The importance of Business Impact Analysis

The adoption of Business Impact Analysis (BIA) in any organisation offers significant potential. With the right focused and strategic approach, any company can preserve their value and capture growth.

Gartner, a world-renowned online tech magazine, defines BIA as “the process of determining the criticality of business activities and associated resource requirements to ensure operational resilience and continuity of operations during and after a business disruption.” Thus, it serves as part of the business continuity structure of a business.

An eatery in Lagos relies on a third-party company for processing its payments. However, on this day, the third-party’s network remained unavailable for more than thirty minutes and this affected business as usual activities. As a result, customers couldn’t make payments through their cards, and as such, there were incomplete orders.

In that window, when the third-party servers were down, the eatery lost money. The BIA, therefore, quantifies the impacts of disruptions on service delivery especially looking at two essential elements, Recovery Time Objectives (RTO) and Recovery Point Objectives (RPO).

The RTO is the duration of time, and a service level within which the business process kicks back to regular operation. In the case of the eatery used as an example, the key decision-makers would know before the incident how much time would it take us to recover after notification of that disruption? How much time is convenient for us? Is this a critical function?

While the RPO answers the question: “Up to what point in time could the business process’s recovery proceed tolerably given the volume of data lost during that interval?” What’s the maximum of loss the business can take during disruption?

Most businesses fail to adopt or calculate the impacts of business functions on the overall business. For example, one Nigerian bank witnessed a substantial disruption in one of its physical data centres. This disruption implied calling various personnel, albeit in haste, to plug the leak and save the company financial losses.  An early adoption of BIA would have saved the bank such a quandary.

Some research indicates that lack of executive sponsorship stifles the business impact analysis exercise. For example, most senior executives argue that a BIA will only serve as useless paper documents. At the same time, another group claims that they wouldn’t need such processes in most cases. However, businesses must prepare for disruptions in order not to be caught off guard.

There is also the need to understand the business functions in the business. What is that critical function that will crumble the company or significantly affect the business. For some, it can be their mobile or web application. Have you ever thought of what would happen to Amazon if their website shut down for ten minutes?

Consider the use of tools that would work for your organisation. For example, certain companies use organisational charts, interviews, questionnaires, data flow diagrams and BIA software to gather data necessary to analyse the potential impact of a disaster on the business. Decide on the best tool for your organisation.

Before carrying out a business impact analysis, the organisation must consider planning to evaluate how internal and external stakeholders will play into the whole BIA structure.

The second stage of plan development, where the company evaluates recovery priority, is the function considered critical, necessary, convenient, or non-essential. For example, in the eatery, ease of customer payment is vital. Therefore, it can’t be down during the eatery case for some hours.

And, of course, planning and implementation form another stage where you highlight vital stakeholders that can implement findings and draw up appropriate plans to manage disruptions.

BIA has lagged in terms of adoption in various companies. However, companies can overcome execution challenges with the right approach to pursue a BIA exercise and boost revenue growth and productivity opportunities that lie ahead due to successful BIA implementation.