What is Impact Analysis? Types and Benefits

What is Impact Analysis (IA)? 

 

In business, risks are never out of sight. Business management involves managing a lot of things apart from the business. One such aspect is the impact of changes made over time in the business. 

 

Change impact analysis, also called Impact Analysis, refers to obtaining an accurate understanding of the potential consequences of a disruptive situation or a substantial change made in the process of developing a business. 

 

Since running different kinds of business is all about growing and developing, it is important for businesses to manage and analyze what kind of repercussions are caused when a certain change is brought in. 

 

Often, a series of decisions can cause considerable things to change in a business, leading to implications that might or might not be fruitful for the business in the long run. Thus, Impact Analysis is an appropriate concept that plays an important role in this scenario. 

 

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“The analysis examines the proposed change to identify components that might have to be created, modified, or discarded and to estimate the effort associated with implementing the change.”

Impact Analysis Assessment 

 

In essence, impact analysis (IA) provides a detailed analysis of business activities in light of prospective changes that could be made to the operations. 

 

With respect to these changes, the IA model presents the implications of these changes that could help the decision-makers to analyze what kind of transitions will have to be addressed in the future ahead. 

 

For businesses that skip Impact Analysis, the transitions do come for sure. However, without the IA model run-through, such changes only come as a shock to businesses that look forward to rapid transformation. Perhaps Impact Analysis is a very essential step that businesses must not miss out on. 

 

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First formulated by software engineers Robert S. Arnold and Shawn A. Bohner in 1996, the concept of Impact Analysis was initially defined as detecting potential consequences of a change. Broadly, Change Impact Analysis can be divided into 3 types on the basis of impact conjectured in different scenarios. 

 

1. Dependency Impact Analysis

 

Changing the requirements of a business to suit different desires is essential for growth and development. In a business, each and every factor is dependent on the other. 

 

As soon as the sales in a business change, other factors like production, distribution, and profit share change. However, with the help of Dependency Impact Analysis, one could determine the depth of change instilled with a transition brought into the business. 

 

“Developing a service that has a dependency on a large number of other distinct systems is likely to result in something that has to be revalidated every time each of those dependencies changes.”

Dependency Impact Analysis 

 

2. Traceability Impact Analysis

 

In order to understand the 2nd type of impact analysis, we shall first consider the intertwined operations in a business setup. In a business, all departments are linked to each other. 

 

In traceability impact analysis, a business tends to the links between requirements, design specifics, and tests, trying to establish a relationship among these factors. This is done in order to analyze the scope of change, and whether to initiate it or not. 

 

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3. Experiential Impact Analysis 

 

The 3rd type of Impact Analysis is rather an interesting concept to learn about. 

 

With the help of past experiences faced by different companies and business management experts, the experiential IA models gather information and relevant data to analyze the repercussions experienced by a company in a similar situation. 

 

Not only does this help them analyze the consequential results they might face but also leads them to find accurate solutions.  

 

(Top reading: How Business Analytics impacts Decision Making in Businesses)

 

 

Benefits of Impact Analysis

 

As we have already understood the whereabouts of Impact Analysis as a significant concept, we will now be moving on to discover the benefits of impact analysis. 

 

1. Risk Assessment

 

One of the biggest advantages of Impact Analysis is that it leads a business to assess the potential risks and losses that might come its way. In the process of bringing about changes, risk assessment can be missed out on. 

 

Thus, IA models can very well establish risk assessment results that will only help businesses weigh the pros and cons of a particular change, and determine whether they should introduce that change or not. 

 

In a way, this risk assessment tool is one of the biggest benefits of Impact Analysis tools and techniques that businesses can benefit from, and decide what kind of changes are suitable in the long run. 

 

(Related reading: Risk Management: Examples and Software)

 

2. Predictive Results

 

Another Impact Analysis advantage is that it provides predictive results. By evaluating the impact of potential changes in a certain situation, IA models can offer predictive results, implying that they can forecast phenomena that are likely to occur in the coming future. 

 

For instance, when a business decides to cut down production costs, there are various repercussions that can occur in this process. Quality deterioration, defective products, and less careful staff are some of them. 

 

While these are pretty common to presume, other such detailed effects can only be predicted with the help of IA models. That said, predictive results with the help of impact analysis techniques can very efficiently produce smooth operations in the long run. 

 

3. Scalable Impact

 

Another very popular benefit of this concept is that it has a scalable impact on the businesses that conduct it from time to time. 

 

Since the success rate of businesses that utilize impact analysis has proved to be very beneficial, the scalability of this specific technique is high. Therefore, the effective results of this technique can be very beneficial for businesses in the long run. 

 

By accumulating data from past experiences and presenting effective results with high efficiency. Moreover, Impact Analysis techniques are also accommodative in terms of capacity and storing data for later uses. 

 

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4. Detecting Failures

 

Be it risk assessment or accommodating large lumps of data for experiential analysis, there is nothing Impact Analysis can’t do. 

 

But, there is something way too important that this concept can achieve for businesses trying to accomplish profitability. By detecting failures, Impact Analysis models assess a change and its potential consequences for detecting whether a transition in the business will lead to failures or not. 

 

More often than not, many steps that are intended to improvise the business, end up creating failures for the organization. Perhaps this can be negated with respect to using impact analysis methods in the long run. 

 

As soon as businesses come to know about potential risks and failures that such changes could lead to, they can divert their focus accordingly and save themselves from imposing any danger on their profit-making ability. 

 

5. Strategic Recovery Process

 

In addition to assessing risks and detecting failures, Impact Analysis is also capable of providing businesses with strategic recovery processes. 

 

Since some businesses conduct Impact Analysis after they have implemented changes, such models can suggest smooth recovery processes that can withdraw losses and help businesses recover. 

 

That said, Business Impact Analysis can help businesses work on a step-by-step business recovery plan along with recommendations that can boost their performance in the long run. 

 

Meanwhile, some new applications can also be included in business management in light of improving business performance and upscaling profit-making ability. 

 

(Recommended reading: AI applications in business management)

 

 

Summing Up 

 

To summarize, Impact Analysis is a concept that has proved to be very beneficial for boosting business profitability. In order to assess the impact that several changes could have on businesses and other interlinked factors, IA models can be put to use to achieve scalability, profitability, and longevity in the long run. 

 

Simply put, Impact Analysis, founded by Arnold and Bohner, is an age-old concept that has benefitted many businesses across the world. 

 

Despite its theoretical approach, the concept has come in light due to its advantageous working and even more beneficial approach to business improvisation.