What is a business contingency plan?
The contingency plan sets out the action plans to be followed in response to future events that may or may not affect a company in the future. Most of the time, these are negative contingencies that affect all or certain areas of the company.
The contingency plan helps to maintain a company’s reputation and even the continuity of the business. However, there are also positive contingency plans, such as in the case of an organisation receiving an unexpected amount of money or other resources.
Contingency planning is an important complement to the business plan. Sometimes, unexpected changes and risks arise in a company. The more a manager prepares for these risks, the more effective their organisation will be. Contingency planning applies to any company.
How to develop a contingency plan
To develop a good contingency plan, follow these steps:
- Identify and prioritise critical resources. Based on research and interviews, list your crucial resources, such as equipment, tools, facilities, etc., and prioritise this list from most important to least important.
- Identify risks and unexpected situations, both negative and positive. This may involve developing a risk management plan that covers everything related to risk identification, assessment, avoidance, and mitigation.
- Detect vulnerabilities based on the risks identified. This involves meetings and interviews with teams, executives, and stakeholders to get a complete picture of what events could compromise your resources; hire an external consultant, if necessary.
- Develop a contingency plan for each identified risk, starting with the most critical to your business. The plan should include the steps necessary to resume normal business operations, considering communications, people’s responsibilities, deadlines, etc.
- Implement the plan to ensure that the entire organisation is aware of it and can easily consult its content. A contingency plan is not effective if it has not been communicated properly. This may involve training courses for the staff involved.
- Scorecard with critical indicators or KPIs to monitor the contingency plan. The scorecard can help identify problems and resolve them to ensure that your contingency plan is a success. Which, considering that it is your plan B, is equivalent.
- Review and maintain the plan to reflect changes in the organisation. As new employees, technologies and resources come on board, the contingency plan must be updated to manage them.