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Need for Inventory Management – Why do Companies hold Inventories
Inventory is a necessary evil that every organization would have to maintain for various purposes. Optimum inventory management is the goal of every inventory planner. Over inventory or under inventory both cause financial impact and health of the business as well as effect business opportunities. Inventory holding is resorted to by organizations as hedge against […]
What Six Sigma is Not ? – Fallacies about Six Sigma
Six Sigma has really become a management buzzword. A lot of people use it in very different contexts. As a result a variety of meanings have been conjured up for the very simple six sigma process. To simplify matters and to ensure that the readers have an accurate understanding of what the Six Sigma process […]
Is the Indian Economy at Risk of Turning into another Greece or Thailand?
What History teaches us and why Forgetting History would condemn us to repeat it? The Indian Elections are over and it is now time to take stock of what the new government has in store for the Indian Economy. With PM Modi winning a record second term with foolproof majority, he and his administration have […]
The concept of insurance came about in the business field to cover the risk of loss of assets due to natural and manmade disasters as well as other calamities.
In the current times, Organizations especially those which are dependant heavily on IT systems have begun to look at preventive steps as well as plan for recovery in case of any disaster striking and paralyzing the business. Thus Disaster Recovery and Business Continuity plans have emerged as a Must Have management practice.
When compared to insurance, DR & BC also look at the risk element involved in the business, processes as well as assets and human lives etc. However Insurance aims at making good the loss while DR looks at similar risk elements as insurance but focuses on recovering the assets, data and other processes etc.
Business continuity plan looks at, getting some critical processes and aspects of business up and running as fast as possible in the event of a disaster. While insurance focuses primarily on physical assets, DR & BC focus mainly on preventing any loss or disturbance to the business.
Business Impact Analysis is one of the most important parts of the DR & BC plan. It is here that the estimation and analysis of all possible risks to business is enumerated and identified.
It should be noted here that the BIA analysis risks and measures its impact to the business. Therefore the business loss is identifiable and quantifiable. DR & BC plans do not end with just the Business Impact Analysis (BIA). It aims to calculate and establish limits up to which the losses can be sustained.
Every Business Impact Analysis determines the recovery time objective of a business taking into account each of the analyzed risks. Against each failure or disruption, a calculation of the lead time taken to get the system or process up and running is required to be calculated.
Against the recovery time, there needs to be an analyses and discussion to determine how much time the Organization can afford to withstand the disruption to the business without losses. Such time is known as the Recovery time objective which the DR plan needs to peg on for planning recovery exercise.
Some businesses might withstand a loss of business for one day or in some cases it could be in terms of few hours. The RTO then becomes the primary target to be achieved.
Every business process or system recovery attempted can be started from a fixed point of time. This concept of point of time of recovery can be easily understood with the help of a common example.
If in an Organization, the system back up for financial systems and data is taken every day at midnight and the system fails due to a major disaster on the following morning, then the recovery of data can happen from the point of time when the last data backup has been taken which is the previous night.
Thus when Recovery point objective is determined for each and every critical process, one can then determine which particular process or system requires a closer recovery point and suitable action can be initiated to increase the backup frequency.
The recovery point objective helps give clarity of recovery in terms of the fixed point up to which the recovery can be expected.
An effective DR & BC plan depends largely upon the quality of the Business Impact Analysis. The more time and attention given to analysis and planning helps get better results in terms of estimating all possible risks and prepare for risk mitigation and disaster recovery.
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