Estimating the Cost of a Business Impact Analysis

If you have used the BIA Calculator located in the Community Resources/Projects section of this website you know that you have an estimate of the number of hours your BIA project will require. Given an estimate of the time required to perform the project it is now possible to answer a second question: “How much will the BIA cost?”

Arriving at a Cost:

This question can be answered in three simple steps:

  1. Multiple the total hours that the Project Manager/Consultant will spend on the BIA by an estimate of the hourly rate of the person(s) conducting the analysis.To calculate the hourly rate of a salaries employee, divide the total salary cost (payroll and benefits cost) by 2080 (the number of working hours in a year). For example, the hourly rate for someone with a $50,000 a year salary, divided by 2080 works out to an hourly rate of approximately $24/ hr. Now, multiple this rate times the total number of project hours to determine the first element (Part 1) of project’s cost – the expense involved in collecting, processing, and reporting the information.
  2. Perform the same cost analysis for the all people who will be interviewed, estimating one hour of interview time per person. This gives you the second component (Part 2) – the cost of having people interviewed.
  3. Next, estimate any ancillary expenses involved in supporting the project (Part 3). If travel to remote locations is required, factor this cost into this third component. Other costs might include the expense of producing reports, telephone calls, etc. In smaller organizations these costs are so low that they can be ignored.

Last, add all three of these components together to arrive at an estimate of the total project’s cost.

Example 1

Following our 3-Step process we first estimate the total project hours, then the cost of labor, and finally the cost of any materials travel or other overhead.

Step 1 – Labor Cost for the Project Manager

To estimate the total project time, assume the following:

  • Your firm employs 17 full time workers.
  • 14 critical process (e.g.: payroll, commission accounting, shipping, etc.)
  • The organization has never been through a BIA before

Given the above, the BIA Calculator determines that you need fifty-nine hours (58.53 to be exact!) of time to complete the basic BIA process of which sixteen hours are overhead.

Now assume that the person in charge of collecting the information is paid an annual salary of $50,000 per year, or approximately $24/hour.

Part 2: Labor Cost of the Workforce

Now, assume that there are six departments in the company and that on average you will interview two people per department for a total of twelve interviews, each lasting one hour. Assume each of these people also make $50,000 a year (12 hours x $24/hr). Add to that a follow up discussion with three members of management who make on average $75,000 per year or $36/hr.

Part 3: Other Costs

Last, assume the cost of supplies and materials at $100. Given these assumptions the cost to conduct this BIA is shown below:

Part 1            Part 2            Part 3

BIA Project Cost = (59 X $24) + ((12 X $24) + (3 X $36)) + $100 = $2,264

Example 2

Now let’s modify our assumptions to fit a second scenario. Please note that the following are for illustration purposes only.

Part 1

To estimate the total project time, assume the following:

  • Your firm employs 214 full time workers.
  • 97 critical process (e.g.: payroll, commission accounting, shipping, etc.)
  • The organization has performed a BIA before

Given the above, the BIA Calculator determines that you need three hundred ninety four hours (394.05 to be exact!) of time to complete the basic BIA process of which forty hours are overhead.

Assume that the person in charge of collecting the information is paid a total salary of $50,000 per year or approximately $24/hour.

Part 2

Now, assume that there are ten departments in the company and that on average you will interview four people per department for a total of forty interviews, each lasting one hour. Assume each of these people also make $50,000 a year (40 hours x $24/hr). Add to that a follow up discussion with twelve members of management who make on average $100,000 per year or $48/hr.

Part 3

Last, assume the cost of supplies and materials at $400. Given these assumptions the cost to conduct this BIA is shown below:

Part 1            Part 2            Part 3

BIA Project Cost = (394 X $24) + ((40 X $24) + (12 X $48)) + $400 = $11,392

Some Interesting Comparisons

A comparison of these two cases may be useful. Comparing them based on full time staff shows that a firm with twelve times as many employees (214 versus 17) has a projected BIA cost that is five times that of the smaller organization.

However, when comparing the organizations by number of critical processes operated (97 versus 14) this   that in an organization with less than seven times the number of critical processes (97 versus 14), this approximately sevenfold difference is much closer to the eightfold difference in the cost of the BIA’s ($11,392 versus $1,336).

One possible conclusion from this analysis is that the number of critical processes is a better indicator of BIA cost than staffing levels. However, the second conclusion is that the BIA Calculator is of enormous help in projecting a cost for the overall project.

More Sophisticated Analysis

The estimate of the time requirement and cost of the BIA as presented here is very straightforward. Several potentially significant factors are not accounted for such as the cost of interrupting the operational workflow to hold the various meetings. However, as often happens with a BIA, there are opportunities to realize productivity improvements by re-thinking the way in which procedures are structured. While interesting, these discussions fall outside the scope of the BIA Calculator presented here.

Can You Help?

If you think you have some additional insights that could improve the BIA calculator or this cost-projection analysis, we encourage you to contact us and make your suggestions. Once reviewed by our team of technical advisors we can decide if and how to present your propose enhancements. After all, that’s how the sandbox is designed to work! Please send your comments to info@continuitycompliance.com.

Not sure how many critical processes you are running. Review this short article that provides a guideline on the number of critical processes in organizations of different sizes.

Seen enough and want to begin working up your estimate? Follow this link to return to the BIA Calculator.

Need Some Help?

After reviewing the estimated work effort needed to conduct a BIA, many organizations decide to hire an outside consultant to assist with this process. If you are looking for an experienced consultant to help you with this or any other continuity, compliance, or security issue – please be sure to visit the Find A Consultant section of this website. ContinuityCompliance.org prides itself on the professionalism and knowledge of our affiliates and we are confident we can help you find exactly the right person for your project.

Pin It on Pinterest