Have a solid Plan B ready.
Fires, floods, tornadoes – these are things that we often connect with contingency planning.
But what if your main supplier suddenly goes bankrupt?
Or, your entire sales force gets food poisoning at the annual sales conference?
Or, your payroll clerk calls in sick on payroll day?
These things can all cause confusion and disorder if you haven't prepared for them properly. Contingency planning is a key part of this preparation.
As you can see, contingency planning is not just about major disasters. On a smaller scale, it's about preparing for events such as the loss of data, people, customers, and suppliers, and other disruptive unknowns. That's why it's important to make contingency planning a normal part of the way your business works.
The need for contingency planning emerges from a thorough analysis of the risks that your organization faces. It's also useful in thinking about new and ongoing projects: what happens when 'Plan A' doesn't go as expected? Sometimes Plan A simply means 'business as usual.' Other times, with more sophisticated risk management plans, Plan A is your first response to deal with an identified risk – and when Plan A doesn't work, you use your contingency plan.
Use these principles in your risk assessment process:
Identify risks – For each of these functions, conduct a Risk Analysis to identify the various risks that your business may face. What has the potential to significantly disrupt or harm your business?
The end result of a risk analysis is usually a huge list of potential threats: if you try to produce a contingency plan for each, you may be overwhelmed. This is why you must prioritize.
Prioritizing risks – One of the greatest challenges of contingency planning is making sure you don't plan too much. You need a careful balance between over-preparing for something that may never happen, and adequate preparation, so that you can respond quickly and effectively to a crisis situation when it occurs.
Risk Impact/Probability Charts help you find this balance. With these, you analyze the impact of each risk, and you estimate a likelihood of it occurring. You can then see which risks require the expense and effort of risk mitigation. Business processes that are essential to long-term survival – like maintaining cash flow, staff support, and market share – are typically at the top of the list.
Note that contingency planning isn't the only action that emerges as a result of risk analysis – you can manage risk by using existing assets more effectively, or by investing in new resources or services that help you manage it (such as insurance). Also, if a risk is particularly unlikely to materialize, you may decide to do nothing about it, and manage around it if the situation arises.
You should be aware of two common obstacles as you begin your contingency planning process:
Remember these guidelines when it's time to prepare your contingency plan:
Disaster recovery specifics are beyond the scope of this article. For more information on this topic, listen to our Expert Interview with Kathy McKee, 'Leading People Through Disasters'.
After you prepare the contingency plan, you need to do several things to keep it practical and relevant – don't just create a document and file it away. As your business changes, you'll need to review and update these plans accordingly.
Here are some key steps in the contingency plan maintenance process:
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 materialize.
Contingency planning requires an investment of time and resources, but if you fail to do it – or if you do it poorly – the costs could be significant if a disaster happens.
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