Importance of Contingency Planning

Every business is impacted by events, and a poor response to those events could result in the loss of the business. So what’s the solution for such situation? It’s contingency planning.

Contingency planning is developing responses in advance for various situations that might impact business. Although negative events probably come to mind first, a good contingency plan should also address positive events that might disrupt operations – such as a very large order, multiple orders at a time etc.

How does it work?

There are 4 steps to plan contingency:

1. Analyze the risk
2. Determine the probability and impact of the risk
3. Develop the process for each risk
4. Monitor it and make required changes

Importance of contingency planning:

A contingency plan is extremely useful if something goes wrong. By identifying potential problems, you’ll be able to take action to prevent them from happening.  A plan will also give clear instructions on what to do if an incident does take place.  Having a written plan will also make sure that anyone can deal with an incident even if the primary responsibility holder isn’t available at the time.

A good contingency plan should include any event that might disrupt operations. Here are some specific areas to include in the plan:

• Natural disasters, such as floods, fires, and earthquakes
• Crises, such as on-the-job injuries, and worksite accidents
• Personnel, such as death of a senior manager, or members going on strike
• Data loss, such as loss due to natural disasters, sabotage, or other criminal action (such as an attack on a website)
• Mismanagement, such as theft, neglect of critical duties, or accidental destruction
• A huge order that requires reallocation of resources

Contingency planning is ignored in many companies. Day-to-day operations are demanding, and the probability of a significant business disruption is small, so it’s hard to make time to prepare a good plan.

However, if you’re proactive in the short term, you’ll help ensure a quicker and more effective recovery from an operational setback in the long term, and you may save your organization from failure in the event that risks emerge.