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The Ultimate Guide to Business Impact Analysis
In the volatile, uncertain, complex, and ambiguous (VUCA) world that we live in, there are new shocks awaiting business every day. There are a lot of geographical, political, and trade conflicts happening. These conflicts disrupt operations, the supply chain, customer demands, and other crucial factors for running a business smoothly. These disrupt the normal workings of a business. As a result, a BIA is required.
Business Impact Analysis (BIA) and its Benefits
BIA helps an organization understand what factors might disrupt the normal functioning of the organization or lead to delays in deliveries, payment cycles, raw material procurement, and others. These risks need to be calculated. Appropriate solutions also need to be implemented so that an organization does not suffer from financial loss and image loss. BIA is also done in cases of organizational change management or disastrous management practices.
BIA is Needed for
Change management in an organization
Natural disaster management that might affect the organization
Technology disruptions or, in the case of obsolete technology
For operational inefficiencies
For other geographical, political, national, and trade conflicts
For other unforeseen circumstances
In any business, there are 5 core areas that might get affected because of a crisis, event, or planned transformational activity, and they are −
Human resources of a company
There is going to be a lot of discomfort among the employees because of the planned change or the uncontrollable crisis. These discomforts will lead to a loss of productivity. Hence, a BIA needs to be done so as to ensure that not a lot of time gets wasted because of it and that the workforce can start working at their full capacity at the earliest. For example, strikes by the employees over inflation, downsizing, and others.
Technology that a company uses
There might be physical harm to the hardware that an organization has, or because of the change, the software may become out of date. In today's era, a lot of money is involved in acquiring state-of-the-art technology and staying updated with the rest of the world. For example, different software updates or the reduction of cameras and telephones with mobile phones coming in.
A company's process and policy
"The old rules will not work on the new roads." Hence, the process and policy need to be regularly updated to remain relevant and productive in case of a business crisis. For example, the work-from-home policy introduced during COVID-19.
Business strategies of a company
In this era, change is the only constant. To stay afloat, an organization's strategies must be changed on a regular basis in response to the outside world and the needs of the business. For example, companies advertise on various social media platforms other than newspapers or television.
With every important aspect changing, the organization needs to adapt itself as well as the external changes or the business impact. For example, when a company is going through a merger.
If BIA is not done properly, an organization may face
Huge financial losses in terms of revenue and profit
Loss in sales or delay in sales
Increase expenses like overtime for labor, increased raw material costs, increased overhead costs, and others.
Delay in starting new businesses or in launching new products
Customer or client dissatisfaction, among others
How to Perform a BIA?
Define − Describe why a BIA is required, the scope of the analysis, and the various goals that must be met. After the explanation, one should get approval from the various stakeholders and project managers.
Collect Information − Ask the different functional and departmental heads to fill out the BIA survey.
In that survey, the heads would be asked questions related to
How do they think this particular change is going to impact their individual function?
How will it affect the production of an organization's support?
how they think this particular change is going to impact their organization's work as a whole.
What will be the financial and operational losses from the business impact?
Critical resources that are needed by the organization to function smoothly
One can even use various templates available only by adding data on how a particular change will affect the organization. What core functions will get affected and to what extent? Some of the templates that you can use are
ASG Business Impact Analysis Template (Excel Toolkit)
Business Impact Analysis Template by Smartsheet
Business Consulting Impact Analysis Template, among others
Using manual methods to conduct business impact analysis is not recommended because it becomes time-consuming and costly for the company.
A template is more suitable because then the organization can also focus on
- Prioritizing the different areas
- understand the impact on different business projects
- Recovery stages
Review the information that has been collected − After collecting the information, the next step is to use this information to prepare an analysis. One can also use other historical data, finding it on the internet for similar cases, legal or compliance effects, and others. These findings are the most important because they will provide us with the information needed to find relevant solutions.
Prepare a BIA report
A BIA report should consider all the potential and actual financial losses that the organization might suffer because of the crisis or change and the recovery costs that will be incurred. If the cost is less than or equal to the loss, the recovery plan should be implemented. The report should also contain
- Executive summary
- Objective and scope of the crisis
- The different methods used to collect data
- Detailed analysis of the collected data
- Other documents that were used for the finding or the analysis
There are even a few limitations to BIA that businesses need to be mindful of.
- Not all risks and losses can be accounted for.
- The change or loss of data during the data collection process.
- It is time-consuming and costly for the company to conduct a BIA.
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