Business Impact Assessment vs. Risk Assessment: What’s the Difference?

Does your business have a disaster recovery plan? If not, it should. In today’s threat-rich business landscape, unfortunately it’s not a question of if you’ll find yourself contending with a cyber incident, it’s a question of when. 

In the absence of disaster recovery, your employees will be left flying blind in times of crisis. Even if they have the necessary tools to maintain business continuity and mitigate an incident’s impact, they won’t necessarily understand how to use them. Moreover, without clear responsibilities and communication processes, they’re very likely to leave key stakeholders in the dark. 

Two of the most effective components of every disaster recovery plan are the business impact analysis and risk assessment. On the surface, the two sound remarkably similar. And while it’s true that the two complement one another, they are ultimately two very different processes, and it’s imperative that you understand those differences.

Business Impact Assessment vs. Risk Assessment

What is a Business Impact Analysis? 

The business impact analysis process seeks to quantify the consequences of a disruptive cyber incident. By collecting relevant data around systems, processes, and events, it also attempts to predict both downtime and recovery time. Although not necessarily focused directly on cyber security, a business impact analysis plays a critical role not just in disaster recovery, but in your business’s overall security strategy. 

How Does a Business Impact Analysis Work? 

Typically, an impact analysis is based on two core assumptions. First, that your business is interconnected, with each segment reliant on continued operation of other segments. Second, certain assets or segments are more critical than others, and will require more resources and attention in the event of a disruption. 

When assessing the broad financial and operational impact of an incident, you’ll generally account for the following: 

  • Lost income
  • Delayed income
  • Damaged or destroyed equipment
  • Salary costs, such as overtime for your IT department
  • Regulatory penalties (ie. HIPAA)
  • Legislative penalties
  • Contractual issues
  • Lost customers
  • Disruption to business plans/strategies
  • The timing of an incident; for instance, if it occurs during downtime or in the midst of a busy season. 

Once you have a clear idea of an incident’s scope and impact, your next step is to determine the following: 

  • The resources required to ensure business continuity should the incident occur. 
  • The maximum acceptable time to recover.
  • The maximum acceptable downtime. 
  • The maximum amount of acceptable data loss. 

It’s important to note that the scope and focus of the above is largely dependent on your business. Your industry, for instance, determines the regulatory frameworks to which you must adhere, and may also influence your business impact analysis framework. Your business’s unique ecosystem will also play a part here; a business that works with multiple vendors or has a complex supply chain will require a different approach than one that’s largely insular. 

Business Impact Analysis Best Practices

The following best practices can help ensure your business impact analysis is as effective and accurate as possible: 

  • Consider employing an industry standard framework. ISO 22301 is one of the most common, and also includes guidance on risk assessment and mitigation. 
  • Ensure you have leadership buy-in. 
  • Involve all departments from the start. 
  • Keep detailed records of all conversations and meetings. 
  • Be cognizant of the difference between objective and subjective criteria. 
  • Remember that this impact analysis is part of a larger strategy. 
  • Carefully evaluate your business impact analysis tools, and ensure they have the necessary functionality and analytics capabilities. 

What is a Risk Assessment? 

While a business impact analysis provides a view of an incident’s consequences, a risk assessment proactively identifies situations and vulnerabilities that may lead to or cause an incident.  These may include natural disasters, hardware failure, accidental data leaks, misconfigured software, and ransomware. 

It’s important to also differentiate between a risk analysis vs risk management — as we’ll explain momentarily, the former is part of the latter. 

How Does a Risk Assessment Work? 

A risk assessment seeks to achieve the following: 

  1. Create a comprehensive list of every risk facing a business. 
  2. Determine the likelihood of each risk occurring. 
  3. Categorize each risk by the scope and severity of its impact. 
  4. Determine the best process for remediation/mitigation. 
  5. Generate reports for stakeholders and leadership. 

Risk Assessment Best Practices

The following best practices should be adhered to in order to maximize the effectiveness of your risk assessment process: 

  • Your risk assessment should be part of a larger risk management program
  • Understand the key priorities of your risk management program.
  • Employ the proper tools to ensure that the risk data you capture is as accurate and informative as possible. 
  • Understand that risk management is an organization-wide initiative. 
  • Ensure the goals and objectives of your risk management program align with your business’s strategic objectives. 
  • Ensure your approach to risk assessment, management, and mitigation is standardized and consistent. 

What’s the Difference Between a Risk Assessment and an Impact Assessment? 

As you’ve likely surmised, there’s a great deal of overlap between these two processes. The main difference between the two boils down to where each occurs in your disaster recovery plan. To put it another way; a risk assessment asks what could happen and an impact assessment says it has happened: what next? 

Risk assessments are largely proactive in nature. They seek to quantify and mitigate each risk to reduce the potential damage it can do to the business. The end goal is to reduce the chances that a cyber incident will occur. 

A business impact analysis, meanwhile, asks what will happen to the business if an incident does occur. It evaluates each unremediated risk identified through your risk assessment. It then attempts to predict what might happen if a particular risk were to occur, while ensuring that your business has the necessary systems, processes, and tools in place for continuity. 

If that sounds remarkably similar to the third step of the risk assessment process, that’s no accident. An impact assessment functionally extends and expands on the quantification stage of a risk assessment. This ultimately means that, for all their differences, they’re two sides of the same coin. 

And where disaster recovery is concerned, you cannot have one without the other. 

Centraleyes: One Platform for Risk Assessment and Business Impact Analysis

Whether we like it or not, risk exists around every corner. And in many cases, the biggest threat is the unknown.

Taking the time to better understand the risks your business is exposed to and the impact those risks can have — is an important first-step to ensuring your business is aware, has a plan in place, and the necessary resources to execute that plan.

Centraleyes makes it easy for you to understand business risk, both from an intrinsic and extrinsic value. With Centraleyes, you can identify business risk, both the financial and overall business impact of that risk, and automate the remediation planning process to achieve more visibility and execution when it comes to mitigating risk.

Are you interested in seeing how Centraleyes is helping organizations in all industries better understand their relationship with risk? Book a demo today to get started.

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