How To Use a Business Impact Analysis To Prepare for Common Risks

Modern businesses run on a complex web of interconnected systems, where a single failure point can trigger a major business disruption.

It could come in the form of a cyberattack, a critical software bug, or a natural disaster that knocks down your servers or flattens your building.

The businesses that thrive after setbacks are the ones that were prepared in advance. They had an action plan built on a deep analysis of their own operations.

This foundation of business resilience can be created with a business impact analysis (BIA). This guide walks you through the process—from identifying your most critical functions to documenting recovery objectives that keep your business running when disaster strikes.

What is a business impact analysis?

A business impact analysis (BIA) is a process that identifies and evaluates the potential consequences of a disruption to your most critical business functions. It produces a detailed report that guides business continuity planning, an important component of risk management.

“A business impact analysis is really a process for figuring out ’What is the most critical function of my business?’” says attorney Kimberly DeCarrera, founder of Springboard Legal in Atlanta.

A business impact analysis links core business processes to the resources they require and the business impact of their future.

Kimberly uses the example of the October 2025 Amazon Web Services outage to illustrate a BIA’s value.

“So you’ve got a critical piece of your IT infrastructure, like the AWS servers, that goes out, right? What happens to your business? Is your website still up and running? Can you take payments? Can you fulfill orders?” she says.

Kimberly notes that in the event of an AWS outage, email services may be disrupted, Zoom might not work, and online design software may be disrupted—and the impact can be far-reaching.

A BIA predicts the cascading effects of a disruption and helps plan for them accordingly. In the case of the example, Kimberly says the backup may be to go with an alternative cloud service provider. 

What can cause a business disruption?

Your operations can be temporarily—or even permanently—disrupted in many ways, ranging from large-scale catastrophes to highly specific failures.

• Natural disasters. These include hurricanes, tornadoes, wildfires, and earthquakes.

• Cyberattacks. These are a data breach or ransomware event that locks up your files.

• Technology failure. For example, a widespread cloud services outage could halt operations for thousands of businesses simultaneously, causing a major disruption.

• Utility or facility issues. These are localized accidents, distinct from natural disasters. Examples include an electrical fire in your server room, a burst pipe that floods your inventory, or a nearby construction crew accidentally severing your internet connection.

• Vendor failures. This involves a key partner’s business failing, such as a financial partner filing for bankruptcy, a critical supplier going out of business, or a software company discontinuing a product you rely on.

How to conduct a business impact analysis

1. Identify scope
2. Gather information
3. Analyze collected data and determine impacts
4. Define recovery objectives
5. Document your findings

When conducting a BIA, break it down into sequential steps. A business impact analysis template—which is a pre-built spreadsheet or document that guides you through the data collection— can help, but the real value may come from conducting the analysis itself. You can often find free templates from government preparedness sites, like Ready.gov, or as resources from business continuity software providers.

Here’s how to conduct a BIA:

1. Identify scope

A BIA is a proactive process; you initiate it during a period of stability to prepare for a future crisis. The goal isn’t to create a complex plan for every possibility; it’s figuring out what’s most important, so you can protect it first.

The decision to conduct a BIA typically comes from senior leadership. However, the process should be led by a cross-functional team that includes key people from IT, operations, finance, and other critical departments.

If you’re a business owner, here’s how to get the process started:

• Assemble your team.

• List your main high-level business functions, such as processing ecommerce sales, fulfilling orders, paying employees, or marketing activities.

• Drill down on that list. Kimberly recommends doing that by asking your team: “What is the most important thing on this list?” and “What happens if this piece fails?”

This stage scopes the project, allowing you to start with the most critical functions and work from there.

“Look at the different functions that you perform on a daily basis and go, ’What’s the most important thing in my business? What happens if this piece fails?’ And you basically just triage your entire business,” Kimberly says. “Start with the most important things, provide redundancy for those, and work down.”

2. Gather information

Here’s where you discover points of failure—the specific resources that, if they go down, take critical functions with them. Without this mapping, you might restore systems in the wrong order, getting email back online while your payment processor stays down.

As the business owner, you already know your company’s core functions. This step is about digging past the surface to map out all hidden dependencies for each one. A dependency is any resource—such as a specific software, vendor, or person—that a business function needs to operate.

Don’t just ask your team what they do; you should also consider asking what they can’t do their job without. This grounds your analysis in the real-world impact of your employees’ day-to-day work. For each critical function you identified in step one, ask granular questions, such as:

• What specific software do you use? 

• What hardware is required? 

• Is there a third-party vendor an essential function relies on? 

• Is there a specific person or skill required?

 “You need to know every link in the chain,” Kimberly says.

This process uncovers all of the internal and external dependencies—the specific software, technology resources, vendors, and people your critical processes rely on to run successfully.

A BIA is a living document, so information gathering is not a one-and-done process. You should plan to review and update it annually or anytime you make a significant change to your business, such as adopting new software, launching in a new region or country, or switching to a new third-party logistics warehouse.

3. Analyze collected data and determine impacts

This step relies on your company’s data and your expert understanding of your business. The goal is to rank your business functions to define what is truly critical. A function is critical, for example, if its failure immediately triggers cash flow problems or causes significant damage to your customer relationships. It’s about the immediate health of the company and the trust of your customers.

Use the data you gathered in the previous step to project the impact in two ways:

Quantitative (financial) impact

Use your own sales data for this. For example, if an ecommerce company’s average revenue is $2,400 per day, you can calculate a specific financial impact: a one-hour outage costs you $100. A one-day outage costs you $2,400. This simple, data-based projection makes the impact tangible. 

Qualitative (non-financial) impact

This is where your discernment as the owner is key. Let’s look at a hypothetical company’s customer data privacy function. If customers’ data is breached, the immediate financial cost might be zero. But the non-financial impact could be catastrophic. A one-hour breach could destroy customer trust built over years, leading to a massive loss of future revenue, brand reputation damage, and potential legal fines.

By applying this analysis to each function, you’ll be able to create a clear, prioritized list—even though some business disruptions are not easily or quickly solved. The aspect of your business with the most immediate quantitative and qualitative impact is your most critical function. This analysis gives you the evidence to decide what to help protect first.

4. Define recovery objectives

After quantifying the financial and operational impact of an unexpected disruption, translate that analysis into two specific, measurable recovery objectives: 

• Recovery time objective (RTO). This is the maximum acceptable downtime for a function. It’s your recovery timeline and dictates how fast your recovery efforts must be.

• Recovery point objective (RPO). This defines the maximum gap in time between your data backups. This gap is the amount of new data you are willing to risk losing permanently if a crash occurs and dictates your backup strategy and frequency.

The RTO and RPO form the foundation of your business continuity plan and disaster recovery plan. They are the prescriptive, non-negotiable goals your recovery efforts must be built to achieve. They move your plan from a vague idea, such as “we should get back online fast,” to a concrete, measurable target, such as “we must get the website back online in under an hour.”

By outlining a contingency plan for restoring data, you can reduce your downtime. In the event of a ransomware attack, a server backup could be quickly uploaded to a cloud provider to get your business up and running again quickly.

“Even if by quickly, it means days, that’s still better than weeks and months or never,” Kimberly says.

Read about Shopify’s security and privacy certifications and standards. 

5. Document your findings 

Compile your detailed findings into a formal business impact analysis report. This report becomes the official blueprint for building or updating your existing plans and resilience strategies.

This document should summarize your company’s biggest weak spots, list your most important day-to-day functions (along with their RTOs/RPOs), and outline the specific damage a shutdown could cause and the exact tools, people, or money you’ll need to fix it. 

Business impact analysis vs. related concepts

• Business contingency plan
• Business continuity plan
• Disaster recovery plan
• Business risk management

Distinguishing between a business contingency plan, a business continuity plan, a disaster recovery plan, and business risk management may feel confusing. In general, a BIA focuses on which aspects of your business should be protected. The other plans focus on how to do it:

Business contingency plan

A contingency plan is the specific response to a single event that could cause failure. You can have different contingency plans for different types of events. A contingency plan is often one specific component of a larger business continuity plan. The BIA provides the why, and the contingency plan explains what to do.

Business continuity plan

A business continuity plan (BCP) is a strategic plan to keep the entire business running both during and after a disruption. The BIA is what informs that plan, too. The BCP uses the BIA data to build the procedures and deploy the resources required to maintain business continuity.

For example, a BIA for an ecommerce company might determine that customer support and order fulfillment must be recovered within 12 hours of a disruption. The BCP is the playbook that outlines the strategy to make that happen.

Disaster recovery plan

A disaster recovery plan (DRP) is a component within a BCP that’s focused on the technology and data side of recovery. The BIA provides the priorities that tell the IT team which system to recover first. If your tech services get knocked out, the DRP is the technical playbook to get it back as soon as possible.

For a disruptive event like a cyberattack, Kimberly notes that the DRP should address specific IT concerns such as:

• Are we equipped with alternate service providers?

• Do we have a new server to plug our computer into? 

• Can we quickly upload what we need to a cloud provider?

If the answer to any of these questions is no, you may not be back online very quickly, which can cost you both money and customer loyalty.

Business risk management

Risk management is the broad, overarching discipline of identifying, assessing, and treating all potential threats—not just operational disruptions. This wide-ranging process considers financial risks, competitive threats, and legal liabilities. A risk assessment identifies a wide range of risks, including financial, competitive, and legal.

As Kimberly explains, the goal of risk management is to analyze these threats and decide what to do about them. Those choices could be to avoid the risk, accept it, transfer it by buying insurance, or mitigate it by creating a plan.

The impact of a business disruption

Conducting a business impact analysis is an investment, but choosing not to do one leaves your company exposed to consequences. Without a BIA, you won’t know which of your functions are most critical until they’ve already failed, turning a manageable problem into a potential crisis.

The most immediate impacts tend to be financial. A suspension of business activities can lead to a direct loss of revenue from downtime and a surge of unexpected expenses for emergency IT, new equipment, and overtime. If you fail to meet service-level agreements, you could also owe contractual penalties to your clients. In the event of a data breach, a lack of preparation can lead to regulatory fines for non-compliance.

Beyond the balance sheet, the damage to your relationships can be even more costly. When you can’t deliver on orders, you erode customer trust, which is difficult to win back. Internally, a major disruption creates chaos and stress for your team. If employees can’t do their jobs, or worse, worry about their pay, morale and productivity plummet, and you risk losing your best people.