Contingency Planning: Effective Tips & Strategies
What if you return from a conference to find your entire executive team has caught COVID-19? What if your biggest customer decides to do business with a competitor? What if a hurricane destroys your workplace, leaving your business unable to function?
There are so many ‘what if’s’ in the business world, and contingency planning is the best way to prepare for disasters and unexpected events. Although we can’t predict many of life’s circumstances, risk contingency plans help us to identify potential hazards, giving businesses the foresight to put emergency protocols in place.
Savvy, forward-thinking managers and executives create business contingency plans because they are aware that many risks can impact a company. Without thorough contingency planning, a business is vulnerable to failure if unexpected events ever occur.
What is a Contingency Plan?
Contingency planning refers to the process of creating a proactive strategy in case of unforeseen circumstances or a disruptive event. A contingency plan outlines the course of action that a business’s management and staff should take in response to a future event.
Business contingency plans play a substantial role in risk management, disaster recovery, and business continuity. They help managers and executives prepare for unforeseen events, minimizing the impact that disasters can have on the company. Contingency plans for businesses allow organizations to resume normal business operations after a disruption has occurred.
Thorough contingency planning helps businesses manage risk, handle employee disputes and workplace injuries, avoid negative publicity, and recover from natural and human-made disasters. By creating a contingency plan, your business can respond immediately to unexpected events. If you can get your company back up and running quickly, you can minimize the potential damage to your business’s reputation, profits, and revenues.
How to Write a Contingency Plan
Whether you’re developing a contingency plan in project management, PR, HR, or marketing, you should follow the steps below:
Before you can prepare for the worst, you need to understand what disasters you might potentially face. Looking to the future, consider all of the risks you might encounter. Make a list including issues such as sudden revenue changes, security threats, natural disasters, and pandemics.
As you brainstorm, make sure you ask individuals across your organization for their input. Remember, you need to prepare for organization-wide risks, not just managerial problems.
If you’re utilizing time and resources during your contingency planning efforts, you should prepare for events that have a high chance of occurring. Let’s use hurricanes as an example. If your area isn’t prone to these natural disasters, don’t spend all your time preparing for them.
However, if your location is prone to earthquakes, it would be a great idea to have a contingency plan in place in case one occurs. Use a risk impact scale to determine which risks are most likely to affect your business. These charts can help your team estimate the chances of an event to decide where to best focus your efforts.
Develop Your Contingency Plan
Now that you’ve prioritized your list of risks, you’ll need to create a plan to mitigate or eliminate each of them. Your contingency plan should include a step-by-step guide outlining exactly what to do if an event occurs and how to keep operations running smoothly.
Your contingency plan should list all staff members in the organization that must be contacted in the event of an emergency, along with their contact details.
Review and Update the Plan
Once you’ve finished your initial contingency planning, you should frequently review and update the plan. You may encounter technological, operational, or personnel changes that render the plan inefficient.
Contingency Plan Example
Let’s take a brief look at what a business continuity contingency plan would look like:
Scenario: Data is compromised via a hacking incident.
Impact: Sensitive customer details could be leaked.
Preparation: Make sure robust cybersecurity in place against such threats.
Response: Minimize damage, and ensure that data is encrypted in the future.
Another contingency plan example is as follows:
Scenario: Machine breaks down at manufacturing plant.
Impact: Monthly production targets might not be met.
Preparation: Have spare parts and components in stock for quick repair.
Response: Maintenance team performs repairs, and management develops processes to ensure production can continue.
The Importance of a Contingency Strategy
Creating a comprehensive contingency plan is crucial for the survival of any organization, regardless of its size. The business environment is continually changing and innovating. Therefore, only the businesses that use efficient planning to adapt will survive.
Contingency planning reduces panic, promotes action, and increases your business’s flexibility. When you prepare for the future, you can keep your business running in the face of adversity.
Day-to-day business operations may leave little time for you to work on contingency plans. However, experience has shown that disruptions occur when they are least expected. COVID-19 is a prime example.
Therefore, it’s crucial to always have a contingency plan in place. Contact Synario today to find out more information about our financial modeling software and contingency planning services.