WOLF & CO Insights Understanding the Importance of a Business Impact Analysis

Understanding the Importance of a Business Impact Analysis

Recovering from a business interruption requires diligent foresight and exceptional planning to mitigate the harmful impacts of an outage and get your business up and running as soon as possible. Adequate recovery during the aftermath of a disaster relies on the strength of your company’s Business Continuity Plan (BCP), and conducting a Business Impact Analysis (BIA) is the first step in building an effective BCP.

Executing a BIA allows your organization to prioritize your business functions and resources, so you can assemble a BCP that minimizes the damage caused to your organization during a service interruption or disaster. Undergoing a BIA involves taking an inventory of current business functions, prioritizing them, and then determining what is needed to keep them going in the event of a business interruption. Performing a BIA also documents the critical resources that support these functions, including people, systems, forms, supplies, and equipment.

Manufacturing organizations are comprised of many services, processes, departments, resources, and technologies—so how do you effectively prioritize the most important functions within your organization to start creating your plan?

How To Conduct A Business Impact Analysis

The first step to conducting a BIA is to list all business functions (and the resources that support them) and determine how important they are to normal daily operations. For manufacturing companies, it may not be as easy as considering personnel and computers. Often, there are unique hardware requirements or non-technology supplies that are crucial to continuing operations. Reliance on third parties can also be paramount.

It’s important to realize that when planning for the recovery of functions, you’ll actually need to determine the recovery of resources and time necessary to do so. Documenting the recovery effort in advance can save time during the critical hours of potentially losing business following an event.

Ultimately, it’s important to remember that it’s nearly impossible to get every business function back up at the same time. Your business impact analysis is a tool to help structure your recovery plan, so it becomes reasonable to recover over a greater period of time based on the criticality of functions with the smallest impact to your organization.

Determine Criticality

Next, it’s important to figure out how long a company can wait after a business interruption before getting these functions running again.

You must also consider the impact on the organization if certain functions are not recovered in a timely manner. Loss of revenue is obvious, but what impact would there be to the organization from a reputational or legal standpoint if it couldn’t fulfill its contractual obligations? If your organization is down for even the smallest amount of time, how quickly will your customers turn to competitors who are readily available?

From this, you will document which processes would have the most impact on the company if they were not recovered and make the recovery of those processes the first priority in the event of a business interruption.

BIA: Is It Really That Important?

Yes. The BIA is the foundation for the BCP, and will help document recovery procedures for the most critical functions and the resources that support them. It allows the company to properly develop a strategic and prioritized recovery program.

The benefits of a BIA are numerous, and companies that want to conduct this process effectively might consider utilizing a BIA questionnaire. Running through the questions contained in a BIA questionnaire allows a firm to consider how it could be affected by a major event. This questionnaire is answered most effectively when a company meets with people who have insight into the key operations of the firm.

Completing a BIA in advance will help identify areas of exposure and potential challenges, saving money and time during the recovery process in the event that a business interruption occurs.