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INTERVIEW QUESTION:

What is the different between a business policy and a business rule?

Posted by Chris Adams

Article Rating // 39528 Views // 4 Additional Answers & Comments

Categories: Business Analysis, Systems Analysis, Domain Modeling, Enterprise Analysis (BABOK KA), Business Rules

ANSWER

Business Rules and Business Policies tend to be complicated for analysts to untangle because they are so closely related.  Policies are typically more general assertions or guidance about how an organization is intended to operate, while business rules describe the specific execution of the business policy. 

The BABOK describes a policy as “a non-actionable directive that supports a business goal', and a business rule as 'a specific, actionable, testable directive that is under the control of the business and supports a business policy'

The Business Rules Group goes further in their definition of business rules describing it as an atomic statement that defines or constrains some aspect of the business.  They categorize business rules as one of three sub-classifications; structural assertion, action assertion, or derivation.  The definitions of these get quite detailed and while knowing them, along with understanding things like fact models, may help elaborate one’s understanding of a business rule, at a summary level business rules are best understood by a higher level definition (like the IIBA’s) and a few examples.

Additionally, policies, being more general, typically change less often than business rules which are specific implementations of policies.

To restate, a policy is:

  • A non-actionable directive
  • Often requires employees to translate into specific statements of what to do (business rules)
  • Supports a business goal
  • Supported by one or more business rules


A business rules is:

  • Actionable
  • Specific
  • Testable
  • Supports a policy


Examples of policies for a car rental company:

  • Maintenance must be performed in a manner which maximizes the life and value of the car
  • Renters must have valid insurance


Example of business rules that may support these policies:

  • All vehicles are required to have a 58 point inspection after every 3 months of use before re-renting.
  • A car which has accumulated more than 3500 miles must have its oil changed before re-renting.
  • Tires with less than 1/16th inch of tread must be replaced.
  • Renters in the state of Texas must have insurance covering $100,000 of liability or more.
  • Renters in the state of Arizona must have insurance covering $50,000 of liability or more.

Notice that each of the business rules are written as a level which is actionable, specific, and testable.


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Chris Adams
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ADDITIONAL ANSWERS / COMMENTS

KlaasCo posted on Saturday, September 21, 2013 7:14 PM
This is a great summary - thank you very much. I offer a small extension; with regards to 'System Rules'. System Rules are simply business rules that have been translated into machine code. These may appear to replicate the Business rules (or may sometimes vary ever-so-sightly depending on the delivery model / vehicle of the required behaviors).
llowe01 posted on Thursday, September 28, 2017 1:13 PM
Thank you for the thorough response. The definitions and associated definitions are very helpful!
MadiMo posted on Wednesday, January 15, 2020 7:27 PM
So in theory, the way I see policies and business rules to be Requirements after all, is that correct?

Many thanks
Adrian M. posted on Saturday, January 18, 2020 11:17 AM
Correct, policies and business rules are requirements. However, the reason they singled out is because they are more prone to change.

For example, let's consider this policy: "Renters must have valid insurance" as communicated by the business SME.

From my perspective, I see three different potential category of requirements for the reservation system:

[1] System must display the applicable policies for the given action/function.
* this requirement is less likely to change in the future
* it is more generic as it applies to all policies
* the implementation may vary(how policies are displayed) but they need to be displayed

[2]System must enforce this policy "Renters must have valid insurance"
* while an important requirement, the policy could change in the future
* for example, the company may decide to make money from renters who do not have their own insurance but offering an insurance product along with the rental
* therefore, it would be important for the system/platform to support an easier and streamlined way to change policies

[3]The insurance policy is considered valid if the expiration date is past the rental agreement date.
* now this one looks more like a business rule
* it is even more likely to change as the regulatory landscape and company risk appetite changes
* example 1: Risk department is worried that if the customer returns the car late, they might not be covered if insurance expires right after contract end date => they change the rule that the insurance policy must expire at least 6 months after rental contract aka a rule change
* example 2: Legal department, responding to complaints from customer attorney, concludes that 6 months is too big of a burden to ask customers so they ask for the requirement to be just 2 months after rental contract aka another rule change.

What is probably very important is to consider the policies and business rules in the context of the broader business process with the goal of the business process in mind.

Here is another way to look at it: What is a business rule and how does it differ from a business requirement?
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Do your homework prior to the business analysis interview!

Having an idea of the type of questions you might be asked during a business analyst interview will not only give you confidence but it will also help you to formulate your thoughts and to be better prepared to answer the interview questions you might get during the interview for a business analyst position.  Of course, just memorizing a list of business analyst interview questions will not make you a great business analyst but it might just help you get that next job.







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