As the owner, manager, or representative of your organization, you have taken some steps to prepare your business for an emergency. You have joined the Red Cross Ready Rating™ program and raised awareness of the importance of implementing an effective business continuity program. You may have also completed the Hazard and Vulnerability Assessment. The next step is to prioritize business continuity strategies, which may include completing a simplified cost-benefit analysis.

 What is Cost-Benefit Analysis?

 Cost–Benefit Analysis (CBA) is a “systematic approach to estimating the strengths and weaknesses of alternatives. It is used to determine options which provide the best approach to achieving benefits while preserving savings in, for example, transactions, activities, and functional business requirements.” – SA Journal of Information Management. Traditional CBA uses a complex approach, whereas the ‘Simplified Cost-Benefit Analysis’ provided by Ready Rating has been modified to meet the requirements of smaller organizations and uses the terms “feasibility” and “effectiveness” rather than “cost” and “benefit”.

A Simplified Cost-Benefit Analysis can be used to justify business continuity strategies and establish buy-in from senior management/decision-makers.

How to do a Simplified Cost-Benefit Analysis

Because most organizations have limited resources (e.g., people, transportation, finance, partners, equipment, data, etc.), business continuity strategies need to have a strong cost-benefit ratio or feasibility-effectiveness ratio, i.e., they need to be affordable or easy and produce strong outcomes. A strategy has a high degree of feasibility if the resources required to implement it (e.g., price, staff, time, technology, facility, project complexity, etc.) are affordable and available. A strategy produces a high degree of benefits if it directly and substantively reduces risk, i.e., will it achieve real change or only marginal improvements?

You may wish to start by brainstorming a list of potential strategies, and then refine the list based on the feasibility and effectiveness of each strategy using a matrix, like the one below.

Feasibility
Low High
Effectiveness Low Low-priority strategies

Do not pursue

 Medium-priority strategies Do as resources allow
High Medium-priority strategies

Develop a plan

 High-priority strategies

Do ASAP

Identify the most appropriate cell for each strategy based on whether it has a high or low degree of feasibility and a high or low likelihood of being effective.

  • Strategies that are highly effective and highly feasible are easy wins – do these as soon as possible.
  • Strategies that are highly effective but have low feasibility often involve significant resources and require more time to plan for and execute – plan to implement these over the next year or two.
  • Strategies with a low degree of benefits and low cost should be executed only when resources allow, such as when you have a summer student or contract employee, or during your organization’s slow season, if applicable. Consider these “nice-to-haves”.
  • Strategies with low feasibility and effectiveness are resource-intensive and won’t reduce risks. Avoid pursuing these strategies.

If a strategy can be further developed now, indicate who will be responsible for doing so and the timeline for completion.