How to Conduct a Business Impact Analysis

How to Conduct a Business Impact Analysis
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  • 0:03 What is a Business…
  • 1:12 Project Development &…
  • 3:19 Application and Data…
  • 4:17 Data Analysis
  • 5:16 Present and Report Findings
  • 6:02 Lesson Summary
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Lesson Transcript
Instructor: Joshua Eaton

Josh Eaton teaches Project Management courses and has a MS in Engineering and Management from MIT.

This lesson will provide a step-by-step approach to conducting a successful business impact analysis. You'll learn how to conduct a business impact analysis from start to finish--from project development to presenting the findings to company executives.

What is a Business Impact Analysis?

Critical to the success of a company is a sound business impact analysis (BIA), which captures important information necessary for contingency planning. A BIA is a systematic process used to identify the operational, logistical and financial impacts of an unplanned or unexpected event. These events can range from earthquakes and tsunamis to power outages and stock market crashes.

There are many potential outcomes to consider when conducting a BIA including lost or delayed sales, impacts to established supply lines, additional expenses, regulatory fines, contractual obligations and delays to future business plans. Business impact analysis also identifies potential risks and the impact those risks will have on business activities, functions and operations with a clear recovery strategy. Since a BIA examines all processes and functions of a business, larger organizations may require more time and effort to complete the analysis compared to smaller organizations.

5 steps of a business impact analysis
BIA Process

Now let's go through each step of a business impact analysis.

Project Development & Info Gathering

Step 1 is project development. During the project development phase of a BIA, there are several activities that must be performed. These include gaining executive support, determining scope of analysis, identifying the objectives and deliverables, selecting data collection methods and conducting an initial stakeholder analysis.

Let's say that a retail company wants to conduct a BIA. It would begin by obtaining executive buy-in or support to ensure the study is worthwhile. Then it must determine scope of analysis--in this case, the scope of the BIA will include a complete and thorough analysis on what impacts a natural disaster or other unplanned event will have on sales, returns, supply lines, communication and advertising. After the project development phase is complete, we can move on to Step 2, which is to gather information.

During a BIA, a business must collect important information and data specific to the company's daily operations. This phase will include collecting basic company information, process information, company dependencies, resources required to remain operational and various impacts if an unplanned event occurs. During a BIA, company vulnerabilities are most easily identified through interviews, focus groups, questionnaires and document reviews.

For our retail company example, critical processes include buying, pricing, receiving, preparing and maintaining inventory. Over the course of data collection, the consultant executing the BIA will need to capture key metrics specific to these processes, such as total sales, cost of goods sold, overhead costs and inventory management metrics. Also necessary might be the average basket size, which refers to the number of items sold during a single purchase, and the average ticket size, which specifies the amount of money the average buyer spends on a single visit.

These are just a few examples that illustrate the level of detail you want to generate during data and information gathering. This information will facilitate future impact analysis on key processes and functions in the event of an unplanned disaster or occurrence.

Application and Data Criticality

Step 3 is application and data criticality. During this phase of a BIA, the consultant will review application information, database systems, hardware information and network systems. Experts agree that every organization needs to conduct criticality analysis to identify what functions and processes are most critical to its operations in the event of a natural disaster or other unplanned event.

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