4 Examples of a Business Impact Statement

John Spacey, September 08, 2022

A business impact statement is an estimate of the costs of an actual or potential negative event that impacts your business. These are prepared as reports to management and other stakeholders such as investors and regulators. Business impact statements are also used for processes such as risk management and business continuity planning. The following are illustrative examples of a business impact statement.

Business Risks & Incidents

A business risk is a potential for loss and an incident is a loss that has occurred. For example, fire risk at a critical facility such as a data center that becomes a fire incident.

Business Impact: Fire at Data Center
Business Areas Affected	IT Operations Business Operations Ecommerce Sales
Operational Impact	Complete loss of all systems running out of data center.
Cost of Business Disruption	$1.7 million / hour
Revenue Loss	$0.3 million / hour
Direct Costs	Fire insurance will not cover loss of data or intellectual property such as software.
Time to Recover	Failover to secondary facilities within 6 hours.
Long Term Impacts	Potential loss of data / backups Damage to reputation Damage to customer relationships / brand image due to outages.

Disasters

Disasters such as an earthquake, environmental emergency or hurricane. For example, a small retailer than closes several shops for 2-4 weeks due to an earthquake. This example takes a people-first approach that notes that employees are safe before continuing to financial costs and losses.

Business Impact: California Earthquake
Business Impact	Due to the recent earthquake in the San Francisco area all of our shops and offices in the area will be closed until the emergency declared by the state and city are lifted. There will be restricted access to several corporate and retail locations for a period of time. Locations will require a clean-up and evaluation of stock to identify damaged items.
Health & Safety	All employees and their families confirmed safe.
Locations Impacted	Corporate Headquarters San Francisco Flagship 4 San Francisco Retail Locations 2 Oakland Locations
Revenue Loss	$690,000 / week
One-time Costs	Estimated inventory damage of $34,000
Ongoing Cost	$40,000 / week in clean up and recovery costs.
Mitigations	Corporate functions unaffected. Confirmed that key employees are safe and available to work from home.
Other Costs	Donation to relief efforts of $1 million.

Political Disruptions

Disruptions due to government actions or political events such as protests. For example, a small business owner who has to close their restaurant for 3 weeks due to protests that shutdown business in a neighborhood for an extended period of time.

Business Impact: July Protests
Incident Summary	Restaurant closed July 3rd - July 25th on advice of police. All retail businesses in the area closed for a similar time period.
Direct Impact	100% revenue loss for 22 days Expired inventory costs Customer defection Increased insurance expense Loss of key employees
Secondary Impact	Business was slow to return as customers avoided the area after the protests. Year-over-year sales decline as follows: August -64% September -20% October -6%
Total Lost Revenue	$549,000
Total Costs	$23,900

Global Disruptions

Global disruptions such as wars, trade wars and political instability abroad. For example, a large European manufacturing firm with a global footprint that experiences supply chain disruptions due to political instability in an Asian country.

Business Impact: Supply Chain Disruption
Overview	Anticipated 15-20 delay shipping parts and components out of ______ and ______ due to political instability in the region.
Business Impact	15 day shutdown of battery systems manufacturing in Frankfurt 10 day shutdown of vehicle manufacturing in Manchester
Production Impact	Battery systems production for the year will miss target of 13 million units. Projected production is on the order of 11 million units representing a shortfall of 2 million units. Vehicle production is scheduled to meet targets with extra production runs scheduled in September through November.
Revenue Impact	Negative impact of $78 million (estimate)
Costs	Costs for shutting down and restarting lines of $16 million. Contractual penalties of $4 million.
Customer Impact	Estimated 13,000 retail orders of vehicles will be delayed 1-3 months. Delay to power systems orders will impact 17 business customers.