What is a business impact analysis (BIA)? 4 steps to prepare for anything

Summary

A business impact analysis (BIA) tells you what to expect when your business is disrupted, so you can proactively create recovery strategies. Learn how a BIA can help you get back on track when roadblocks occur, plus four steps to create one for your own business.

“Be prepared.”

This concept rings as true in business as it does in The Lion King . Whether you’re singing on the African savannah or managing a project from your desk, it’s important to understand what a worst-case scenario looks like so you can spring into action if needed.

That’s where a business impact analysis (BIA) comes in. A BIA tells you what to expect when unforeseen roadblocks occur, so you can make a plan to get your business back on track as quickly as possible.

What is a business impact analysis (BIA)?

A business impact analysis helps you predict the consequences of disruptions to business processes, so you have the data you need to proactively create recovery strategies. For example, a manufacturing company could create a BIA to measure how losing a key supplier would affect company operations and revenue.

Simply put, a BIA identifies the operational and financial impacts of disruptions—like what would happen if your servers crashed or a global pandemic changed the market landscape. The data you collect during a business impact analysis helps you understand and prepare for these potential obstacles, so you can act quickly and face challenges head-on when they arise. For example, you could use the insights from your BIA to create a business continuity plan, which outlines how your team will respond to unexpected business changes.

Here are some examples of business disruptions and their potential impacts:

Example business disruptions

Data security breaches or cyberattacks

Scheduling delays

Natural disasters

Power outages or utility outages

Equipment malfunctions

Loss of key employees

Loss of key suppliers

Example business impacts

Lost sales or revenue due to production downtime

Delayed sales or revenue (like payment delays)

Unforeseen expenses (like overtime pay or outsourcing costs)

Regulatory fines or contractual penalties

Delayed business plans due to business disruptions

Lost customers

Business impact analysis vs. risk assessment

A risk assessment analyzes potential threats and the likelihood of them happening. A business impact analysis measures the severity of those threats and how they would affect business operations and finances. In other words, a business impact analysis is essentially an extension of a risk assessment report—a BIA identifies potential risks, then also measures their impact.

Business impact analysis vs. project risk management

Project risk management is the process of identifying, analyzing, and responding to potential project risks. In this case, a risk is anything that could cause project failure by delaying the project timeline , overloading your project budget , or reducing performance.

While project risk management is focused on predicting and responding to roadblocks within a specific project, a business impact analysis is broader in scope. A BIA doesn’t focus on a single project, but rather overarching business functions and processes. For example, you would use project risk management for a cross-functional initiative to redesign your company app, but  create a BIA to investigate how disruptions to your staffing may impact production for your company app.

Why is a business impact analysis important?

Disruptions happen, and it’s important to be prepared so you can get back on track and minimize profit loss. A business impact analysis helps you gather the data you need to plan for and handle roadblocks when they inevitably occur.

In particular, the BIA process helps you:

Identify essential business activities and resources. A BIA helps you understand which processes are necessary to deliver your most important products and services—so you know which activities must be performed, regardless of the circumstances.

Analyze the financial impacts of business disruptions. When you understand how potential roadblocks could impact company finances, you can proactively strategize and allocate funds to tackle unexpected disruptions when they occur. With a BIA, you can understand resource requirements, justify budget requests, and pitch your business continuity plan (BCP) to leadership.

Collect the data you need to create a business continuity plan. A business continuity plan lays out strategies to prevent and respond to business disruptions. But in order to plan your response, you first need to understand how those disruptions will impact your business.

4 steps to conduct a business impact analysis

Creating a business impact analysis may seem daunting, but we’ve broken the process down into four digestible steps. Here’s how to get started:

1. Plan how you’ll conduct your BIA

Even though you use a BIA to analyze larger company processes, think of the business impact analysis itself as a project that needs to be planned. Just like a regular project, start by creating a project plan that outlines how you’ll approach your BIA—including the scope of the analysis, the objectives of your BIA, and the stakeholders you’ll work with. A well-written project plan provides a clear path forward for your BIA. It helps stakeholders understand what they’re responsible for, and ensures you have all the resources you need before you begin.

As you create your plan, consider how you’ll organize the different pieces of your business impact analysis so team members can find and understand the information they need, then act effectively. Project management software like UDN Task Manager can help you coordinate all of your work in one central tool, so team members have a single source of truth for each project component. UDN Task Manager also updates in real-time as work is completed, so you always know if you’re on schedule.

2. Gather information

Before you can predict the consequences of business disruptions, you first need to understand how critical business processes work. For that, you need to ask the experts—the stakeholders who manage and execute the business processes you're investigating. While you probably have a bird’s-eye view of processes and understand big picture needs, it’s important to talk with someone closer to the work. That way, you can understand the on-the-ground impacts of business disruptions as well as the solutions you’re thinking of implementing.

There are two common information-gathering methods:

Set up interviews with stakeholders.

Create a business impact analysis questionnaire that stakeholders can complete asynchronously .

The questions you ask during an interview and on a questionnaire are similar. While interviews are often more personal, a questionnaire can save time and help you standardize your data.

To get you started, here’s a template BIA questionnaire with example answers:

3. Analyze your data

Now that you’ve collected information about each business process, it’s time to start your analysis. To help guide your investigation, consider the following questions:

Which processes are most important to keep your business operating? Create a prioritized list of critical business functions. That way, when disruptive events occur you know which processes you need to get up and running first, and which ones can wait.

What resources does each process need to operate successfully? This can include team members, technology, and physical resources like raw materials or workspaces. When you know which resources are absolutely essential, you can more easily prioritize resource allocation when business disruptions occur.

How long will it take to bring each process back to normal operation when a disruption occurs, and how much money will it cost? This helps you create an accurate timeline and budget for your disaster recovery plan, so you can be prepared for potential losses and get things back on track as quickly as possible.

4. Create your report

Once you’ve analyzed your findings, the final step is to actually create a business impact analysis report. A BIA report helps you or senior management create data-backed recovery strategies based on input from process experts. Your report is the most important outcome of your BIA, because it’s how you’ll communicate your findings to company leadership and help them identify the best contingency plans to get your business back on track.

Your BIA report should include the following components:

- Executive summary

- Objectives and scope

- Methodology

- Summary of your findings

- Breakdown of your findings for each process, including:

A prioritized list of the most important business processes.

How a disruption to that process would impact different areas of your business.

How long you could reasonably tolerate the disruption. This is also known as a recovery time objective (RTO).

The maximum amount of losses your business could tolerate. This is also known as a recovery point objective (RPO).

A comparison between the potential financial cost of a disruption and the cost of business recovery strategies.

- Supporting documents

- Recommendations for recovery

Analyze, then strategize

When you create an in-depth business impact analysis, you know what to expect when disruptions inevitably occur—plus a list of your best options for getting back on track as quickly as possible. The data you collect helps you create a business continuity plan that’s backed by evidence from process experts, so you have solutions in hand when disaster strikes.