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

Caeleigh MacNeil contributor headshotCaeleigh MacNeil
February 12th, 2024
9 min read
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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. 

Free business continuity template

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 and then also measures their impact.

Read: 7 common project risks and how to prevent them

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 on 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.

Read: What is a risk register: a project manager’s guide (and example)

Business impact analysis vs disaster recovery plan

Business impact analysis and disaster recovery planning (DRP) are complementary yet distinct components of business continuity. While BIA focuses on identifying critical functions and the potential impacts of disruptions, DRP outlines specific steps for restoring IT systems and operations after a crisis. 

BIA informs the priorities and strategies within DRP, ensuring a targeted and efficient recovery process that aligns with the organization's most critical needs.

Read: What is a crisis management plan? (6 steps)

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.

Read: Incident management: How to create a plan (plus 7 best practices)

How 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 Asana 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. Asana also updates in real-time as work is completed, so you always know if you’re on schedule.

Free business continuity template

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.

Example business impact analysis questionnaire

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


Name the business process you’re responsible for

Online checkout process

Describe where the process is performed

The server we use to process customer payment information. 

List all the inputs and outputs of the process

  • Inputs: Items in cart, customer payment information, billing address, shipping address

  • Outputs: Customer pays for the item, shipping information is sent to distribution center, and a confirmation email is sent

List the resources and tools required for the process

An ecommerce platform (Shopify), email automation software, and a customer service team

List the users of the process

Customers

Describe the timing of the process

Checkout process takes 3-5 minutes. It happens after items are added to the cart and before items are shipped. 

List potential disruptions to the process

Server crash, email automation bug, ecommerce platform is down, security breach

List the financial, operational, and legal/regulatory impacts of potential disruptions

  • Financial impacts: A server crash would result in $1,000 lost revenue per minute.

  • Operational impacts: If the ecommerce platform was down longer than a day, lost sales would cause a surplus of resources. 

  • Regulatory impacts: A security breach could result in fees from lack of compliance with customer data regulations.

If applicable, provide historical data on past business disruptions and their impacts

See the attached report for a summary of a server crash that happened last year, including its impacts on the checkout process, financial losses, and recovery timeline. 


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.

Read: Data-driven decision making: A beginner's guide

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. 

Business impact analysis report template

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

  • The maximum amount of loss 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

Business impact analysis template

A business impact analysis template serves as a foundational tool for organizations aiming to protect their operations from disruptions. It guides you through identifying critical functions, assessing disruption impacts, and formulating effective mitigation and recovery strategies. 

This free business impact analysis template ensures a thorough evaluation of operational vulnerabilities, equipping teams with the necessary insights for business continuity management.


Introduction to BIA

  • A brief overview of the purpose and scope of the BIA

  • Explanation of the objectives and expected outcomes

Business function and process identification

  • Description of each critical business function and process

  • Explanation of the importance and objectives of these functions and processes

Impact assessment

  • An explanation of how possible disruptions to each business function could affect the company's finances, operations, legal standing, and reputation

  • The timeframe of impacts for each function (e.g., within 24 hours, 72 hours, one week)

Resource requirements

  • List of key resources needed for each business function (staff, technology, information, facilities, equipment).

  • Dependencies on internal and external services and suppliers

Recovery objectives

  • Recovery Time Objectives (RTO) for resuming business functions after a disruption

  • Recovery Point Objectives (RPO) for data and system recovery

  • Detail how these objectives align with your business continuity goals

Mitigation Strategies

  • Strategies to reduce the risks and impacts of disruptions

  • Pre-emptive measures to ensure business continuity

Response and Recovery Plans

  • Step-by-step response actions for identified risks and scenarios

  • Recovery plans for restoring business operations and services

BIA conclusion

  • Summary of key findings and recommendations

  • Next steps for implementing BIA outcomes


Free business continuity template

Business impact examples

A business impact analysis is needed to identify and understand the potential impacts of disruptions on an organization's critical functions. It guides the development of robust business continuity management plans. 

Here's how specific scenarios can be examined with a focus on supply chain vulnerabilities, cybersecurity, regulatory dependencies, and other key aspects.

Natural disaster impact on a manufacturing plant

When a natural disaster strikes, a manufacturing plant might face severe disruptions ranging from damaged infrastructure to supply chain delays. A thorough BIA for such a scenario would start by identifying critical processes that are most vulnerable to natural disasters. 

Critical process identification:

  • Highlight dependencies within the supply chain and identify key equipment and technologies vulnerable to natural disaster damage.

  • Map out critical manufacturing workflows to pinpoint where disruptions could cause the most significant impact.

Impact assessment:

  • Estimate potential downtime and its impact on production schedules. 

  • Analyze supply chain logistics and infrastructure vulnerabilities to estimate when full-scale operations will resume.

  • Calculate the financial implications of lost production, including cost implications for emergency sourcing.

Mitigation strategies:

  • Develop contingency plans for alternative production methods.

  • Establish agreements with backup suppliers and logistics providers.

  • Invest in infrastructure improvements and workflow modifications to hedge against natural disasters (e.g., flood defenses, earthquake-resistant structures).

Read: 7 common project risks and how to prevent them

Cyberattack on a financial institution

A cyberattack can compromise sensitive data and disrupt financial services, leading to significant reputational and financial damage. In this context, a BIA would evaluate the institution's cybersecurity posture and identify critical assets at risk.

Cybersecurity posture evaluation:

  • Conduct a vulnerability assessment to identify weaknesses in the institution's cybersecurity defenses.

  • Identify and prioritize assets that, if compromised, would have the greatest impact, such as customer data and core banking systems.

Impact assessment:

  • Consider how important the impacted systems are to the institution's daily operations and assess possible financial losses from ongoing operational disruptions.

  • Determine the timeframe for restoring secure operations.

  • Evaluate the effect on customer trust and the long-term implications for customer retention.

Recovery Planning:

  • Outline cybersecurity mitigation strategies and incident response plans that comply with ISO 22301 standards for business continuity management. 

  • Develop a detailed communication strategy to manage stakeholder expectations and maintain trust during recovery efforts.

Regulatory change impacts a pharmaceutical company

Regulatory changes can have a profound impact on pharmaceutical companies, affecting their product lines, market strategies, and compliance costs. A BIA in this scenario would focus on identifying which regulatory changes are likely to have the most significant impact.

Regulatory landscape analysis:

  • Identify upcoming regulations that could impact operations, product development, or market access.

  • Assess the scope and timeline of regulatory changes to prioritize compliance efforts.

Impact evaluation:

  • Determine the financial implications of compliance, including potential costs for adjusting manufacturing processes or conducting additional clinical trials.

  • Consider the operational impacts, such as delays in product launches or modifications to existing product lines.

Adaptation and mitigation strategies:

  • Plan for resource reallocation to ensure priority projects remain on track.

  • Engage with regulatory bodies to gain a clearer understanding of requirements and timelines.

  • Adjust internal processes and training programs to align with new regulatory standards.

Read: How risk mitigation can protect your company

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.

Free business continuity template

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