Contingency planning is a management tool that involves all parts of an organization. It can help ensure timely and effective humanitarian aid to those who need it most.
Making a contingency plan involves making various decisions as an organization before an emergency happens. These decisions range from how to manage human and financial resources, how to best coordinate internally and with partners, and what communications procedures to put in place.
The contingency planning process can be broken down into three simple questions: What is going to happen? What are we going to do about it? What can we do ahead of time to get prepared?
It is often used when there is a specific threat or hazard which is likely to impact an organization. But it is also important to consider less likely scenarios and develop contingency plans accordingly.Contingency planning must be a collaborative effort. And plans must be linked to the plans, systems and processes of governments,
What Is Contingency Planning?
The term contingency planning refers to the process of preparing a plan to respond to any risks or unexpected events that might affect an organization. Contingency planning starts with a thorough risk assessment to identify any risks and then develop a contingency plan to resolve them or at least mitigate their negative impact.
Contingency planning takes many shapes as it’s used for helping businesses and projects across industries. Even governments use contingency plans to prepare for disaster recovery or economic disruption, such as those caused by natural disasters.
What Is a Contingency Plan?
A contingency plan is an action plan that’s meant to help organizations mitigate the negative effects of risks. In simple terms, a contingency plan is an action plan that organizations should execute when things don’t go as expected.
Benefits of Contingency Planning
- Saves time: Management is not stopping to develop a plan. All they need to do is assess the situation and implement the contingency plan.
- Saves money: Downtime for a business is costly. Contingency plans limit the costs of being forced on the sideline.
- Quick recovery time: Contingency plans redirect everyone so what they are doing is productive despite the adverse incident.
- Minimizes damages: A contingency plan can reduce the effects of a disastrous situation that would otherwise lead to massive damages to the business’s property and equipment.
- Avoid negative press: When things go wrong, the press can get wind of it, which can be negative publicity for the company. Contingency plans keep the business running with minimal impact on operations.
How To Create a Contingency Plan in 7 Steps
Step 1. Create a Policy Statement
A policy statement is the outline of the authorization that exists to develop a contingency plan. This might be something as simply stating a possible scenario and noting that owners have put this plan in place.
Step 2. Conduct a Business Impact Analysis
This step digs into what would happen if no contingency plan existed. It prioritizes the systems that are imperative to the business functions.
Step 3. Implement Preventative Controls
This step is designed to mitigate any adverse scenario’s impact on the business. The goal is to reduce the costs associated with running the business on a contingency plan basis.
Step 4. Develop Contingency Strategies
These are recovery strategies that help the business ensure that it will recover quickly and efficiently after a disruption occurs. Contingency strategies may be specific to the type of disruption that happens.
Step 5. Write Out the Contingency Plan
This step takes the strategies and writes out an action plan that is designed to overcome the disruption. It is a detailed response that allows the business operation to continue to work.
Step 6. Test and Train Employees
Every contingency plan should be shared with employees well in advance of needing to enact the plan. Employees should be trained on what to do in specific scenarios and help keep the business operations running as smoothly as possible.
Step 7. Maintain the Plan
Keep the plan updated based on current systems and organizational changes. You don’t want to implement the plan and then run into a hiccup because a key employee is no longer with the firm or the system doesn’t allow you to do what you want to do.
Business Contingency Plans
A business contingency plan is an action plan that is used to respond to future events that might or might not affect a company in the future. In most cases, a contingency plan is devised to respond to a negative event that can tarnish a company’s reputation or even its business continuity. However, there are positive contingency plans, such as what to do if the organization receives an unexpected sum of money or other project resources.
The contingency plan is a proactive strategy, different from a risk response plan, which is more of a reaction to a risk event. A business contingency plan is set up to account for those disruptive events, so you’re prepared if and when they arrive.
While any organization is going to plan for its product or service to work successfully in the marketplace, that marketplace is anything but stable. That’s why every company needs a business contingency plan to be ready for both positive and negative risk management.
FAQs
What is the purpose of a contingency plan?
A contingency plan exists to deal with unexpected adverse situations, often disasters that disrupt your ability to run your business.
What is another term for contingency?
Other terms for contingency planning include crisis management, emergency planning and risk management.
What is a good contingency plan?
Good contingency plans address the many possible disasters that may happen. It might address natural disaster scenarios or supply chain issues. A good contingency plan helps you address many different types of disruptions.
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