In: Operations Management

Risk Assessment and Business Impact Analysis

Describe the differences and similarities between risk assesment and business impact analysis.


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            Risk assessment is defined as identifying, evaluating, and estimating the levels of uncertainty in business situations (Torabi et al., 2016), while business impact analysis is defined as identifying and assessing the possible effects of natural and artificial events on an operating business firm (Krahulec & Jurenka, 2015). The key difference between these two concepts is that business impact analysis does not cover the likelihood of the disruptions business event to occur rather than the worst-case scenarios while risk assessment is the likelihood of these events to occur. During disaster management, both risk assessment and business impact analytics play a significant role in business operation recovery plans. However, there are differences during roles operations as stipulated below;

            The process of risk assessment refers to determining the nature and extends of risk while developing and advancing the laid out policies and strategies for managing a disaster (Sadgrove, 2015). The process identifies the risk exposure, estimate, and the range of potential risks. Risk assessment assesses the potential losses or gains on property, business environments, exposed populations, financial services, and their effects on operating scenarios. Business impact analysis has a crucial role in predicting the consequences of business disruptions, processing, and advancing the recovery strategy. Business impact analysis assesses risky scenarios such as failure supply, delayed deliveries, fires in business premises, theft, moral hazards, and several other scenarios identified by the risk assessments personnel (Sikdar, 2017). Generally, business impact identifies the impact of the disruptions of the businesses financial and operations operation, such as dynamic changes on expenditures, product defections, changes in administration, and delayed business processes.

The main role of risk assessment is the identifications of the potential risks that are likely to occur and they are resultant in the business operations. The main concern is the possibility of business disruption occurring and the probability of the business disruptions occurring.  Business treat is recognized before occurrence and cushions again these disruptions is put in place. On the other hand, the financial organization uses business impact analysis to assess the proportion of resources to gain or lose under the particular scenarios. The impact analysis assumes the worst-case scenarios which involve the type and rate of the resulting loss under particular circumstances. This analysis is to acknowledge the magnitude of financial and operations effects that may results from the failure of normal business operations. When business operations are at a minimal level, this analysis enables the business to calculate and determine recovery procedures (Vochitoiu et al, 2020). 

            Risk assessment's main objective is to realize the optimal balance between future opportunities for profit gain to minimize the loss vulnerabilities that are likely to be incurred. In contrast, the business impact analysis's main aim is the impact determination of the firm's ability to lose the available resource (Uhl & Gollenia, 2016). Resources needed for implementing the business impact analysis differ from the resources needed to execute risk assessment. Business impact analysis is made up of business processes and resources that enable management to determine the resource impact on the disrupted business operation. Risk assessment is determined on the same scenario but requires additional measures for threat identification on processes and the resources, determining the chance of occurrence and implementation of the business safeguards.   

            The main elements consider in risk assessment are the likelihood and the impact of the associated risk identified (Torabi et al., 2016). The possibility is the chance of the undesirable event's occurrence is determined by risk analysis, and the effects of the occurred event are determined by the business impact analysis. BIA must be performed stepwise to determine the impacts of losing the available resource in a firm, hinting that business impact analysis focuses on the market worst-case scenarios, unlike risk assessment.

            Risk assessment has five key main stages of being considered when evaluating it. The stages include identification of the risk by comprehending the risk, risk-minimizing vies informed policies, investing and using structural and non-structural measures intended to reduce or diversify the risk identify, establishing the severity and likelihood of a risk occurrence while evaluating the possible precautions, developing a financial plan for the management or transferring such as insurance and reconstructing back the resilience vie assessment review (Sadgrove, 2015). On the other hand, business impact analysis answers two considerations; what and how the disrupted performance affects the business operations since the leading role is about problem restructuring (Benavente et al., 2016). Such steps involve developing a business firm profile such as critical functions and key stakeholders, identifications and profiling of the business hazards such as moral hazards, establishing the best criteria for risk assessment and evaluations, creation and applications of scenarios impact, and finally, comparison and prioritization of the risk which the main aim of reviewing the risk performance management strategies, detecting the effective strategy and reviewing the undeveloped strategies.  

            Risk assessment helps the risk analyst to comprehend both internal, external, and threats possibilities of risk, the probability, and the impacts of the occurred events (Uhl & Gollenia, 2016). Carrying out the risk assessment make the firm to be aware of the risk and hazards, identification of people or property at risk, assessing if the existing risk-mitigating measures are adequate or ought to be increased, estimate the costs of any unexpected illness or injuries, prioritize the extremes cases and meet the regulatory requirements. On the other hand, business impact analysis is used to measure the loss of a service or property damage of an operating business (Krahulec & Jurenka, 2015).

The significant source of input while trying to be certain about the needs of business operations, the effects, and the deviation of the firm's operations' unexpected delivery (Torabi et al., 2016). Business impact analysis is the main factor in the stewardship of business operations. Business impact analysis is a significant part of redefining policies and strategies for minimizing risk and developing recovery plans. The analysis is significant in assessing the critical applications of services and technological inputs to which are considered the vital components of business processes. The overall success of a business impact analysis in a firm helps business management to know the acceptable level of worn-out service vie comprehending the degree of damage, minimum operating conditions for business processes, recovery time for disrupted business, and the cost of loss (Benavente et al., 2016).   

            The other difference is their respective classifications. Risk assessment is classified into five types which include qualitative risk assessment, which aims at the severity and the likelihood of an event based on personal experience and judgments; quantitative risk assessment, which aims at the numerical analysis of the risk using probabilistic ways and past data, generic risk assessment for health and safety, specific sites risk assessments which assess risks on the different kinds of work which may cover qualitative and quantitative and finally the dynamic risk assessment which evaluates risks in spots situations. This risk holds explicitly more uncertainty during handling operations. Business impact analysis is classified into four types which include abstraction capabilities mapped into business processes, the services of business processes, general business processes, and finally, business systems for disaster recoveries (Sikdar, 2017).

Risk assessment assesses all the business programs in a firm and systematically analyses any root cause of the likelihood of the loss or the gain in the business operations. Business impact analysis detailed a reflection of the business firm environment situations on monetary amounts, and resources when business disruptions occur. This impact analysis gives direct predictions of what will happen if the business disruption occurs without the proper quantity or the likelihood of these disruptions to occur. Risk assessment is carried out based on similar higher-level facts and techniques as business impact analysis to evaluate the impact of the events with a thorough examination of the potential threats, omissions, failures, errors, negligence, moral hazards and casual ignorance. Business impact analysis is based on the information from sensitive sources such as company accounts, current market data, regulatory, surrounding business environment, customers, suppliers and firms employers. Impact analysis analyses the relationship between these company variables via granular and deeper level assessment. Business impact analysis is independent of the risk assessment (Al-Surmi et al., 2020). Analysis impact sources of information such as questionnaires can operate freely without risk assessment technique. But risk assessment is dependent on the impact analysis whereby business impact analyses provide quantification and prioritization of any porthole in a firm that may result in a loss or disrupts business operations.

            Risk assessment and business impact analysis are the main features in the continuity of business planning.  Business impact analysis more often occurred before risk assessment since it focuses on the consequential effects interrupting critical business operations to quantify the costs (financial and non -economic)  associated with the failed operations (Benavente et al., 2016). Risk assessment continuity assesses the risk related to business, analyzes the business's risk impacts, checks the current management ways, operates on the identified pathways, and restores the normal operation for current and future activities. Business impact analysis covers an organization's critical parts in line with strategies and recovery policies, considering the available resources and a business needs for business continuity. On the other hand, risk assessment identifies the potential business hazards such as fire, failure in supply, earthquakes, shortage of utilities, and evaluations of these vulnerability areas before occurrence (Sadgrove, 2015). Risk assessment develops a mitigating strategy for minimizing the probability that the impact will occur.

            During the risk assessment phases, the findings of business impact analysis are examined along with hazard scenarios.  The potential disruptions are based on the chance and the adverse likelihood of failed business operations. Giving the best hint that business impact analysis justifies the investments in mitigating and preventing a disaster.


            Although risk assessment and business impact analysis differs from the perspective of definition and functions, they still have some similarities as stipulated below;

            Risk assessment and business impact analysis impact the firm's assets (Torabi et al., 2016). Risk assessment tries to determine the risk associate with assets like business impact analysis which considers the worst-case scenarios of these assets. Any organization or affirm that seeks to protect herself from risk and hazards, both risk assessment and business impact analysis, plays a significant role in the imperative continuation of business management.

            Both create an initial basis for business continuity management policies and strategies that identify various ways of restoring the most important firm operations after the normal disruption has occurred (Sadgrove, 2015; Krahulec & Jurenka, 2015)). Business impact analysis is connected with risk assessment techniques and methods. The business impact analysis helps risk assessment in situations such as financial, economic, and structural ways. These situations impact the disruption of business activities.

            Risk assessment and business impact analysis are essential factors in a firm disaster recovery planning (Sadgrove, 2015; (Benavente et al., 2016)). They both involve assessing the disruptive events and use for disaster management strengthening techniques. Business impact analysis explains the impacts of the severity of a particular loss while risk assessment analyses the potential effects of the likelihood of undesirable events to occur, giving us a clue that business impact analysis is an extension of risk assessment reports when a catastrophic event is being analyzed by a firm’s business continuity consultant.

            Business impact analysis and risk assessment outward analysis arise when the firm's shareholders do not have enough products and fewer services being offered to consider the recovery procedures, risk tolerances, potential risks, and their respective likelihood. Also, they looked up to the firm's failures, potential impacts of the identified events, and mitigating while devising a recovery plan.

            Both uses follow the specific steps in handling risk and hazards (Benavente et al., 2016; Sadgrove, 2015)). They both extend the business processes capabilities and systems via process-oriented considerations and risk counter measurements. The strategic processes for risk identification and prioritization of the business operations are analyzed using risk assessment and business impact analysis.

Both business impact analysis and risk assessment use same similar sources of information and techniques for assessing the loss or gain impact or the likelihood.  These sources include company accounts and information from the company's employees. These concepts in an organization plan for the cost of emergencies, accidents and entire natural disasters that can suspend the entire business operations. Business analyst and risk analyst focuses on four strategic methods of data collections which include firm facilities, employers, company property and equipment's, raw materials, suppliers, outputs and market(Bonsall IV at el,.2017) Also, these two concepts have better comprehending of the business activities such as proactive planning, comprehending critical situations and prioritizing business operations.

Risk assessment and business impact analysis need different groups and individuals during their respective stages (Krahulec & Jurenka, 2015; Sadgrove, 2015)). Business impact analysis needs business continuity programs, sponsors, and managers to work on the impacts collaborate for business impact analysis; experts from the different departments are selected to air their views about the possibility of loss or the likelihood of a loss occurrence from their respective departments. Both business impact analysis and risk assessment reports are business management committees. The summary reports of risk assessment and business impact analysis cover worst-case scenarios, recovery rates and times, the risks of firms, and the mitigation measures for the identified risk.


Benavente, F. C., Gallardo, M. R., Esquivel, M. B., Akakura, Y., & Ono, K. (2016). Methodology and procedure of business impact analysis for improving port logistics business continuity management . Journal of Integrated Disaster Risk Management , 6(1), 1-29.

Krahulec, J., & Jurenka, M. (2015). Business impact analysis in the process of business continuity management. Security and Defence Quarterly , 6(1), 29-36.

Sadgrove, K. (2015). The complete guide to business risk management (3rd ed.). Routledge Taylor & Francis Group.

Sikdar, P. (2017). Practitioner’s guide to business impact analysis. CRC Press.

Torabi, S. A., Giahi, R., & Sahebjamnia, N. (2016). An enhanced risk assessment framework for business continuity management systems. Safety Science, 89, 201-218.

Uhl, A., & Gollenia, L. A. (2016). A handbook of business transformation management methodology. Routledge .


Vochitoiu, H., Vedinas, F., Miclea, O., & Unguras, C. L. (2020, June). Risk Management as a          Part of the Business Process in Corporate Firms. In International Conference “New Technologies, Development and Applications” (pp. 964-972). Springer, Cham.

Al-Surmi, A., Cao, G., & Duan, Y. (2020). The impact of aligning business, IT, and marketing strategies on firm performance. Industrial marketing management84, 39-49.

Bonsall IV, S. B., Holzman, E. R., & Miller, B. P. (2017). Managerial ability and credit risk assessment. Management Science63(5), 1425-1449.

Risk assessment is defined as identifying, evaluating, and estimating the levels of uncertainty in business situations (Torabi et al., 2016), while business impact analysis is defined as identifying and assessing the possible effects of natural and artificial events on an operating business firm (Krahulec & Jurenka, 2015). The key difference between these two concepts is that business impact analysis does not cover the likelihood of the disruptions business event to occur rather than the worst-case scenarios while risk assessment is the likelihood of these events to occur.

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