A business impact analysis (BIA) is an essential tool in your business continuity arsenal. It is designed to identify the anticipated costs (qualitative and quantitative) of any disruptive incidents that may come your way — from bottlenecks in your supply chain to business loss, and more. In project management, a business impact analysis report seeks to find costly weaknesses within a project setting that could pose a potential risk in the event of an emergency.
This type of assessment outlines key parts of your organization’s activities, resources, and infrastructure. With a thorough bird’s eye view of operations, project managers can accurately plan the impact of any individual project or major event. They can also properly understand the consequences and costs of each new assignment. And, if something disrupts progress, project managers can use their business impact analysis to find strategic solutions to get everything back on track.
Here are some practical definitions, frequently asked questions, and impactful methods you can use to create your own business impact analysis.
What is a business impact analysis?
A business impact analysis is a risk management process that studies and identifies areas that may be impacted by a major disruption. It also forecasts any financial loss that may be incurred as a result. It may outline a strategy and a plan of action for if — or when — something goes wrong.
If there is any potential for disruption, the business impact analysis report can be used to outline the specific risk as well as options and strategies for recovery and continuity. A BIA allows businesses and projects to anticipate hurdles, both expected (such as normal fluctuations in the economy or losing clients from time to time) and unexpected (such as a fire in your office space or a major recession).
For example, let’s say your business relies on a rare part to manufacture its principal product. This product accounts for 95% of the sales your company makes each year. Unfortunately, due to unforeseen circumstances, the supplier of this part has abruptly ceased operations and it will take an estimated eight weeks to finalize a deal with a new supplier. Here’s what a business impact analysis might have addressed in this scenario:
- What is the maximum amount of downtime the business (or project) can realistically withstand as a result of this?
- What is the expected loss of revenue in the event that access to this rare part is choked off for x days, x weeks, or x months?
- Is there a risk of litigation due to an inability to manufacture and supply this product (unfulfilled contracts, etc)
- Will the company incur any reputational damage?
- What, if any, are the costs associated with recovery?
By creating a business impact analysis, you’ll clearly define your potential recovery time objectives (RTOs), which create a realistic timeline for returning to regular operations.
Without a business impact analysis, companies run the risk of becoming shell shocked when big issues come up. This makes it harder to achieve goals within a set time frame and can force teams to play catch up for many months or years after. That translates to a loss in revenue, extra fees, broken contracts, and plenty of other avoidable headaches.
Best Practices for Conducting a Business Impact Analysis
Conducting a business impact analysis is a critical step in understanding the potential effects of an interruption to your organization's operations. Here are some best practices to ensure your BIA is thorough and effective:
- Involve All Relevant Stakeholders: A successful BIA requires the input of stakeholders from across your organization. This includes not only top management but also team leaders and employees who understand the day-to-day operations best. Their insights help identify potential vulnerabilities that might not be apparent at the higher levels.
- Use a Structured Approach: A structured approach ensures that your BIA is comprehensive and leaves no stone unturned. Start by identifying critical business functions and processes, then assess the resources they depend on. Next, analyze the impact of a disruption to these resources over time. Finally, prioritize these functions and processes based on their importance to your organization's operations.
- Regularly Update the BIA: A BIA is not a one-time exercise. It should be regularly updated to reflect changes in your business environment, such as introducing new processes or technologies, changes in market conditions, or new regulatory requirements. This will ensure that your BIA remains relevant and continues to provide value.
- Integrate the BIA into Strategic Planning: The insights from a BIA can be invaluable for strategic planning. They can help in identifying areas for improvement, making informed decisions about resource allocation, and developing more robust business continuity plans. Therefore, make sure to integrate your BIA into your organization's strategic planning process.
- Leverage Technology: Today's advanced tools can greatly simplify and enhance the process of conducting a BIA. Tools like Wrike Analyze can help in collecting and analyzing data, identifying patterns, and visualizing the potential impacts of different disruptions. By leveraging these tools, you can conduct a more robust and predictive BIA.
Remember, the objective of a BIA is not just to meet a regulatory requirement or to create a document that sits on a shelf. It's to understand the potential impacts of disruptions on your organization and to develop strategies to mitigate these impacts. By following these best practices, you can ensure that your BIA achieves this objective.
What should be included in a business impact analysis?
Your business impact analysis should include a proper long lens view of your operation or project lifecycle.
Project managers should check off each of the following categories in their business and project impact analyses:
- Products, services, and recurring projects offered by your organization.
- The implicit and explicit costs of failing to deliver on any of these areas.
- An assessment of the costs and availability of tools and supplies used to accomplish these tasks.
- A list of procedural and financial priorities to reference during potential setbacks.
- A continuity plan that details the minimum requirements needed to remain operational during any disruptive event.
Pro tip: Combine all of the above with a strong risk assessment. It will help you identify specific solutions to any anticipated obstacles.
How do you do a business impact analysis for project management?
You can do a business impact analysis simply by using a template. But even if you do, you’ll need to gather key stakeholders, define the purpose of the project, and use tools (such as a process questionnaire and informational interview questions) to fill out your report. Each company will have its own unique set of subject matter experts and categories they need to cover depending on what industry they are in and the scope of the business impact analysis.
Pro tip: Choose stakeholders and experts who actually work on the projects and services on a daily basis. They’ll be able to accurately point out the costs, impact of potential disruptions, and where resources should be redirected in an emergency.
When outlining your business impact analysis project, make sure you use a project management tool like Wrike Analyze. Wrike Analyze is an add-on that aligns goals with analytics in a single platform. It helps project managers view and track progress, draft their business impact analysis, collect and organize team feedback, and quickly carry out their predetermined risk management activities as needed.
What is a good business impact analysis example?
Wrike’s business continuity template is a good example of what you should include as a supplement to your business impact analysis. In it, you’ll see a business operations roadmap, projects ranked by risk level, up-to-date employee availability, and communication tools that help your team act fast. These elements come together to help project managers create their business impact plan, establish projects and timelines, and complete their recovery goals with ease.
Analyze the true impact of projects with the help of Wrike
Project managers can use a business impact analysis to critically assess processes, tools, and resource usage. Not only will it help measure the true impact of projects, but it will also outline the consequences and costs of potential setbacks. Going one step further, a business impact analysis tool like Wrike Analyze will even help project managers develop and execute a plan that keeps progress moving forward no matter what. Check out Wrike’s free two-week trial to see how a business impact analysis can help your project team mitigate risk and carry on with minimal disruption whenever obstacles arise.