an inventory of all applications and services that fall within the scope of the BIA.
Next, the IT organization should collect data about each service that will be used to measure the business impact of a disruption to that service. This data should include:
- Service Name/Identifier - The name of the application or service. A unique identifier code may be applied when the BIA includes multiple deployments of the same service or multiple services with similar names.
- Service Owner - The name of the individual, team, or department that operates the service.
- Service Description - A basic description of the service, including its essential functionality, who uses the service, and how frequently it is used.
- Service Requirements - A listing of the essential people, processes, technology, and facilities needed to support and deliver the service.
- Service Dependencies - A listing of relationships between the service and any other applications or services that must be operational for the service to function.
- Service Level Agreements (SLAs) - A description of any contractual obligations the organization has with respect to SLAs for the application or service.
- Legal/Regulatory Considerations - A description of any legal or regulatory obligations tied to the application that could be impacted by a service disruption.
Data collection often requires input and cooperation from multiple stakeholders. Understanding SLAs for specific applications and services might require a review of active customer contracts, while understanding regulatory considerations might require input from legal/compliance teams. IT personnel may need to communicate with service owners across multiple departments to better understand how applications are being used.
Information Review and Analysis
Once the IT organization has collected data on the applications and services covered by the BIA, it’s time to review the data and complete a business impact analysis.
For each service, the IT organization should think about answering a few key questions:
- How critical is this application or service to our mission?
- What other services support this service? What other services does this service support? How could a disruption to this service impact other services?
- How much downtime can we afford for this service before the impact is considered unacceptable?
- How much data loss can we afford for this service before the impact is considered unacceptable?
- What would be the impact of an unplanned service interruption that disrupts the availability of this service?
When quantifying or describing the impact of a service disruption, the IT organization should consider the following impact categories:
- Financial - lost market share, lost revenue, fines and penalties.
- Reputational - brand damage or degraded customer opinion.
- Legal - litigation liability.
- Contractual - liability for breaching contractual obligations.
- Business - inability to achieve business objectives or exploit competitive advantage.
BIA Report Creation and Presentation
Following a thorough analysis of the data, the IT organization should create a BIA report and presentation detailing the results.
This material may be submitted or presented to executive management to inform decision-makers about the potential impact or consequences of business disruption, establish risk management priorities, and secure buy-in for the implementation of business continuity and disaster recovery protocols to enhance business resilience.
Business Continuity Strategy Development and DR Planning
IT organizations can use the results of a business impact analysis (often combined with the results of a risk assessment) to inform the business continuity strategy development and disaster recovery planning.
From a business continuity perspective, IT organizations should determine which applications or services are truly mission-critical and create a strategy to ensure that those services can continue to be delivered at an acceptable level following a service disruption.
From a disaster recovery perspective, IT organizations should establish a Recovery Point Objective (RPO) and Recovery Time Objective (RTO) for each application or service. From there, IT organizations can develop and implement disaster recovery protocols to meet those targets and avoid unacceptable negative consequences of operational downtime or data loss.
Mitigate Risk and Maximize Business Resiliency with TierPoint Business Continuity Consulting
TierPoint offers Business Continuity Consulting Services to help our customers extend their business resilience capabilities.
TierPoint can guide you through the process of conducting a business impact analysis and risk assessment, developing or updating your business continuity plan, and implementing cost-effective strategies and protocols for ensuring business continuity and minimizing operational downtime in case of a service disruption.
Ready to Learn More?
Book an intro call with us and see how working with TierPoint can make your business impact analysis project a success.
