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Impact tolerance is an important component of an operational resilience strategy. By understanding your impact tolerance, you can better understand the impact single points of failure and vulnerabilities could have on your organization. From there, you can use that information to prioritize what’s most important and then focus on mitigation and remediation.
Yet, many organizations aren’t quite sure exactly what their impact tolerance is or the role it plays in ensuring operational resilience now and in the future.
Before we dive into impact tolerance, it’s important to understand how it’s connected with operational resilience.
At Castellan, we see operational resilience as your organization’s ability to continue to provide business services when faced with adverse operational events by anticipating, preventing, recovering from, and adapting to those events.
And, importantly, learning from those events, by asking:
As part of your resilience strategy, there are several areas you’ll need to explore before setting your impact tolerance. For example, ensure you’ve:
From there, it’s time to dive into setting your impact tolerance.
So, what is impact tolerance and why is it important for your organization?
Defining impact tolerance is difficult. At Castellan, we define impact tolerance as a point in time—or decreased capacity of—an important business service that causes unacceptable harm to a customer, the broader market, or irrevocably threatens your organization’s viability.
Unfortunately, as pointed out in the BC Management BCM Trends Report 2021[MOU1] , 75% of organizations don’t understand program drivers and another 70% have not intentionally developed strategies to recover important business services.
Why is this important? Because of the value proposition of setting good impact tolerances. Doing this well can help your teams, especially your executives, better understand key program drivers and expected outcomes.
When you establish and use impact tolerance properly, it brings a range of resilience benefits. For example, your organization is better poised to:
While there is no magic formula to set impact tolerance, here are some tips that can help get you on the right path. We recommend a five-step framework that looks like:
Ideally, as you go through this process, you should be able to look back and have a better understanding of what your impact tolerance is. By defining plausible scenarios and determining your remediation prioritization strategies, your organization should be in a solid position to understand which of your resources, if disrupted, would prevent you from resuming important business services as you’ve aligned them to your impact tolerances. This is a core element of operational resilience.
Want to take a deeper dive into how to establish impact tolerances for your organization? Download our Impact Tolerance Builder or contact a Castellan advisor today.
Now you’re ready.TM
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