What are business rules?

What are business rules?

Business rules guide the everyday decision-making within businesses by outlining the relationships between objects, such as customer names and their corresponding orders.

The conversion of an organization's business activities into concrete business logic allows software professionals and business analysts to apply these rules within workflow tools or other applications to enable process automation. Without them, updating processes can become more arduous and time-consuming, and documents can be subject to more human error and inconsistencies. By implementing business rules across an organization, a business can save time and money by streamlining work to the right stakeholders and reducing churn.

Business rules versus business requirements

Some people can confuse the terms, business rules and business requirements, but they are distinct and different. As a result, it's worth noting how they are used within business settings.

Business rules provide the foundation for automation systems by taking documented or undocumented information. They then convert this information into conditional statements. For example, when conducting a purchase order, there might be a different approval process depending on the cost. Tools and services that are under five thousand USD, need manager approval, but as costs get higher, they might require approval by the C-suite. Business rules formalize this process by setting thresholds under which invoices are sent to upper management versus first-line managers. Conditional statements, such as these, are applied across several business processes.

Business requirements establish the success criteria for a project. By specifying the tasks and resources needed to complete the project, teams can more clearly see the gaps and barriers to achieving their goal. This exercise is completed at the start of a business project to set expectations among stakeholders and address any additional needs for project completion.

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Types of business rules

Business rules can be classified in several ways, and they can vary in their classification depending on the source of information. However, irrespective of their categorization business rules are typically expressed by using formal logic qualifiers, such as: "IF-THEN", "IF-ELSE", "ONLY IF", "WHEN" and more. This syntax is used across the following different types of business rules:

  • Constraint rules set conditions that place restrictions on object structures. These rules can be further broken down into three different subsets of rules, which include stimulus and response, operation constraints and structure constraints. Stimulus and response rules require conditions to be true before an action is being taken, while operation constraint rules place restrictions before and after an operation. Finally, structure constraint rules establish policies around classes, objects and the relationships between them that should not be disregarded.

  • Derivation rules define conditions under which facts can be inferred from other information. These rules are broken out into two subsets, which include inference rules and computation rules. Inference rules specify that if certain facts are true, a particular conclusion can be determined, while computation rules use algorithms to make these inferences.

These types of rules are the foundation of rules engines, allowing organizations to automate business decisions to expedite various processes, like customer orders and shipping. They enhance business processes by providing guidance on when these processes should be initiated, stopped or altered in order to enforce policies consistently across the business.

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Examples of business rules

Business rules are used for different use cases, which can be based on either internal or external constraints. Some of these rules include:

  • Compliance: Regulatory agencies can apply strict rules around multiple verticals, such as finance, insurance, healthcare and marketing. Business rules can help ensure that documents reviewed by any regulatory bodies meet their respective requirements.

  • Application approval: Banking and real estate markets use business rules for application processes for housing loans or rental properties. For example, an organization can reject an applicant if their credit score is under a specific threshold.

  • Subscription services: Companies use business rules to end their services to a specific client when the payment is not received within a set number of days. This policy ensures that the company does not waste resources on a customer that is not generating revenue.

  • Purchase orders and returns: Business rules can also be applied within the retail industry. For example, a business can reject a customer's return claim for a product if it falls outside of a 30-day window.

  • Personalization: Marketing automation tools allow companies to customize their website based on the visitor attributes, allowing marketers to use a set of business rules to message across different audience segments. For example, if you're a returning visitor to a website, the business might display photos of the product category you last viewed on their home page. In contrast, a new visitor can see images of the company's most popular product instead.

Benefits of business rules

Business rules can yield several benefits to organizations, which streamline business operations and lower expenses.

  • Increased efficiency: Programming business rules into applications and workflows can save time in the long term. When business rules require updates to regulatory changes or company standards, only this aspect of the program is modified, eliminating manual updates across the entire software application. Less technical resources, like business analysts, handle these updates, saving technical resources for more complex business problems.

  • Improved consistency: Business rules ensure that tasks are executed consistently as specific criteria needs to be met for a task to be implemented. For example, regulatory agencies might require the completion of certain documents. Companies can create custom templates, which are not marked as complete until all required fields have been met. As a result, less human error occurs and if all business rules have been implemented accurately, leaders can rest assured that they're meeting compliance requirements, avoiding any unnecessary fees and penalties.

  • Less complexity: Documentation of business rules can potentially translate to other lines of business, and teams can potentially repurpose documents for other workstreams, reducing complexity across the organization as a whole.

Process mining and other business analysis can help identify areas where business rules can be applied within your company to capitalize on these benefits.

Business rules engines and business rules management systems (BRMSs)

To help organizations remain responsive and agile, decision process automation software makes it possible to manage business rules independently from other business computing processes. In particular, business rules management systems (BRMSs) can automate the creation and implementation of business logic in real-time without dependencies on other applications and processes. As a result, a single repository of decision logic can easily be shared across the entire enterprise.

Common tools for defining and managing the decision logic and a common runtime environment allow both developers and stakeholders with less technical backgrounds to efficiently implement and change automated decision-making processes. They also enable complex rule sets to be enforced consistently across large environments.

A business rules engine transforms one or more business rules into business logic that functions in a runtime production environment. Today, most business rules engines are integrated into full-scale BRMS solutions that can be integrated into services-oriented or microservices-based architectures. Modern BRMSs often employ machine learning or rules-based expert systems to optimize decision-making, improve customer experience and facilitate smoother operations.

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