Assessing Threats: A Complete Guide to BCP Risk Management

This post was originally published at https://invenioit.com/continuity/bcp-risk-management/

BCP risk management is the process of assessing your business’s risk for operational disruptions and documenting those risks in a business continuity plan (BCP). This process is essential for mitigating risk and responding appropriately to disruptions when they occur.

In this guide, we explore:

·?????? The key components of BCP risk management

·?????? How to conduct a risk assessment for business continuity

·?????? How to document risks & impact in your business continuity plan

·?????? Why it all matters

Prioritizing Risk Assessments for Business Continuity

Risks are everywhere. They’re in your building, the aging utility lines, the weather, the space heater under your colleague Bob’s desk, and even in?Bob himself, who has a propensity for opening email attachments from unknown senders. All these things threaten your business in one way or another. Your job is to determine?how these threats might manifest?and?what?steps can be taken to minimize them. That is the essence of?business continuity plan?(BCP) risk management.

Businesses that engage in regular risk assessments?and who make plans for potential disasters have better odds of long-term success. If your business’s process of analyzing and mitigating risks is lackluster, don’t despair. The first step toward improvement is?understanding how to?identify threats and their impact on your company within your?business continuity plan.

What is BCP Risk Management?

In business, risk management typically refers to the process of forecasting financial or operational risks and managing them with procedures and solutions that minimize their impact. The term BCP risk management refers to a similar process of identifying and removing risks, as outlined in your organization’s?business continuity plan.

Understanding BCPs

A BCP is the foundation of your?continuity planning. It’s a written document that provides guidance on how your company can prevent and recover from a disaster and minimize the risks of operational downtime.

Three of the most crucial sections within your BCP are:

• Risk assessment: A detailed list of all events or scenarios that threaten company operations?and the estimated likelihood of those events occurring
• Business impact: A reasonable projection of the extent to which each event?would disrupt the organization, both in the immediate aftermath and the long term
• Resolution & recommended guidance:?The preventative measures currently implemented that help to mitigate the risks of those events, along with recommendations for further solutions that have yet to be added

The process of gathering and compiling this data empowers your organization to face risks head-on and to respond to disasters in a thoughtful, pre-meditated manner rather than devolving into chaos and panic.

BCPs as a Part of?Risk Management

In a technical sense, business continuity planning is a subcategory of risk management.?Risk management involves trying to lower the likelihood that a threat will cause lasting financial, legal and security damage to an organization. An important part of that process is developing a?BCP that outlines what the organization will do should the worst happen. A detailed BCP is a central component of?effective risk management that helps?businesses fully prepare for every eventuality.

It’s important to note?that a BCP isn’t the only element of risk management. Other pieces, such as?disaster recovery plans, are also vital to your business’s ability to minimize threats, disruptions and hazards.

Why Is BCP Risk Management Important?

Before we delve into the best practices for your BCP, it’s worthwhile to?consider?why?these measures are so important. Your business’s?stakeholders, managers and team members?will be far more motivated?to contribute to an effective system of BCP risk management when they understand how it will benefit them and the organization as a whole.

No company looks forward to being infected by ransomware,?sustaining structural damage in a fire or?losing a trove of business-critical files due to accidental deletion. But even companies that are aware of these risks aren’t doing enough to prevent them. Often, that’s simply because no one has seriously evaluated what the consequences might look like.

Key Statistics

A quick look at some key numbers helps illuminate how these?events can devastate your company:

• Downtime costs more than?60% of businesses?a minimum of $100,000, with 15% of businesses losing at least $1 million.
• According to FEMA, around?25% of businesses?never reopen their doors following a disaster.
• Cybercriminals perpetrated more than?317 million ransomware attacks?in 2023, representing one of the biggest threats to modern businesses.

These statistics are frightening for any organization, but they underscore the importance of continuity planning. Evaluating?the risks and consequences of a disaster at your company doesn’t have to be overly complicated. That’s where BCP risk management comes into play. By performing a thorough risk assessment, you can determine the exact level of danger and damage that each threat?poses. This in turn?provides clarity around the exact solutions that are needed to minimize them.

How Does BCP Risk Management Work?

At this point, you may be wondering where to begin when?developing a system of BCP risk management. The process boils down to?some important questions:

• What events could disrupt your operations?
• Which risks are unique to your business?
• What is the business impact of those events?
• How is the company already taking steps to mitigate those risks?
• What further actions must be taken?

It’s true that human error, like?Bob infecting your systems with ransomware, can cause a lot of damage in a small?amount of time. But you can’t blame Bob if you failed to identify the risks in the first place?or if you knew the risks existed but never took any steps to prevent the error from occurring. The responsibility for BCP risk management begins at the top and flows downward, which is why it’s essential that you include your team in not only developing the BCP but also in regular training and professional development related to risk management.

What are the Keys to Effective BCP Risk Management?

To achieve a successful outcome, your BCP risk management should include two core elements: collaboration and accuracy. In other words, crucial teams and personnel?within your organization?should be actively involved in BCP risk management because their participation?ensures that the process is built on thorough and reliable information.

Essential Ingredients

Having the right people in place can make or break your BCP risk management. Why? Because each individual who participates can provide valuable insights, data and perspectives. Without them, your planning might lack critical context.

To achieve the?best possible BCP risk management, bring in voices from each of these spaces:

• Disaster Recovery Team (DRT):?A DRT consists of a?small group of personnel who can help to compile information for the risk assessment and?manage the BCP. This team will also help coordinate recovery efforts after a disaster, making their contributions among the most important in your organization’s risk management system.
• Interdepartmental representatives:?BCP risk management involves every aspect of your business, so you’ll likely need to communicate with several departments, such as IT, accounting and QA, to obtain the data you need. Department managers should be aware of the importance of?risk assessment and should make resources available to assist you with the information-gathering process.
• Business continuity consultant: Bringing in an outside consultant is an optional step that might not make sense for every business. However, if your team does not have much experience with risk management or business impact analysis, then it may be a good idea to collaborate with?someone new. A qualified consultant should be able to complete a risk assessment for business continuity with greater speed and efficiency, which may actually save the company money when compared to completing the assessments in-house.

Once you’ve built a dream team of personnel, disaster specialists, and (if necessary) external representatives, you can confidently take on the task of BCP risk management.

The Importance of Accuracy

Let’s take a moment to underscore the significance of accuracy. When you’re engaged in risk management, there’s no room?for loose predictions or careless errors. If you want to truly limit the risks facing your organization, precision is absolutely necessary. To get a better picture of how guesstimating could undermine your BCP risk management, consider this hypothetical scenario.

You operate a business in California, which is historically prone to fire disasters. Logically, as?you develop your BCP, fires are a primary threat you need to address. However, you’re running short on time and have a million other tasks to handle, so you make a rough guess about the total losses and recovery costs that your business would experience in the event of a fire.?This single decision negatively affects every other aspect of your continuity planning:

• Your preventative measures fall short because you’ve underestimated the threat and your team doesn’t take it seriously.
• Your recovery procedures aren’t aggressive enough, meaning that it takes longer to resume operations than it should.
• Unexpected recovery costs cause the company to go under.

All of these outcomes became inevitable simply because you didn’t take the time to do the calculations the right way.

What Should a BCP Include for Effective Risk Management?

With all this in mind, it’s time to dig into the details of the three vital BCP sections mentioned above: risk assessment, impact and resolution. Fleshing out each of these areas will provide the depth of information you need to minimize risks to your organization.

1) Risk Assessment for Business Continuity

This is where you’ll list all the what-ifs that your business faces. By conducting a risk assessment for business continuity, you identify every possible risk or incident that has the potential to disrupt your operations. As you add this section to your BCP, don’t worry too much about the likelihood of each scenario just yet. You’ll identify that and prioritize as needed later.

Some risks, like fire, are common to almost all businesses, although the impact might not necessarily be. Other risks might be more unique to your organization based on your industry, infrastructure or location. For example, if you’re located in a crowded metropolitan area?and there’s a mass transit breakdown that prevents a large portion of your workforce from coming to work, then your operations are likely to be more affected. Rural businesses, on the other hand, may not have to worry about the breakdown of public transportation but rather poor weather conditions that shut down roads.

The threats looming over your business might range from internal actors to?natural disasters to digital sabotage. Some of the most common risks listed in BCPs include:

• Human errors such as file or folder deletion, failing to update systems or sharing login credentials
• Unsafe conditions?such as fires, gas leaks and hazardous materials
• Cyberthreats including ransomware, malware, viruses and DDoS
• Data loss or disruptions due to failed hardware, software or network infrastructure
• Loss of telecommunications
• Electrical outages or utility disruptions
• Damage from natural disasters or severe weather like earthquakes, floods or tornadoes
• Violence or unsafe conditions caused by terrorism or civil unrest

While these categories are fairly broad, remember that the more specific you can be in your BCP, the better.?At larger companies, you may find it difficult at first to determine which risks pose the biggest threats. You’ll gain a better picture of your company’s unique risks as you (or your BC consultant) meet with managers throughout the organization to better understand their processes.

2) Business Impact

The next critical section of the BCP is the business impact analysis, which involves prioritizing and quantifying your risks. To do so, you’ll need to define exactly how they will affect your?business.

a. Impact on Operations

First, evaluate to what extent a particular risk will impede your business’s operations. For example, will it prevent your employees from going into the office, accessing digital files or operating important machinery???You should also project, to the best of your ability,?how likely it is that each event will happen.

When outlining your impact analysis, you may?find it helpful to use a 5-point scale to indicate the severity and probability of each event in general. You might rank them as follows:

• Business impact: 5=Major disruption, 3=Moderate, 1=Minor
• Probability: 5=Very likely, 3=Somewhat?likely, 1=Very unlikely

Consider adding these numerical ratings to the columns in your Risk-Impact-Resolution chart, which we’ll discuss in a moment.

b. Cost Analysis

Cost analyses are an essential component of your business impact assessment. To truly understand how the company will be affected, you must?quantify the losses.

Consider an event in which?SMB ransomware?has locked up data that is critical to nearly every unit of your business, from sales to shipping. How would it affect your operations? How long would the disruption last? Most?importantly,?how will it affect your financial standing? Ideally, you should know how much the event will cost the company per hour, per day, per month and so on.

This is where you’ll likely need the assistance of your accounting teams. When calculating the cost of losses, be sure to consider every possible factor, including:

• Loss in sales or revenue
• Damaged equipment
• Compliance liabilities
• Worker inactivity
• Production disruption
• Long-term damage to the company’s reputation

Certain unknown factors will make it impossible to pinpoint exactly how much a disaster might cost. The idea is to get as close an estimate as possible so that you can plan accordingly.

3) Resolution and Recommended Guidance

Resolution?(not the New Year’s kind) is?the final important piece of your BCP risk management. In this section, you’ll outline the systems and protocols for responding to each possible disaster. Additionally, this is where you’ll identify the solutions to any remaining weaknesses.

In the case of the ransomware attack example above, your resolution section would identify both the high-level solution, such as your?corporate data backup system,?as well as the specific steps that should be taken. These might include:

• Which personnel to notify when an infection has been detected
• How to isolate the infection
• How to validate and restore a backup

Keep in mind that some disasters will require additional steps for contacting external contacts, such as emergency responders, attorneys and the media.

If, while developing your BCP, you find that there are no adequate systems to prevent or respond to certain risks, place emphasis on them.?Specify exactly which steps need to be taken, how long they should take?and any technologies or solutions that need to be implemented to remedy these vulnerabilities.

Putting the Pieces Together

Depending on the format of your business continuity plan, you may decide to break these?areas into separate sections?or use a Risk-Impact-Resolution chart. A very basic example might look like this:

Risk: Warehouse server outage due to hardware malfunction or physical damage (Probability 3)

Impact: Maximum of 6 hours of critical data loss; suspended warehouse and logistical operations (Level 4)

Resolution / Recommendation: Datto SIRIS data backup system in place. Check status of most recent backup and restore.

In actuality, each section or column will go into much greater detail to ensure that your organization?has all of the necessary information?to prevent and respond to a disaster.

Common Mistakes & Pitfalls

Even the most well-intentioned business continuity plans can fall short if certain scenarios are overlooked in the risk assessment or other areas of the planning. Recognizing these mistakes can help ensure a more robust and effective plan.

1. Inadequate Risk Assessment: Failing to identify and evaluate all potential risks can leave your business vulnerable to unexpected disruptions. Be sure to conduct a comprehensive risk assessment covering various scenarios.

2. Lack of Regular Updates: Business environments are dynamic. Not regularly updating your BCP to reflect changes in operations, technology and external threats can render your plan ineffective. (We see this all the time, at organizations of all sizes.)

3. Insufficient Training: Employees need to be well-versed in the BCP. Without regular training and drills, staff may be unprepared to execute the plan during an actual crisis.

4. Overlooking Supply Chain Risks: Your continuity depends on your suppliers and partners, who have their own unique risks. Not assessing and planning for supply chain disruptions can severely impact your operations.

5. Incomplete Documentation: A BCP with missing or unclear instructions can lead to confusion during a disruption. Ensure all procedures are well-documented and easily accessible.

6. Focusing Solely on IT: While IT is crucial, a BCP must address all critical business functions, including human resources, customer service and facilities management.

7. Ignoring Smaller Incidents: Only planning for major disasters can overlook smaller, yet significant, incidents. Include scenarios for minor disruptions to ensure comprehensive coverage.

8. Failure to Involve Key Stakeholders: Developing a BCP in isolation can lead to gaps in understanding and execution. Involve all relevant departments and stakeholders in the planning process.

Frequently Asked Questions (FAQ)

1. What is BCP risk management?

BCP risk management is the process of determining and mitigating a business’s risk for incidents that threaten its operational continuity. This process typically involves conducting a comprehensive risk assessment, documented within a business continuity plan (BCP).

2. How to do a risk assessment for business continuity?

To conduct a risk assessment, start by identifying potential risks that could disrupt business operations (e.g., cyber threats). Assess their impact and likelihood. Develop strategies to mitigate these risks, ensuring continuity of critical functions. Document everything in a business continuity plan and regularly review it with key stakeholders. Train staff and conduct drills to ensure preparedness.

3. What are the 5 steps to a BCP?

Five critical steps to developing a business continuity plan (BCP) are: 1) Identify key business functions and risks, 2) Conduct a business impact analysis, 3) Develop disaster prevention and recovery strategies, 4) Implement and communicate the plan and 5) regularly review and update the plan to ensure effectiveness.

4. What is BCM risk assessment?

A Business Continuity Management (BCM) risk assessment identifies and evaluates potential threats to business operations, assesses their likelihood and impact and prioritizes them to develop mitigation strategies, ensuring the continuity of critical functions.

5. What does BCP stand for?

BCP stands for business continuity plan. It’s a comprehensive strategy that ensures critical business functions continue during and after disruptions, such as natural disaster or cyberattacks.

Conclusion

BCP risk management should be on every business’s priority list. Yet, in spite of the dire threats on the horizon,?an estimated 51% of businesses worldwide have no BCP in place. If your business is among them, or if you know that your plan isn’t up to par, now is the time to make a change. By conducting a thorough risk assessment, and documenting those risks in a comprehensive business continuity plan, you can significantly reduce the chances of your critical operations being disrupted by an unexpected incident.

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