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Emergency Preparedness Essentials
 

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Business Impact Analysis (BIA)

A business impact analysis (BIA) is used to predict consequences from the disruption of a business function. It also processes and gathers information that is needed in order to develop recovery strategies. During a risk assessment, scenarios for potential loss should be identified. If a supplier fails to deliver a service or good, or if these things are delayed, operations could be interrupted. Consider all the possibilities.

Defining and assessing the impact disasters have on a business provides the foundation for investing in the recovery, mitigation, and prevention strategies.

The BIA needs to identify both the functional and operational impacts that result from disrupting vital business processes and functions. Consider these impacts:
  • Delayed sales or income
  • Regulatory fines
  • Lost sales and income
  • Increased expenses (e.g., outsourcing, overtime labor, expediting costs, etc. )
  • Delay of new business plans
  • Customer dissatisfaction or defection
  • Contractual penalties or the loss of contractual bonuses

Timing and the Duration of Disruption

The time at which a business process or function gets disrupted might have a major impact on how much is lost. For example, stores that get damaged right before the holiday shopping season could lose a significant amount of the businessís yearly sales. Power outages that last only a few minutes may be no big deal for a business but if they last for hours it could result in substantial business losses. If the disruption to production is short it could be overcome by simply shipping the finished goods from a warehouse but if the disruption is to a product in high demand it could have a much larger impact.

Conducting the BIA

You should employ a BIA questionnaire in order to survey your management team and other employees. It is important to survey people with a detailed knowledge of how the business provides its services or manufactures its products. Have them identify the possible impacts if the business process or function they are responsible for were to get interrupted. The BIA also needs to identify any critical business resources and processes that are needed for the business to be able to continue to function at various levels.

BIA Report

The main purpose of the BIA report is to document how a potential hazard could negatively impact vital business operations and processes. Look at the financial impacts from possible business interruptions. Compare these costs with possible recovery strategy costs.

Use the BIA report to prioritize the business restoration. Restore the processes which cause the biggest financial and operational impacts first.

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