Authored by QBE Senior Risk Manager Sam Rees
Building a foundation for targeted risk mitigation strategies requires robust Business Impact Analysis
In today’s rapidly evolving business landscape, businesses face a wide array of risks, both domestic and global, that can pose significant threats to their operations. Disruptions caused by events such as fires, natural catastrophes, cyber-attacks, terrorism, and pandemics can lead to severe consequences impacting financial performance, reputation, regulatory and workforce stability.
The importance of robust business continuity planning has been underscored by numerous high-profile disruptions in recent years. Events such as the COVID-19 pandemic, fires at critical manufacturing facilities driving the semi-conductor chip shortage, and the Suez Canal blockage have all highlighted the need for preparedness.
However, relying on a Business Continuity Plan (BCP) is not sufficient. For a BCP to be truly valuable, it must be based on an effective and comprehensive Business Impact Analysis (BIA). This analysis involves systematically identifying and evaluating potential disruptions to critical business activities.
Through the BIA process, organisations gain invaluable insights into interdependencies, recovery priorities and the resource requirements necessary to maintain or restore operations and processes – and acts as the foundation for developing targeted mitigation strategies.
Four reasons a Business Impact Analysis is necessary:
BIA helps organisations identify and prioritise critical functions, processes, and internal/external dependencies. This information enables firms to focus resources e.g., people, technology, equipment, processes, building, and infrastructures, and efforts on the essential areas.
With BIA, decision makers are equipped with valuable knowledge and insight to take informed actions during incidents. By quantifying potential financial and operational outcomes, BIA supports effective decision making to minimise downtime and financial losses.
BIA assists in prioritising risk mitigation efforts by identifying critical dependencies, vulnerabilities, and gaps in existing continuity plans. Organisations can strategically allocate resources and investments to enhance their resilience and ensure continuity of operations.
Many industries have regulatory requirements related to Business Continuity Planning. Conducting a BIA helps organisations meet these compliance obligations and demonstrate their commitment to risk management.
Key features of a BIA
To ensure a comprehensive assessment, a BIA typically encompasses the following steps:
Identify and document critical business processes, systems, and resources. Determine the dependencies and interrelationships between them.
Maximum Tolerable Period of Disruption (MTPD)
Analyse the potential consequences of disruptions on operations and determine the maximum acceptable downtime for a process, service, or activity without causing critical impact to the overall health of the organisation. This includes quantifying impacts in measurable terms such as financial losses, customer dissatisfaction or regulatory penalties.
Recovery Time Objective (RTO)
Define the achievable length of time from the point of a disruption being discovered to the resumption of the affected product, process, or activity.
Identify the necessary resources, including personnel, technology, facilities, and third-party support required to recover critical operations within the defined RTO.
Based on the analysis, develop tailored mitigation strategies for each critical function. These strategies may include implementing back-ups, outsourcing, establishing strategic partnerships, identifying alternative suppliers, securing alternative premises and/or cross training employees.
Pro-active risk management
A comprehensive BIA is a vital tool for organisations seeking to pro-actively manage risks and enhance their resilience. By conducting a thorough BIA, businesses gain valuable insights into their critical functions, potential risks, and recovery requirements.
This knowledge enables them to develop targeted risk mitigation strategies and ensure continuity in the face of disruptions.
Risk management services for QBE customers
QBE helps businesses build resilience through risk management and insurance.
Depending upon the size and complexity of the business needs, QBE customers can access a wide range of risk management services, self-assessment questionnaires and risk management toolkits which are focused on the key causes of claims, and on generating action plans for improved outcomes – including protecting employees, reducing risk, and making claims less likely.
You can find out more about how QBE helps businesses to manage risk here.