Enterprises are often defined by how they deal with events that are out of their control. For example, how you react to a disruptive technology or cope with a sudden change in the markets can be the difference between success and failure.

Contingency planning is the art of preparing for the unexpected. But where do you start and how do you separate the threats that could do real harm to your business from the ones that aren’t as critical?

Here are some important definitions, best practices and strong examples to help you build contingency plans for whatever your business faces.

What is a contingency plan?

Business contingency plans, also known as “business continuity plans” or “emergency response plans” are action plans to help organizations resume normal business operations after an unintended interruption. Organizations build contingency plans to help them face a variety of threats, including natural disasters, unplanned downtime, data loss, network breaches and sudden shifts in customer demand.

A good place to start is with a series of “what if” questions that propose various worst-case scenarios you’ll need to have a plan for. For example:

  • What if a critical asset breaks down, causing delays in production?
  • What if your top three engineers all quit at the same time?
  • What if the country where your microprocessors are built was suddenly invaded?

Good contingency plans prioritize the risks an organization faces, delegate responsibility to members of the response teams and increase the likelihood that the company will make a full recovery after a negative event.

Five steps to build a strong contingency plan

1. make a list of risks and prioritize them according to likelihood and severity..

In the first stage of the contingency planning process, stakeholders brainstorm a list of potential risks the company faces and conduct risk analysis on each one. Team members discuss possible risks, analyze the risk impact of each one and propose courses of action to increase their overall preparedness. You don’t need to create a risk management plan for every threat your company faces, just the ones your decision-makers assess as both highly likely and with a potential impact on normal business processes.

2. Create a business impact analysis (BIA) report

Business impact analysis (BIA) is a crucial step in understanding how the different business functions of an enterprise will respond to unexpected events. One way to do this is to look at how much company revenue is being generated by the business unit at risk. If the BIA indicates that it’s a high percentage, the company will most likely want to prioritize creating a contingency plan for this business risk.

3. Make a plan

For each potential threat your company faces that has both a high likelihood of occurring and a high potential impact on business operations, you can follow these three simple steps to create a plan:

  • Identify triggers that will set a plan into action: For example, if a hurricane is approaching, when does the storm trigger your course of action? When it’s 50 miles away? 100 miles? Your teams will need clear guidance so they will know when to start executing the actions they’ve been assigned.
  • Design an appropriate response: The threat your organization prepared for has arrived and teams are springing into action. Everyone involved will need clear, accessible instructions, protocols that are easy to follow and a way to communicate with other stakeholders.
  • Delegate responsibility clearly and fairly: Like any other initiative, contingency planning requires effective project management to succeed. One proven way to address this is to create a RACI chart . RACI stands for responsible, accountable, consulted and informed, and it is widely used in crisis management to help teams and individuals delegate responsibility and react to crises in real time.

4. Get buy-in from the entire organization—and be realistic about cost

Sometimes it can be hard to justify the importance of putting resources into preparing for something that might never happen. But if the events of these past few years have taught us anything, it’s that having strong contingency plans is invaluable.

Think of the supply chain problems and critical shortages wreaked by the pandemic or the chaos to global supply chains brought about by Russia’s invasion of Ukraine. When it comes to convincing business leaders of the value of having a strong Plan B in place, it’s important to look at the big picture—not just the cost of the plan but the potential costs incurred if no plan is put in place.

5. Test and reassess your plans regularly

Markets and industries are constantly shifting, so the reality that a contingency plan faces when it is triggered might be very different than the one it was created for. Plans should be tested at least once annually, and new risk assessments performed.

Contingency plan examples

Here are some model scenarios that demonstrate how different kinds of businesses would prepare to face risks. The three-step process outlined here can be used to create contingency plans templates for whatever threats your organization faces.

A network provider facing a massive outage

What if your core business was so critical to your customers that downtime of even just a few hours could result in millions of dollars in lost revenue? Many internet and cellular networks face this challenge every year. Here’s an example of a contingency plan that would help them prepare to face this problem:

  • Assess the severity and likelihood of the risk: A recent study by Open Gear showed that only 9% of global organizations avoid network outages in an average quarter. Coupled with what is known about these attacks—that they can cause millions of dollars in damage and take an immeasurable toll on business reputation—this risk would have to be considered both highly likely and highly severe in terms of the potential damage it could do to the company.
  • Identify the trigger that will set your plan in action: In this example, what signs should decision-makers have watched for to know when a likely outage was beginning? These might include security breaches, looming natural disasters or any other event that has preceded outages in the past.
  • Create the right response: The organization’s leaders will want to determine a reasonable recovery time objective (RTO) and recovery point objective (RPO) for each service and data category their company faces. RTO is usually measured with a simple time metric, such as days, hours or minutes. RPO is a bit more complicated as it involves determining the minimum/maximum age of files that can be recovered quickly from backup systems in order to restore the network to normal operations.  

A food distribution company coping with an unexpected shortage

If your core business has complex supply chains that run through different regions and countries, monitoring geopolitical conditions in those places will be critical to maintaining the health of your business operations. In this example, we’ll look at a food distributor preparing to face a shortage of a much-needed ingredient due to volatility in a region that’s critical to its supply chain:

  • Assess the severity and likelihood of the risk: The company’s leaders have been following the news in the region where they source the ingredient and are concerned about the possibility of political unrest. Since they need this ingredient to make one of their best-selling products, both the likelihood and potential severity of this risk are rated as high.
  • Identify the trigger that will set your plan in action: War breaks out in the region, shutting down all ports of entry/exit and severely restricting transport within the country via air, roads and railroads. Transportation of their ingredient will be challenging until stability returns to the region.
  • Create the right response: The company’s business leaders create a two-pronged contingency plan to help them face this problem. First, they proactively search for alternate suppliers of this ingredient in regions that aren’t so prone to volatility. These suppliers may cost more and take time to switch to, but when the overall cost of a general production disruption that would come about in the event of war is factored in, the cost is worth it. Second, they look for an alternative to this ingredient that they can use in their product.

A social network experiencing a customer data breach

The managers of a large social network know of a cybersecurity risk in their app that they are working to fix. In the event that they’re hacked before they fix it, they are likely to lose confidential customer data:

  • Assess the severity and likelihood of risk: They rate the likelihood of this event as high , since, as a social network, they are a frequent target of attacks. They also rate the potential severity of damage to the company as high since any loss of confidential customer data will expose them to lawsuits.
  • Identify the trigger that will set your plan in action: Engineers make the social network’s leadership aware that an attack has been detected and that their customer’s confidential information has been compromised.
  • Create the right response: The network contracts with a special response team to come to their aid in the event of an attack and help them secure their information systems and restore app functionality. They also change their IT infrastructure to make customer data more secure. Lastly, they work with a reputable PR firm to prepare a plan for outreach and messaging to reassure customers in the event that their personal information is compromised.

The value of contingency planning 

When business operations are disrupted by a negative event, good contingency planning gives an organization’s response structure and discipline. During a crisis, decision-makers and employees often feel overwhelmed by the pile-up of events beyond their control, and having a thorough backup plan helps reestablish confidence and return operations to normal.  

Here are a few benefits organizations can expect from strong contingency plans:

  • Improved recovery times: Businesses with good plans in place recover faster from a disruptive event than companies that haven’t prepared.  
  • Reduced costs—financial and reputational: Good contingency plans minimize both financial and reputational damage to a company. For example, while a data breach at a social network that compromises customer information could result in lawsuits, it could also cause long-term damage if customers decide to leave the network because they no longer trust the company to keep their personal information safe.
  • Greater confidence and morale: Many organizations use contingency plans to show employees, shareholders and customers that they’ve thought through every possible eventuality that might befall their company, giving them confidence that the company has their interests in mind.

Contingency plan solutions

IBM Maximo Application Suite is an integrated cloud-based solution that helps businesses respond quickly to changing conditions. By combining the power of artificial intelligence (AI) , Internet of Things (IoT) and advanced analytics, it enables organizations to maximize the performance of their most valuable assets, lengthen their lifespans and minimize costs and downtime.

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What Is Contingency Planning? [+ Examples]

Flori Needle

Published: January 13, 2023

The COVID-19 pandemic has shown, more than ever, the importance of being prepared with a contingency plan for the unexpected, especially when it comes to business continuity.

business professional creating a business contingency plan

While some unexpected interruptions can be due to situations outside of your control, some issues arise that may be caused by internal errors. Unexpected problems can also be positive, like a sudden influx of interest in a new product.

Download Now: Free Contingency Plan Template

Regardless of the scenario, it's essential to prepare for everything, and contingency planning helps you do so. This post will explain what contingency planning is, outline the steps you can follow to create your own plan, and give examples that you can use for inspiration.

  • Contingency Planning
  • Business Contingency Plan
  • Making a Contingency Plan
  • Contingency Plan Timeline
  • Contingency Plan Example

Contingency Plan Definition

What is a contingency plan? Simply put, a contingency plan is an action plan designed to help organizations respond to a potential future incident. Think of it as a backup plan, or plan B to guide organizations through a worst-case scenario.

Contingency plans are helpful for all types of organizations, from businesses to non-profits, to government organizations. While these scenarios may never come to fruition, it’s important to have a plan in place so that your team isn’t panicking or scrambling to deal with an unfavorable event at the last minute.

What is contingency planning?

Contingency planning is a proactive process of creating a strategy to help you prepare for any scenario that can affect your business, regardless of the likelihood of its occurrence.

These plans shouldn't focus solely on situations that may harm your business. For example, you may experience a significant increase in revenue during a specific period due to changes in market behavior. This is a good scenario, but you will still need to adapt your operations to scale and appropriately meet the new demands of your growing audience.

Contingency Planning vs. Crisis Management

Contingency planning is also different from crisis management , as it is not a reaction to something that has already happened but more so a plan for if and when something may happen. However, a contingency plan can help you with crisis management when issues arise.

Contingency Planning vs. Risk Management

Risk management is the identification, mitigation, and assessment of potential risks that may affect your organization. This process helps an organization prevent losses before they occur and aids in assessing whether or not certain risks are worth taking. Contingency planning can be a component of risk management since that process helps organizations survive these potential risks.

To ensure your business is prepared for everything, it's crucial to understand how to create a contingency plan.

What is a business contingency plan?

A business contingency plan is a strategy that outlines the steps your business’ teams will take in the event of a crisis occurring. It is essentially the backup plan that goes into action when the worst-case scenario occurs. The goal of your contingency plan is to help your business stay up and running after an issue arises.

Business Continuity Plan vs. Contingency Plan

Although their names vary by few letters, business continuity and contingency plans are different concepts. Continuity is the ability of your business to continue functioning after an incident that has disrupted operations occurs. A contingency plan is an action plan that goes into place if an incident were to happen.

Contingency plans can significantly impact whether your business can achieve continuity. Being able to react and take action during a crisis can dictate whether or not your business can emerge from the other side and continue normal business operations.

You can think of it like this: your continuity plans contain five sections: program administration, governance, business impact analysis, strategies and requirements, and training and testing. If your business also uses contingency plans, it could be part of the strategies and requirements section, which dictates how your business will respond to a crisis if it occurs.

Contingency Planning: How to Make a Business Contingency Plan

Creating a contingency plan is responding to the question of "What if?"

What if your storefront floods? Or what if your supplier goes out of business? The responses to the what-ifs are contingency plans. These scenarios aren't necessarily going to happen, but if there is a possibility that they'll affect your business, you're prepared if they do.

Below we'll discuss the steps that go into contingency planning.

Contingency Planning in 7 Steps

1. identify critical business functions..

This first step is the most important aspect of your planning, as it sets the tone for why your plans need to exist in the first place.

During this phase, identify all critical areas essential to keeping your business up and running every day. As these operations are imperative to success, you need to have plans to ensure that these operations continue, regardless of whatever scenarios arise.

You can think of it like this: these critical areas keep your business up and running on a day-to-day basis. Other areas are important, but these are the main functions that keep you afloat. Given this, you want to be prepared for anything and everything that may happen that can affect the critical areas, whether positive or negative. Contingency planning is exactly that.

Identifying these areas helps you move on to the next step as you begin brainstorming possible scenarios that can impact them.

2. Conduct a scenario assessment.

Once you've identified the critical operations of your business, you'll want to conduct a scenario assessment to identify situations that will affect these functions and put stress on your day-to-day operations.

For example, if your business operates out of a storefront, keeping your storefront up and running is a critical area of your business's success. Maybe you launch a new product that attracts more interest than you thought, and you need to deal with higher in-store traffic and a lack of products to satisfy the market. While it is a positive situation that will draw in more revenue, it can still have negative repercussions for your business if you don't deal with it when it happens.

You can think of this stage as similar to a risk assessment, but the possibilities are positive and negative. It may be helpful to meet with people who work in these critical areas and understand what they think may cause interruptions to their job duties and barriers to their success. Ask them how they feel situations will impact them and how they would deal with each scenario.

If you come up with a long list of threats, you can prioritize them based on their likelihood of occurring and how significant their impact would be on your business.

3. Create contingency plans for each scenario.

During this phase, you'll create contingency plans. Begin with the highest priority "threats," or those most likely to occur and most likely to cause significant stress to your business.

Outline the scenarios, people to inform, and the roles and responsibilities involved parties will have when they respond. We'll go over an example below, but a helpful template to follow can be:

  • Outlining the scenario,
  • Determine the probability of it occurring,
  • Explain how you'll prepare ahead of time,
  • Detail what the response will be if and when it happens.

Once you've created your plans, distribute them to key stakeholders in each scenario, so everyone understands what they are responsible for and can prepare ahead of time.

4. Get your plan approved.

Once you’ve come up with a desired plan of action, it’s time to get approval from stakeholders and management. If you’re creating both department-level and company-wide plans, this is especially important. Your plan won’t be a success unless there is buy-in from key members of your team and management. Once all parties agree that the course of action described in the contingency plan works for everyone, you can move forward with confidence.

5. Share the plan with your team.

Once your plan is approved, it’s time to distribute it. Putting it in a shared folder accessible to everyone creates transparency and makes it readily available if the time comes.

Make sure the parties involved know what they’re responsible for in the plan, that way you can execute the plan seamlessly should the worst-case scenario occur.

6. Test your plans.

As with all plans, it's essential to continuously test (more on that in the next section) and update them over time. As businesses scale and change, your business needs will likely change, and specific scenarios will no longer have as significant of an impact. There may also be new scenarios to plan for that you hadn't anticipated or thought of when you were a smaller operation.

It can be helpful to create a timeline that you'll use to spend dedicated periods reviewing your plans, testing them, and communicating with the necessary stakeholders about any changes you've made to the plans.

7. Update your plan as needed.

Consider your contingency plan a work in progress. You’ll need to adapt it as new risks arise and to ensure it still makes sense for your business needs. Whenever a new manager or executive joins the team, be sure to share it with them as needed so they know what (if anything) is expected of them.

Contingency Planning Timeline

As planning is always an involved process, you may be wondering how much time you should devote to each step. Let's discuss a timeline below.

Week One: Identify Key Operations

Give yourself about a week to identify the operational areas essential for business function. You likely already know what these areas are, but you want to do enough research to identify them all.

Weeks Two & Three: Brainstorm Scenarios

Take two to three weeks to brainstorm the scenarios you're going to create plans for. Spend as much time as possible speaking to the necessary stakeholders to understand their ideas about the scenarios and how they'd like them dealt with. You'll want to conduct probability assessments and market research to understand if your competitors have ever dealt with something similar. You want to make sure you have all the necessary information before drafting your plan, so this step should be the longest.

Week Four: Draft Plan

Give yourself a week to draft your plans. The first two steps should give you all the information you need, so the third step is simply fine-tuning your research and creating the final plan. You can also share what you've created with your stakeholders and iterate on what you have based on their feedback.

The final step to creating your plan, maintaining and testing, is a continuous effort. As mentioned above, your business will likely be impacted by different things at different times, so it's always important to review plans and ensure they still relate to your needs. For example, maybe you plan to do quarterly reviews and training so new hires, and existing employees, are all on the same page.

Contingency Planning Example

business contingency plan steps

It may be helpful to have an example of a contingency plan, so we'll go over one below. The examples are of a positive and negative situation, so you can get a sense of how a plan applies to both.

Contingency plan example

Contingency Planning Mistakes to Avoid

Even with the best intentions, your contingency plan may get off to a rocky start. Here are some common mistakes to avoid when creating one of your own.

Not securing executive buy-in first.

Before you can get your team or department onboard, you must get buy-in from the executive team. Otherwise, you risk creating a doomed plan from the start.

Get their feedback on potential risks and other factors that may impact guidelines in the plan. Having executive support from the start ensures the plan put forth is approved and also can motivate those at the department level to buy-in as well.

Failure to cover multiple scenarios.

When assessing potential risks and scenarios, it’s important not to cut corners or slack. Scenario planning is key to your contingency plan’s success. All potential risks should be taken into account. You can rank them by likelihood, but you should by no means leave less likely events out. Otherwise, you leave yourself vulnerable should the event happen.

Think about how many businesses were affected by supply chain issues during the pandemic. Most probably never predicted such a catastrophe, but the ones that had a plan in place for such an obstacle were better prepared.

Set it and forget it.

It’s really easy to get comfortable once your contingency plan is in place — after all, if you did your due diligence from the start, you’re ready to tackle any obstacle thrown your way.

Unfortunately, it’s not a one-and-done process. A contingency plan should be looked at as a living document and updated as needed. Your business needs will change over time and so will its obstacles and risks.

Create Business Contingency Plan

All in all, contingency plans help you prepare for a host of what-if scenarios, whether they happen or not. As you never want to be caught in a challenging situation, being prepared is the best thing you can do to ensure your business continues to succeed, regardless of whatever happens along the way.

As the saying goes, better safe than sorry .

Editor's note: This post was originally published in November 2021 and has been updated for comprehensiveness.

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Use this contingency plan template to communicate risk, prevention, and mitigation measures in your company.

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What is a contingency plan? A guide to contingency planning

Julia Martins contributor headshot

A business contingency plan is a backup strategy for your team or organization. It lays out how you’ll respond if unforeseen events knock your plans off track—like how you’ll pivot if you lose a key client, or what you’ll do if your software service goes down for more than three hours. Get step-by-step instructions to create an effective contingency plan, so if the unexpected happens, your team can spring into action and get things back on track.

No one wants Plan A to fail—but having a strong plan B in place is the best way to be prepared for any situation. With a solid backup plan, you can effectively respond to unforeseen events effectively and get back on track as quickly as possible. 

A contingency plan is a proactive strategy to help you address negative developments and ensure business continuity. In this article, learn how to create a contingency plan for unexpected events and build recovery strategies to ensure your business remains healthy.

What is contingency planning?

What is a contingency plan .

A contingency plan is a strategy for how your organization will respond to important or business-critical events that knock your original plans off track. Executed correctly, a business contingency plan can mitigate risk and help you get back to business as usual—as quickly as possible. 

You might be familiar with contingency plans to respond to natural disasters—businesses and governments typically create contingency plans for disaster recovery after floods, earthquakes, or tornadoes. 

But contingency plans are just as important for business risks. For example, you might create a contingency plan outlining what you will do if your primary competitors merge or how you’ll pivot if you lose a key client. You could even create a contingency plan for smaller occurrences that would have a big impact—like your software service going down for more than three hours.

Contingency planning vs risk management

Project risk management is the process of identifying, monitoring, and addressing project-level risks. Apply project risk management at the beginning of the project planning process to prepare for any risks that might come up. To do so, create a risk register to identify and monitor potential project risks. If a risk does happen, you can use your risk register to proactively target that risk and resolve it as quickly as possible. 

A contingency plan is similar to a project risk management plan or a crisis management plan because it also helps you identify and resolve risks. However, a business contingency plan should cover risks that span multiple projects or even risks that could affect multiple departments. To create a contingency plan, identify and prepare for large, business-level risks.

Contingency planning vs crisis management

Contingency planning is a proactive approach that prepares organizations for potential emergencies by implementing pre-planned risk mitigation strategies. It involves identifying threats and crafting strategies in advance. 

Crisis management , on the other hand, is reactive, focusing on immediate response and damage control when a crisis occurs. While contingency planning sets the stage for effective handling of emergencies, crisis management involves real-time decision-making and project management during an actual crisis. Both are important for organizations and businesses to maintain their stability and resilience.

Contingency plan examples

There are a variety of reasons you’d want to set up a contingency plan. Rather than building one contingency plan, you should build one plan for each type of large-scale risk or disaster that might strike. 

Business contingency plan

A business contingency plan is a specialized strategy that organizations develop to respond to particular, unforeseen events that threaten to disrupt regular operations. It's kind of like a business continuity plan, but there's one key difference. 

While business continuity plans aim to ensure the uninterrupted operation of the entire business during a crisis, a business contingency plan zeroes in on procedures and solutions for specific critical incidents, such as data breaches, supply chain interruptions, or key staff unavailability. 

A business contingency plan could include:

Strategies to ensure minimal operational disruption during crises, such as unexpected market shifts, regulatory compliance changes, or severe staff shortages.

Partnerships with external agencies that can provide support in scenarios like environmental hazards or public health emergencies.

A comprehensive communication strategy with internal and external stakeholders to provide clear, timely information flow during crises like brand reputation threats or legal challenges.

Environmental contingency plan

While severe earthquakes aren’t particularly common, being unprepared when “the big one” strikes could prove to be catastrophic. This is why governments and businesses in regions prone to earthquakes create preparedness initiatives and contingency plans.

A government contingency plan for an earthquake could include things like: 

The names and information of the people designated to handle certain tasks in advance to ensure the emergency response is quick and concise

Ways to educate the public on how to respond when an earthquake hits

A timeline for emergency responders.

Technology contingency plan

If your business is particularly data-heavy, for example, ensuring the safety and cybersecurity of your information systems is critical. Whether a power surge damages your servers or a hacker attempts to infiltrate your network, you’ll want to have an emergency response in place.

A business’s contingency plan for a data breach could involve: 

Steps to take and key team members to notify in order to get data adequately secured once more

The names and information of stakeholders to contact to discuss the impact of the data breach and the plan to protect their investment

A timeline to document what is being done to address the breach and what will need to be done to prevent data breaches in the future

Supply chain contingency plan

Businesses that are integral parts of the supply chain, such as manufacturing entities, retail companies, and logistics providers, need an effective supply chain contingency plan to continue functioning smoothly under unforeseen circumstances.

These plans hedge against supply chain disruptions caused by events like natural disasters or technological outages and help organizations reduce downtime and ensure real-time operational capabilities. 

A supply chain contingency plan could include:

Secure critical data and systems while promptly notifying key team members, such as IT staff and management, for immediate action.

A predetermined list of essential stakeholders, including suppliers, customers, investors, and authorities, should be contacted to inform them about the disruption and steps being taken.

A detailed timeline is essential for documenting the immediate response and outlining long-term strategies to prevent future disruptions in the supply chain.

Pandemic contingency plan

In the face of a global health crisis, a pandemic contingency plan is vital for organizations in healthcare, retail, and manufacturing. This plan focuses on mitigation strategies to minimize operational disruptions and ensure the safety of employees while maintaining business continuity. 

A pandemic response plan could include:

A comprehensive health and safety protocol for employees, which integrates regular health screenings, detailed risk analysis, and emergency medical support as key components.

Flexible work arrangements and protocols for remote operations and digital communication.

A list of key personnel and communication channels for immediate response and coordination.

Regularly reviewing and adapting the pandemic contingency plan as part of an ongoing disaster recovery plan to address evolving challenges and lessons learned.

How to create a contingency plan

You can create a contingency plan at various levels of your organization. For example, if you're a team lead, you could create a contingency plan for your team or department. Alternatively, company executives should create business contingency plans for situations that could impact the entire organization. 

As you create your contingency plan, make sure you evaluate the likelihood and severity of each risk. Then, once you’ve created your plan—or plans—get it approved by your manager or department head. That way, if a negative event does occur, your team can leap to action and quickly resolve the risk without having to wait for approvals.

1. Make a list of risks

Before you can resolve risks, you first need to identify them. Start by making a list of any and all risks that might impact your company. Remember: there are different levels of contingency planning—you could be planning at the business, department, or program level. Make sure your contingency plans are aligned with the scope and magnitude of the risks you’re responsible for addressing. 

A contingency plan is a large-scale effort, so hold a brainstorming session with relevant stakeholders to identify and discuss potential risks. If you aren’t sure who should be included in your brainstorming session, create a stakeholder analysis map to identify who should be involved.

2. Weigh risks based on severity and likelihood

You don’t need to create a contingency plan for every risk you lay out. Once you outline risks and potential threats, work with your stakeholders to identify the potential impact of each risk. 

Evaluate each risk based on two metrics: the severity of the impact if the risk were to happen and the likelihood of the risk occurring. During the risk assessment phase, assign each risk a severity and likelihood—we recommend using high, medium, and low. 

3. Identify important risks

Once you’ve assigned severity and likelihood to each risk, it’s up to you and your stakeholders to decide which risks are most important to address. For example, you should definitely create a contingency plan for a risk that’s high likelihood and high severity, whereas you probably don’t need to create a contingency plan for a risk that’s low likelihood and low severity. 

You and your stakeholders should decide where to draw the line.

4. Conduct a business impact analysis

A business impact analysis (BIA) is a deep dive into your operations to identify exactly which systems keep your operations ticking. A BIA will help you predict what impact a specific risk could have on your business and, in turn, the response you and your team should take if that risk were to occur. 

Understanding the severity and likelihood of each risk will help you determine exactly how you will need to proceed to minimize the impact of the threat to your business. 

For example, what are you going to do about risks that have low severity but high likelihood? What about risks that are high in severity, but relatively low in likelihood? 

Determining exactly what makes your business tick will help you create a contingency plan for every risk, no matter the likelihood or severity.  

[inline illustration] Business impact analysis for a contingency plan (example)

5. Create contingency plans for the biggest risks

Create a contingency plan for each risk you’ve identified as important. As part of that contingency plan, describe the risk and brainstorm what your team will do if the risk comes to pass. Each plan should include all of the steps you need to take to return to business as usual.

Your contingency plan should include information about:

The triggers that will set this plan into motion

The immediate response

Who should be involved and informed?

Key responsibilities, including a RACI chart if necessary

The timeline of your response (i.e. immediate things to do vs. longer-term things to do)

[inline illustration] 5 steps to include in your contingency plan (infographic)

For example, let’s say you’ve identified a potential staff shortage as a likely and severe risk. This would significantly impact normal operations, so you want to create a contingency plan to prepare for it. Each person on your team has a very particular skill set, and it would be difficult to manage team responsibilities if more than one person left at the same time. Your contingency plan might include who can cover certain projects or processes while you hire a backfill, or how to improve team documentation to prevent siloed skillsets. 

6. Get approval for contingency plans

Make sure relevant company leaders know about the plan and agree with your course of action. This is especially relevant if you’re creating team- or department-level plans. By creating a contingency plan, you’re empowering your team to respond quickly to a risk, but you want to make sure that course of action is the right one. Plus, pre-approval will allow you to set the plan in motion with confidence—knowing you’re on the right track—and without having to ask for approvals beforehand.

7. Share your contingency plans

Once you’ve created your contingency plans, share them with the right people. Make sure everyone knows what you’ll do, so if and when the time comes, you can act as quickly and seamlessly as possible. Keep your contingency plans in a central source of truth so everyone can easily access them if necessary.

Creating a project in a work management platform is a great way of distributing the plan and ensuring everyone has a step-by-step guide for how to enact it.

8. Monitor contingency plans

Review your contingency plan frequently to make sure it’s still accurate. Take into account new risks or new opportunities, like new hires or a changing business landscape. If a new executive leader joins the team, make sure to surface the contingency plan for their review as well. 

9. Create new contingency plans (if necessary)

It’s great if you’ve created contingency plans for all the risks you found, but make sure you’re constantly monitoring for new risks. If you discover a new risk, and it has a high enough severity or likelihood, create a new contingency plan for that risk. Likewise, you may look back on your plans and realize that some of the scenarios you once worried about aren’t likely to happen or, if they do, they won’t impact your team as much.

Common contingency planning pitfalls—and how to avoid them

A contingency plan is a powerful tool to help you get back to normal business functions quickly. To ensure your contingency planning process is as smooth as possible, watch out for common pitfalls, like: 

Lack of buy-in

It takes a lot of work to create a contingency plan, so before you get started, ensure you have support from executive stakeholders. As you create your plan, continuously check in with your sponsors to ensure you’ve addressed key risks and that your action plan is solid. By doing so, you can ensure your stakeholders see your contingency plan as something they can get behind.

Bias against “Plan B” thinking

Some company cultures don’t like to think of Plan B—they like to throw everything they have at Plan A and hope it works. But thinking this way can actually expose your team to more risks than if you proactively create a Plan B.

Think of it like checking the weather before going sailing so you don’t accidentally get caught in a storm. Nine times out of ten, a clear sunny day won’t suddenly turn stormy, but it’s always better to be prepared. Creating a contingency plan can help you ensure that, if a negative event does occur, your company will be ready to face it and bounce back as quickly as possible. 

One-and-done contingency plans

It takes a lot of work to put a contingency plan together. Sometimes when you’ve finished, it can be tempting to consider it a job well done and forget about it. But make sure you schedule regular reminders (maybe once or twice a year) to review and update your contingency plan if necessary. If new risks pop up, or if your business operations change, updating your contingency plan can ensure you have the best response to negative events.  

[inline illustration] The easiest ways to prevent contingency plan pitfalls (infographic)

You’ve created a contingency plan—now what?

A contingency plan can be a lot of work to create, but if you ever need to use it, you’ll be glad you made one. In addition to creating a strong contingency plan, make sure you keep your plan up-to-date.

Being proactive can help you mitigate risks before they happen—so make sure to communicate your contingency plan to the team members who will be responsible for carrying them out if a risk does happen. Don’t leave your contingency plan in a document to collect dust—after creating it, you should use it if need be!

Once you’ve created the plan, make sure you store it in a central location that everyone can access, like a work management platform . If it does come time to use one of your contingency plans, storing them in a centrally accessible location can help your team quickly turn plans into action.

Mastering Contingency Planning: Expert Strategies, Proven Best Practices, and Testing Techniques for Optimal Results

By Joe Weller | May 9, 2023

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Successful organizations must understand potential risks and have contingency plans in place to address them. We’ve assembled expert tips on effective contingency planning and offer practical insights on how to test those contingency plans.

Included on this page, you’ll find the benefits of contingency planning , steps to take to create a contingency plan, examples of contingency plans , and information on a range of exercises your team can do to test its contingency plans.

What Is a Contingency Plan?

A contingency plan is a proactive strategy that outlines the actions a person or entity will take in response to a potential future event. Businesses often develop contingency plans to prepare for risks and mitigate their impact on the business.

What Is Business Contingency Planning?

Business contingency planning is work an organization does to determine how it responds to future events that might affect the business. The goal is to prepare an organization to respond to negative events and mitigate their impact on the business.

A business contingency plan is a written document that outlines an organization’s contingency planning efforts. It typically includes a comprehensive assessment of possible risks to the business and corresponding measures the organization has planned to mitigate these risks, such as legal and budget contingency.

Why Is a Business Contingency Plan Important?

A business contingency plan is crucial for any organization, as it helps them respond quickly and effectively to negative events. With a solid contingency plan in place, companies can minimize damages and continue to thrive even amid challenges.

While an organization might develop a contingency plan for risks to individual projects or general risks to the enterprise as a whole, business contingency plans refer specifically to general risks to the enterprise. This document details all of the most important risks that a business or organization faces.

In recent years, the importance of business contingency plans has increased significantly. With the rise of climate change, natural disasters have become more frequent and disruptive, underscoring the need for organizations to have effective contingency plans. In addition, the ever-growing threat of cybercrime has further highlighted the importance of contingency planning, as businesses increasingly rely on technology to operate.

Luis Contreras

“Before, you might have said, ‘What are the odds of a 100-year flood?’” says Luis Contreras, President and Principal Consultant for AzTech International , a California consultancy that helps organizations manage large, complex projects. “Well, they are happening more often now. ‘What are the odds of a cyber incident?’ Well, they're happening more often.”

Erika Andresen

Many organizations take steps in their risk management programs to try to completely eliminate certain risks. However, it’s almost impossible for any organization to completely eliminate the chance of a risk happening, says Erika Andresen,  a business continuity and resilience expert, author, and founder of EaaS Consulting . Business contingency planning is important, she says, “because your risk management will fail at a certain point.”

The Benefits of a Contingency Plan

Contingency plans offer several benefits to organizations. They enable organizations to respond promptly and effectively to unexpected events, minimize damages, and facilitate a quick recovery. With a contingency plan in place, organizations can take proactive measures to mitigate risks.

Here are some of the primary benefits of having a contingency plan in place:

  • Improves Event Responsiveness: By having a clear plan in place, there is no confusion and individuals know how to react without blindly searching for direction. This enables the organization to take swift and effective action, minimizing response times and ensuring continuity of operations.

Andrew Lokenauth

  • Facilitates Quick Recovery: Organizations with good contingency plans bounce back quickly from negative events. For example, a severe storm or power outage might have a huge effect on a state or metropolitan area, but businesses that have backup generators and other contingency plans can often resume operations quickly. “It's resilience — it's how your company stays a company,” Andresen says. “That's how the company is able to grow and thrive. You've figured out that you're going to have a risk that is going to impact your operations. And then you worked and took the extra step to put in policies and procedures to get yourself back up and running with minimal disruption.”
  • Decentralizes and Disseminates Important Information: Business contingency planning forces organization leaders to gather people to assess the organization’s potential response to various events. This work necessitates the sharing of important information about the company and its operations, resulting in more people knowing how to assist in the company’s response. Accessible, decentralized information is invaluable in a crisis event or when top leaders in a company suddenly leave.“If you have a company with one or two top leaders, then it makes it even more important,” says Lokenauth. “If one person has all the knowledge, when something happens to that one person, how does the company function?”
  • Gives the Company Confidence in Its Operations: When you create effective contingency plans, you boost the confidence of everyone in the company. You instill a sense of trust that the company will respond well in an emergency. Moreover, you enhance confidence in the company’s overall preparedness, foresight, and integrity.

What Does a Contingency Plan Cover?

A contingency plan covers the important risks the organization is monitoring and any possible triggers to those risks. It also outlines the specific actions organization staff will take to respond to them.

A contingency plan often includes the following components:

  • Triggering Events: Identify the events that can make a risk event more likely to happen, such as weather patterns or market conditions.
  • Response Details: Outline specific actions the organization will take in response to a risk event, including preventive measures and mitigation strategies.
  • Organizational Responsibilities: Detail the roles and responsibilities of key personnel within the organization, such as the crisis management team and first responders. This might include a RACI chart that outlines who is responsible, accountable, consulted, or informed about specific response actions.
  • Key Contacts: Include contact information for key people or organizations that will be involved in the response efforts, such as emergency services, suppliers, and customers.
  • Outside Experts: Identify outside experts or consultants the organization might need to engage for help when responding to the risk event, such as legal advisors, public relations firms, or technical specialists.
  • Response Timeline: Include a timeline that details when certain responses need to happen, such as when to activate the crisis management team, notify stakeholders, or implement recovery measures.

Learn more about important components and how to write an effective contingency plan in this all-inclusive guide to writing contingency plans.

How to Develop a Contingency Plan

Developing a contingency plan begins with identifying and assessing potential risks. Next, teams outline an appropriate response to each risk, including specific actions that need to be taken and who will be responsible for executing those actions.

Steps in Business Contingency Planning

To develop an effective contingency plan, businesses need to follow some critical steps. The process starts with identifying and assessing potential risks and creating a response plan. Teams should then be trained on the plan and continually monitor potential risks.

These are the important steps to creating an effective contingency plan:

  • Identify and Assess Risks: Identify potential risks that could have the most significant impact on your organization. This assessment might involve conducting a business risk analysis to evaluate potential threats, vulnerabilities, and consequences. Learn more about this step in the contingency planning process in this comprehensive guide to risk mitigation .
  • Identify Resources: Identify what resources your organization already has that can help with contingency responses. This might include people, tools, or services that can be used to respond quickly to an unexpected event. Gather and coordinate those resources.
  • Create Contingency Plans: Create a contingency plan for each risk that your organization has identified as critical. This plan should outline specific actions that need to be taken, who will be responsible for those actions, and a timeline for executing the plan.
  • Seek Input and Secure Approvals: Get input from stakeholders and people within your organization on your draft contingency plans. Once you’ve gathered feedback, finalize plans and get approval from the organization’s leaders.
  • Share Your Plans: Communicate your contingency plans to all relevant stakeholders within your organization. This includes making sure that everyone understands what the plans are, what their role is in executing the plans, and any necessary training or resources required to implement them.
  • Perform Training Exercises: Train all relevant staff members on the contingency plans, and make sure they understand their roles in executing them. To test the effectiveness of the plans, perform exercises or drills that simulate potential risk events.
  • Monitor Risks and Contingency Plans: ​​Regularly review and assess business risks to ensure that your contingency plans remain effective and relevant. Evaluate whether the current plan provides the best response to potential risks and consider making updates or modifications as necessary.
  • Create New or Adjusted Contingency Plans as Needed: If your monitoring indicates that your contingency plans require adjustments, take action and promptly update them.

Business Contingency Planning Grid Template

Sample Business Contingency Planning Grid Template

Download a Sample Business Contingency Planning Grid Template for  Excel | Microsoft Word

Download a Business Contingency Planning Grid Template for  Excel | Microsoft Word

Download this business contingency planning grid template to assist your team in identifying potential risks to consider in your organization’s business contingency planning. This template provides a comprehensive list of broad risk categories and specific risks within those categories. By using this tool, you can evaluate which risks are relevant to your organization and develop appropriate contingency plans.

Contingency Planning for IT

Contingency planning in IT follows the same basic steps as other organizations. However, it often begins with a contingency planning policy statement , which outlines an organization’s broad approach to contingency planning.

What to Include in a Contingency Planning Policy Statement

A contingency planning policy statement is a document that outlines how an organization will perform contingency planning. It includes details on objectives, roles and responsibilities, resource and training requirements, testing schedules, and data backup and storage plans.

A contingency planning policy statement should include the following components:

  • Objectives: Describe the organization's overall contingency planning objectives — for example, what types of risks the organization is preparing to address and how the organization's contingency planning efforts align with its overall business goals.
  • Roles and Responsibilities: Outline the specific roles and responsibilities for performing contingency planning within the organization. This should include both high-level positions and specific individuals who will be responsible for carrying out different components of the plan.
  • Organizational Functions and Departments: Identify which organizational functions and departments will be responsible for performing contingency planning. This helps ensure that all relevant areas of the organization are involved in the planning process.
  • Resource Requirements: Determine the resources needed to support contingency planning efforts, including funding, personnel, equipment, and other necessary resources.
  • Employee Training Requirements: Develop a plan for training employees on their roles and responsibilities in the event of a contingency situation. This might include both general training on contingency planning concepts and specific training on the organization's specific plan.
  • Schedules of Exercises and Tests: Establish a schedule for conducting exercises and tests of contingency plans to ensure that they are effective.
  • Procedures for Maintaining and Updating: Develop procedures for maintaining and updating contingency plans over time, including regular reviews and updates to reflect changes in the organization's risk landscape or other relevant factors.
  • Data Backup and Storage: Determine how the organization will back up and store all electronic data to ensure that critical information is not lost in the event of a contingency situation.

A Contingency Plan Model for IT

The National Institute of Standards and Technology (NIST) has created SP 800-34, a popular contingency plan guide for IT. The guide outlines the steps and considerations that organizations should take when developing, implementing, and maintaining an effective contingency plan.

The SP 800-34 guide covers the entire contingency planning process, from risk assessment to plan testing and maintenance. It is widely used as a reference by government agencies, private organizations, and security professionals.

IT Preventive Controls

Any organization’s IT contingency plan should include preventive controls. These are measures an organization can take to prevent interruptions to information services or technology.

 Here are some basic IT preventive controls recommended by the NIST for federal information systems:

  • Uninterruptible power supplies (UPS): To provide short-term backup power to all components, appropriate for the size of your system.
  • Fuel-powered generators: To provide power over the longer term.
  • Air-conditioning systems: Establish adequate capacity to prevent failure of components that malfunction when overheated.
  • Fire and smoke detectors: Install in appropriate locations.
  • Fire suppression systems: Install to minimize potential damages.
  • Water sensors: Place in the ceiling and floor of rooms where computer equipment is located.
  • Containers for backup media and vital non-digital records: Ensure they are heat resistant and waterproof.
  • Master system shutdown switch: Make available for emergencies.
  • Off-site storage areas: Use them for backup media, system documentation, and important non-digital records.
  • Technical security controls: This includes management of cryptographic keys.
  • Frequent scheduled backups of data: This includes information on where the backups are stored, onsite and offsite.

Examples of Contingency Plans

Contingency plan examples can help your team understand what to consider in creating a plan and the important components to include.

You can learn more about contingency planning and download blank and example contingency plans.

Business Contingency Planning Best Practices

To improve your organization’s business contingency planning, experts recommend following a number of best practices, such as performing an effective risk assessment, training employees on the plan, and conducting exercises to test the plan.

These are some best practices to follow for effective business contingency planning:

  • Perform Good Risk Assessment and Analysis: Your team should identify the most critical risks through a thorough risk assessment. This includes analyzing the potential impact of each risk and determining which risks require a comprehensive contingency response.
  • Ensure All Team Members Are Aware of Contingency Plans: Contingency plans will not be effective if the employees in your organization are not aware or have only a vague understanding of them. Incorporate contingency planning into employee training and orientation programs, and communicate regular reminders and updates on the plans through team meetings, newsletters, and other internal communication channels.
  • Train Staff and Conduct Regular Drills: Your organization should train all employees responsible for specific tasks in the plan. Conducting exercises or drills where employees simulate a risk event scenario can help teams identify potential gaps or issues in the plan and improve its effectiveness. Many organizations will complete a business continuity or contingency plan, then “put it on a shelf and say, ‘OK, I did it.’ No, you didn’t,” says Andresen. “You haven't done it. You don’t know what’s in it. You don’t have the muscle memory for what the procedures are. When the disaster happens, you don’t want to be saying, ‘Hold on, let me flip through the pages.’ That's another integral part to business continuity planning or contingency planning: to train the plan and exercise the plan. That’s how you figure out if the plan works.”
  • Continually Review Plans and Make Necessary Adjustments: Drills and exercises are crucial to contingency planning, as they allow organizations to identify which contingency are ineffective and need to be revised. It is essential to modify plans when necessary, whether due to changing risks or other factors. After conducting a drill on a contingency plan, Andresen advises, “Go back and relook at the plan and say, ‘OK, we did this well. This didn't work. This needs to be improved.’” By doing so, teams can ensure that their contingency plans actually work. “This is why this needs to be revisited continuously so that the plan is not just a heavy paperweight,” says Andresen. “Don't break your arm patting yourself on the back that you've accomplished making the plan — actually do something with it.”

Types of Exercises to Test Your Contingency Plan

Conducting a variety of drills and exercises for contingency plans is essential for organizations that want to be prepared for any potential risks. The following chart outlines different types of exercises that can test and improve your contingency plans.

Common Contingency Planning Pitfalls to Avoid

To achieve effective contingency planning, it is important to be aware of common challenges and pitfalls. One such challenge: organizations not allocating sufficient resources to planning and executing responses that are part of the plans.

These are some of the most common challenges and pitfalls to avoid:

  • Lack of Resources Devoted to Contingency Planning and Actions: To create effective contingency plans, organizations must allocate staff time and resources for both planning and response. This includes significant resources to execute the actions required in response to a risk event. Neglecting these necessary resources can result in ineffective contingency plans and costly responses to risks.
  • Lack of Buy-in From Organizational Leaders: Lack of buy-in from organizational leaders often results in a lack of resources. Leaders who don’t value contingency planning might not provide the necessary funding, time, or attention to ensure the plans are effective. This can result in plans that are incomplete, inadequate, or not tested or updated regularly. “Every level of employee is going to look at leadership and see if they take this seriously,” Andresen says. “Is this some simple extra duty? If leadership is saying, ‘No, this is really important, and this is why this is important,’ they get the employees behind that. Then the employees are going to take it seriously.”
  • Bias Against Plan B Thinking: Contingency planning assumes that at some point, an organization’s mission is going to fail. Unfortunately, some organizational leaders have a bias against this, as they perceive it as thinking about a Plan B. However, these leaders must work to understand that having contingency plans is vital for the organization’s future and doesn’t reflect a lack of confidence in Plan A.
  • One-and-Done Contingency Plans: According to Andresen, organizations often develop contingency plans because they are deemed useful or someone within the organization encourages their development. However, these contingency plans are often completed, then disregarded. In order for contingency plans to be effective, organizations must share them widely, train their employees on them, and continuously adapt them to changing circumstances.

Effective vs. Ineffective Contingency Planning Example

The table below demonstrates the varying outcomes between a well-considered contingency plan and one that is less so. The consequences of these differing results can be significant for both the organization and the community.

Resource and Environment at Risk: An oil production facility has above-ground oil flowlines that run for 7,000 feet. The facility is located half a mile west of a major creek and six miles north of a river. The creek flows into the river, which flows into a town of 150,000 people located 12 miles away.

Contingency Plan Purpose: Detect and mitigate any significant oil leak from the facility's flowlines, with the goal of minimizing environmental damage. The plan places a special emphasis on preventing oil from reaching the nearby creek or river.

Business Contingency Plan vs. Business Continuity Plan

A business continuity plan and a business contingency plan share some similarities, but a business continuity plan primarily focuses on how an organization can continue operations during an emergency, whereas a contingency plan addresses a broader range of risks.

  • Business Continuity Plan: A business continuity plan outlines the steps an organization will take to maintain normal operations following a major and disruptive event, such as an earthquake, fire, or major data breach.
  • Business Contingency Plan: A business contingency plan covers a broader range of risks that an organization might face and outlines how the organization plans to respond. These risks can include potential major disruptions or events that might not directly affect operations but still require an effective response.

Business Contingency Plan vs. Project Risk Management Plan

Business contingency plans and project risk management plans both identify potential risks and determine ways to respond to them. The former focuses on risks to the entire organization, while the latter focuses on risks to a particular project.

In a project risk management plan , teams identify and assess possible risks to a specific project. It then determines how project leaders can respond to, eliminate, or mitigate those risks.

A business contingency plan identifies potential threats to an organization's ability to continue operating. It assesses risks that could temporarily or permanently halt operations, and then outlines plans to mitigate or eliminate those risks.

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Contingency planning: 4 steps to prepare for the unexpected

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What is contingency planning?

Why is contingency planning important, 4 steps to develop a contingency plan.

Most days at work are business as usual — you hope. Unfortunately, there are also days where nothing seems to go right. Sometimes, these hiccups are just part of running an organization. And some days, they can be a major disruption in your work.

Because your clients and customers are relying on you to deliver as promised, it’s critical that you have a backup plan in place. There’s no way to prevent all mishaps from occurring, but you can minimize their impact with a little strategic planning .

Rather than waiting for the worst-case scenario to play out, companies — and individuals — can put together a contingency plan. This helps to ensure that normal business operations continue as smoothly as possible.

Learn what a business contingency plan is, why you should have one, and how to start planning in this article.

Contingency planning is a part of a business’ risk management strategy. It’s how companies foresee potential disruptions to the business. 

Contingency planning is an action plan put in place to help individuals, teams, and organizations minimize disruption. In common terms, we think of this as “plan B.” Contingency plans are less about how to mitigate negative events and more about proactively developing problem-solving skills.

While traditionally, contingency planning have been an area of focus for managers and organizations, there are many benefits for individuals as well.

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To understand contingency planning, it’s best to take a broad view. Sure, when companies have a crisis management plan in place, everyone sleeps a little better at night. It’s nice to know that you’ll know what to do if something happens.

But in life — as well as in business — the only real constant is change. As Tina Gupta, VP of Talent and Employee Experience at WarnerMedia puts it , “Change is not something to solve for.” Fear of change and uncertainty leads people to hide from it, interpreting every bit of rough air as a sign of an impending crash.

When you embrace a future-minded perspective , you no longer have to be afraid of uncertainty. Contingency planning becomes a strategy to be proactive instead of reactive . It’s an exercise in looking for ways to thrive instead of survive. 

BetterUp calls this type of person a future-minded leader . Rather than running from potential threats or pretending everything is fine, they cultivate an agile mindset . These people combine optimism, pragmatism, and the ability to envision the future (or, what positive psychologists call prospection ).

Contingency planning example:

Let’s look at how WarnerMedia has been able to embrace contingency planning as a tool to build a psychologically safe environment.

Conducting a risk assessment

Before you can create a contingency plan, you need to identify the risks that may impact your business. The best way to do this is with the support of your team. Hold a brainstorming session where you can talk through recent experiences, upcoming initiatives, and common pitfalls.

This type of risk assessment can't protect you from being surprised. Tomorrow will hold unexpected events, many of which never happened before in your organization (months-long pandemic shutdowns anyone?) Instead think of this assessment as surfacing the things you can prepare for and opening up everyone's imagination to the range of possible obstacles and outcomes. This will prime the pump for awareness, a flexible mindset, and solution-seeking orientation.

Don’t make the mistake of limiting the meeting to just managers. Your entry-level employees and individual contributors will have a lot of insight as to what could happen — and how to handle it.

Companies often make strategic planning an annual event, but you should review your contingency plan more frequently. Risk assessment should ideally be a natural part of planning for every new initiative.

contingency-planning-team-writing-on-a-whiteboard

Here are 4 steps to develop a contingency plan for your team:

1. Identify the triggers

What are the risks? The first step in contingency planning is knowing which scenarios you’re preparing for. It’s impossible to predict everything, but chances are you can think of one (or ten) worst-case scenarios that would throw operations off.

Put these scenarios in order of likelihood. The most probable and important ones will form the backbone of your contingency plan.

2. Examine the situation

In your hypothetical scenario, what would be the most likely course of action? Write that down, but be sure to ask: is it the best course of action? If your new plan is significantly different from what you’ve done before, you’ll want to talk it over with your leaders.

Get your team involved in this stage of the process. One of the benefits of planning in advance is that you have time to brainstorm responses. If the disruption has happened before, ask them what they did to resolve it and what they wish they had done differently.

3. Determine who needs to know

Once you’ve created a viable plan, determine who the stakeholders are. Identify who needs to know as soon as plans change and who will be responsible for kicking plan B into gear. If anyone needs to authorize purchases, provide access to resources, or otherwise support the plan, make sure that they know as well. 

contingency-planning-team-having-a-discussion

4. Practice

If you can, do a practice run of your disaster recovery plan. The specifics will vary depending on the “disaster,” but running through the plan is a useful exercise. It will help you spot areas that you might not be able to predict in advance.

For example, when the coronavirus pandemic sent millions of workers into lockdown, companies that already had remote work policies in place were in the ideal position for the change. Companies that relied on brick-and-mortar workplaces had to quickly develop strategies to ensure remote team members had the technology and support they needed to work from home for an extended period of time. 

How to maintain a contingency plan

In general, it’s a good idea to review your contingency plan on (at minimum) an annual basis. However, there may be other events that might trigger a review of your recovery strategies.

There are three main parts to your plan: the trigger (or unexpected event), the planned course of action, and the people involved. If any of these change, you’ll want to update your plan. 

For example, moving to a new system, platform, or workflow would cause a change in both your Plan As and Plan Bs. If you hire for a new role that sits between functions, that may change the people involved.

Final thoughts

Your business continuity plan isn’t just an exercise in preparedness. It’s an opportunity to help your teams learn how to become more agile and creative problem solvers.

Everyone, from a project management team developing a contingency plan for rolling out a new sales incentive, an IT team planning for a new system to go live, or a manager coaching an employee through creating a contingency plan for meeting work deadlines, needs to develop this skill. In a time of uncertainty and constant change, thinking through possible problems and alternatives in advance is part of life. 

Gupta of WarnerMedia says that empowering her team through coaching has helped them "move from overwhelm to thriving through change." When they trust themselves, the company, and the plan, employees become more confident. They’re more willing to take risks and trust each other.

When things go awry, your plan won’t just minimize the potential impact. It will empower your team to thrive in uncertainty as they respond to whatever gets thrown their way.

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Allaya Cooks-Campbell

BetterUp Associate Learning Experience Designer

It depends. Understanding the contingency theory of leadership

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A practical guide to creating a contingency plan

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The vast majority of failed projects and bankrupt companies had a plan and followed it. So why do these projects and companies end up failing?

Unexpected things happen that companies don’t plan for, and many fail to adapt in time.

The key: having a sound contingency plan. A contingency plan is all about expecting the unexpected and preparing to deal with worst-case scenarios ahead of time. This article will cover why you need a contingency plan, and walk you through step-by-step instructions for creating one. We’ll also provide a contingency planning template you can implement and use on monday.com immediately.

What is a contingency plan?

A contingency plan is a predefined set of actions that you will implement in response to specific future events that put your project or business at risk.

A simple example of a contingency plan is to back up all your website data. That way, if your website gets hacked, it will be easy to restore the data after regaining access and changing passwords.

Without that backup, the team might have to recreate the entire website from memory or build a website from scratch . That’s a significant expense and can mean several extra days (or weeks!) of downtime.

A contingency plan is about managing and lowering risk and setting yourself up for speedy disaster recovery.

What are the two types of contingencies in project management?

monday.com makes budget contingency planning visual

There are two types of contingencies that you should plan for: budget contingency & schedule contingency.

  • Budget contingency is an additional amount of money that you allocate to your budget, so you can cover extra costs that might come up as the project progresses. If you don’t have a contingency budget, you might run into an unexpected cost that could send you over budget and risk the profit margin of your project.
  • Schedule contingency is an additional amount of time that you bake into your project schedule, to allow for any unexpected delays or hiccups in your project progress. Without schedule contingency, you risk running over your project deadlines and disappointing stakeholders.

Contingency plan examples

Here are a few examples of how contingency planning could help save the day, no matter what happens:

Project contingency plan

Imagine that a key team member unexpectedly leaves the project. If you were contingency planning for this scenario, you might outline the following steps you could follow if you lost a key project team member:

  • Identify who will take over the tasks of the departing team member, and what tasks still need doing
  • Assess if any additional resources will be needed (such as an additional part-time project member from another team)
  • Provide training sessions for other team members to ensure they can step in effectively
  • Notify any stakeholders about the change and how it will be managed to minimize disruption and offer reassurance.

Business continuity plan

How about if a natural disaster disrupted operations at your primary office location? Could your business cope? With a continuity plan in place, you’ll turn things around quickly:

  • Make sure all your employees have access to the necessary tools and systems so that they can work remotely if necessary
  • Regularly back up all essential data to the cloud, and have a data recovery plan in place, in the event of loss of the hardware in your primary office
  • Identify backup office space or plan for remote work options if the primary location becomes inaccessible
  • Define communication channels that you’ll use in the event of a major disruption so that you can reach your employees to provide updates and instructions on how to proceed

Supply chain contingency plan

Do all your logistics depend on a few key suppliers? Then you should have a supply chain contingency plan in place, in case of unexpected production or shipping delays.

  • Have more than one supplier for critical components, so this becomes less of a business risk.
  • Maintain a buffer stock of your essential components, so that production won’t be held up by supplier delays
  • Find a shipping company that offers expedited shipping options in case you have an urgent need
  • Update your supplier contract to include penalties for delays and a procedure for resolving any disputes

Why contingency planning is important

contingency planning is easier with monday.com boards

Murphy’s Law specifies that anything that can go wrong will go wrong. And any experienced project planner knows how true that is! Contingency planning can make or break your business:

It helps mitigate risk.

Contingency planning helps to identify potential risks and get ahead of them with a proactive plan. That way, even when things go wrong, you can minimize the disruption to operations and reduce your financial losses.

It makes your business more resilient.

Having a contingency plan in place enables you to respond to the unforeseen more effectively, adapt to changing conditions, and recover from setbacks more efficiently.

It keeps you compliant.

In many industries, contingency planning is mandated by regulatory requirements, so you’ll need these plans in place to avoid penalties and maintain good legal standing.

It increases customer trust.

Customers trust businesses that handle disruptions effectively. The ability to respond quickly and effectively when things go wrong will help build your reputation for great customer service.

Looking for a tool to make contingency planning easier? With monday.com, you can store all your contingency plans in a central location, communicate changes with stakeholders, and create automated workflows in response to unexpected events.

What are the characteristics of a good contingency plan?

Your contingency plan should include the following components:

List of risks

Begin by making a thorough identification of potential risks that could realistically occur. Depending on what kind of contingency plan you’re putting together, these could be all the risks that could impact your business, or the risks that could delay or disrupt a specific project or product.

For example, in terms of business-level contingency planning, you could list out:

  • Natural disasters
  • Technological failures
  • Economic downturns
  • Supply chain disruptions
  • Sudden market changes

Response options

Your plan should then outline various responses that you could choose between, for each risk you’ve identified. These might be:

  • Actions to mitigate the risk
  • Ways to transfer the risk to another party (e.g. by buying insurance)
  • Ways to accept and manage the risk

Plan of action

For each risk and response option, you should then add in a plan of action, including:

  • Steps to take
  • Who is responsible for each step
  • Any resources you’ll need
  • Any need to coordinate with other stakeholders or third parties

Communication management protocols

You’ll also want to make sure that you have a plan in place to communicate effectively with all stakeholders, including:

  • Who needs to be notified
  • The channels you’ll use for communication
  • How often you’ll send out updates
  • Any useful templates to use for messages

Trigger points

Decide in advance when you’ll activate a specific contingency response. For instance, you might have a particular threshold beyond which you’ll move to a contingency plan — such as the severity level of a natural disaster. You should also define who has the authority to make these decisions, and how the decision will be made (by committee or by chain of command, for instance.)

Testing and review

To keep your plan up to date, you should schedule regular tests and reviews. For instance, for a natural disaster contingency plan, you might want to run a drill once a year, to practice your response procedures and make sure that everything works as it should.

How to create a contingency plan

Let’s cover the basic contingency planning process and detail how to get yours up and running.

1. Map out essential processes.

What processes are essential to your business and safely delivering your product or service to customers?

If you’re a manufacturing company that ships directly to consumers, a simplified process list might look something like this:

  • Getting raw materials from suppliers
  • Manufacturing process
  • Freight and shipping
  • Packaging and warehousing
  • Last-mile delivery

Looking at this list, you can see how vulnerable it is to natural disasters or even minor human errors.

Create an overview of every crucial process in your organization.

2. Create a list of risks for each process.

Once the process list is created, consider what might disrupt business continuity.

What can go wrong with each of these critical processes?

Let’s look at an example of what could go wrong with “last-mile delivery” …

  • The driver can deliver single or multiple packages to the wrong address.
  • The package can be damaged during delivery.
  • The package could get lost at a distribution center.
  • A truck full of packages could be involved in an accident.
  • A flood could cripple the road system in a specific area.
  • The driver could get delayed because a moose wants to lick salt splatter off the car (seriously, it’s a thing ).

And that’s only a preliminary list. Once you start thinking about it, you’ll realize how many things you rely on to avoid going wrong, even for fundamental processes.

Every business process is vulnerable to some sort of emergency or human error and requires a solid risk management process .

3. Evaluate the potential impact and likelihood of each risk.

Once the risks are identified, it’s essential to determine how they could impact your business.

Are they likely to happen? How large will the impact on your business if they do occur?

Most companies use “qualitative risk assessment” to do this.

PMI uses the following risk exposure assessment table — also called the probability impact matrix — to evaluate … the probability and impact of potential risks.

Risk impact probability table from PMI

( Image Source )

First, rate the severity of the impact on a scale from 1–100. Then, multiply with a percentage based on how likely it is to occur.

4. Calculate costs and contingency reserves, and identify issues to mitigate.

The quantitative risk assessment approach is less common — but more practical — to assess the potential cost of each risk.

How much would each risk potentially cost your business? To get a better overview, add these 4 columns to the risk register template :

  • Full potential loss from the event
  • Expected loss from the event
  • Cost of response (post-event)
  • Cost of mitigation (pre-event)

Quantitative risk register example in monday UI

This means you can make an educated decision when budgeting contingency reserves into project plans and yearly budgets.

During the risk analysis , estimate the potential costs of the adverse event.

EXAMPLE: if your online store goes down, multiply the average online sales revenue per hour with expected downtime. Make one pessimistic and one realistic estimate.

Your hosting service may also have a flat fee for restoring sites, which would be your response cost. If these costs are unreasonably high and the event is likely, estimate the costs of a mitigation effort. In this case, it could be a firewall and extra procedures, like 2-factor authentication, an important security system , for all employees.

Budget in those costs. An accurate budget is the first part of emergency response and prevention. Without enough cash, your team won’t be able to put any response plans into action.

5. Create a response plan for prioritized events.

Create a response plan for events by exploring the following questions:

  • What can be done ahead of time to minimize any adverse effects on the event? For example, backing up data, carrying extra stock, or having more employees on call.
  • What can be done immediately after the event to minimize the impact? For example, ordering more from a secondary supplier, rerouting another vehicle, or bringing in on-call staff.

The specifics depend on your company’s unique processes and situation.

6. Share the contingency plan.

A contingency plan only works if it’s used when things go wrong—and that means that everyone in your organization knows to reach for the plan in times of trouble. To make sure that happens:

  • Identify who needs to be aware of and involved in contingency planning.
  • Choose appropriate communication methods for each stakeholder group. For instance, department heads may need specific meetings to focus on their section of the plan. Key employees might need a training session.
  • Create the plan in an accessible, centralized location, such as a monday.com board. That way, everyone involved can access the plan, and you can keep it updated at all times.
  • Encourage feedback on the plan, such as running an employee survey to check understanding and seek ideas for changes and improvements.
  • Post reminders and updates on your shared internal communication channels.

7. Monitor and review the contingency plan.

If you want your contingency plans to protect your business, you have to keep them up to date. That means you’ll need to schedule regular reviews of the plan to check that it’s still relevant and aligned with your changing business.

Remember to communicate updates or revisions to all relevant stakeholders, and provide opportunities for additional training if needed.

Manage your contingency planning process with monday.com

Having your business contingency plan on paper is an excellent place to start. But it won’t translate to how your entire company will tackle a crisis.

That’s where monday.com comes in. Our flexible digital workspace gives you everything necessary to ensure everyone follows the contingency plan when they need to.

Use our pre-built contingency plan template to get you started 

Make sure that no employee is left clueless during a crisis. Our contingency plan template has everything you need to start the planning process.

With our pre-built template, you can feel confident you’re following best practice contingency planning, so your business will run smoothly even in the case of unexpected events.

Use integrations to notify someone of an event automatically 

use automation to keep stakeholders up to date on your contingency plan

With monday.com’s powerful integrations and automations, you can respond to unfavorable events more quickly.

For example, you can immediately create and assign a work item whenever a customer submits a bug report.

This approach helps avoid another potential problem: customer service failing to report bug reports to your development team.

Monitor project status at all times in dashboards to avoid bottlenecks and domino effects.

manage your contingency planning with monday.com dashboards

The best time to start acting is before a catastrophic event that puts your entire project or business at risk.

To do that, your management team needs a clear understanding of the project’s status at all times.

Use the 30,000-foot view every manager needs to avoid predictable project delays and failures and check that project controls are working properly.

Contingency plans are a must-have.

When starting a project or business, most people plan according to the status quo. Unfortunately, that’s a best-case scenario and not helpful in the real world.

A contingency plan helps you prepare for worst-case scenarios and keep your project afloat, should anything go wrong.

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You are currently viewing 5 Steps Your Contingency Planning Should Include

  • 5 Steps Your Contingency Planning Should Include

For millennia, lighthouses have guided ships safely out to sea or into harbor. They’ve served as crucial navigational tools to avoid disasters. 

While you may not be a sailor, you still need lighthouses (metaphorically speaking). After all, you have an organization to run. And you need a strategy to steer clear of storms. 

Enter contingency planning — your tool to prepare for not only potential disasters (like the COVID-19 pandemic) but also commonplace problems, such as facility staffing shortages. 

Used correctly, contingency planning gives your organization a robust backup if things go wrong. Ultimately, that backup plan ensures your business can pivot safely, minimize negative impact, and even capitalize on emerging opportunities. 

In this article, we’ll cover what contingency planning is and the benefits of the process. We’ll also cover five steps your organization’s contingency planning should include.

financial forecasting plate

What is contingency planning?

“One thing that makes it possible to be an optimist is if you have a contingency plan for when all hell breaks loose.” – Randy Pausch, a renowned computer science educator

A contingency plan is a plan organizations make for an unexpected scenario. Contingency planning enables you to explore and prepare for any possible future.

The risk management function of the organization typically handles contingency planning. Senior leadership and stakeholders participate in strategic decision-making as well. 

When we think of contingency plans, we often think of response strategies for tornadoes, floods, fires, earthquakes, and other natural disasters. Perhaps the most famous contingency plan is National Response Scenario Number One , America’s planned response to a nuclear attack. 

Contingency planning involves planning for worst-case disasters, especially for an individual business, utility company, university, or healthcare organization. Such organizations face a variety of risks, some of which leaders may not even anticipate. Nobody can predict how external events and market conditions will unfold with absolute precision. Internally, things could turn unexpectedly, as well. 

So, you must plan around the uncertain future by establishing a process to follow should a risk event occur. As research published by the Project Management Institute notes, “ contingency planning involves defining action steps to be taken if an identified risk event should occur.” It gives your organization a blueprint for handling unusual or unexpected events

financial forecasting plate

Source: UT Dallas

Benefits of contingency planning

During troubling times, we hear people discuss the light at the end of the tunnel. But what if you had a tool to get to the end of the tunnel faster? 

Well, you do. Think of contingency planning as that tool. 

Contingency plans not only can guide you out of trouble and safely to shore, like a lighthouse, but they also can propel your organization to a brighter future (as long as you have the right approach). 

When done correctly, the benefits of contingency planning extend far beyond being ready for a disaster. Contingency planning can: 

  • Promote assessment of strengths, weaknesses, and opportunities. 
  • Test unlimited sets of scenarios and help you prioritize risks.
  • Avert panic and enable rational, data-driven decision-making. 
  • Minimize operational losses during worst-case and unexpected scenarios.
  • Improve your ability to adapt and maximize opportunities. 
  • Improve trust with team members and stakeholders. 
  • Enable the organization to emerge from disaster stronger. 

In short, contingency planning makes your organization proactive. Contingency planning is an essential part of risk management and strategic management . It can better enable you to adapt and survive if external and internal conditions get challenging. It can also give you the potential to capitalize on new opportunities.

How to Do Contingency Planning: 5 Steps You Need

Contingency planning is unique to each organization. For example, the risks faced by a private university differ from what a telecom company might face. So, contingency planning for the two organizations will vary. 

With that said, the framework remains the same. Here, we’ll cover five steps your contingency plan must include. For each action, we’ll use an example for clarity and to highlight the use of contingency planning. 

1. Risk assessment

Break this down as follows: 

  • Identify mission-critical operations
  • Identify threats and risks to those operations
  • Analyze the impact of each threat and risk

Example of risk assessment

Research is a vital part of a private Midwestern university’s operation. With the COVID-19 pandemic ongoing, the university recognizes the pandemic’s potential to harm or impact the most critical asset of research operations: the humans who do the research . Impact analysis shows that COVID-19 contingency planning for research teams has to be the highest priority.

financial forecasting plate

2. Scenario analysis

The future is full of possibilities — good, bad, and unexpected. Through scenario analysis , you can test unlimited sets of assumptions and scenarios. Based on those results, you can develop financial and strategic plans that allow you to adapt and navigate successfully when disruption comes. 

Example of scenario analysis

An internet provider experienced cash flow issues during the 2008-2009 financial crisis, as economic difficulties impacted payments. To avoid future disruption to cash flows, the internet provider tests all sorts of scenarios.

Their scenario analysis shows them that a more extensive credit line and a 2% rate increase can help avoid future cash flow problems. A larger credit line offers a cushion, while a 2% rate increase boosts cash reserves (while not hurting customer retention rates). 

3. Trigger analysis

What events would necessitate you to activate your contingency plan? Any contingency plan can have multiple triggers, so cover all your bases. 

Example of trigger analysis

A telecom company does contingency planning for staffing shortages. They identify trigger events that could cause a minor staffing disruption, such as a field technician unexpectedly quitting. They also identify trigger events that could cause significant disruption, such as the flooding of offices. 

4. Plan development

Your contingency plan’s success hinges on communication, resource optimization, decision-making, and the ability to adapt. When forming your contingency plan, you should:

  • Analyze how to best allocate resources
  • Identify gaps to successfully implementing a contingency plan
  • Layout step by step actions for all contingencies
  • Communicate responsibilities for everyone involved
  • Test, refine, and test again (this is an iterative process)

Example of plan development

A university wants to implement a contingency plan for closures during the COVID-19 pandemic. They establish a plan that goes as follows:

  • Assign : The university notifies all departments and stakeholders of what needs to be done. For instance, the health services department oversees facility cleaning, while the student services department handles communications with students. The finance department enacts plans to ensure cash flow during the closure. 
  • Alert : The university notifies staff, students, and the general public that they will be going remote. To assist with questions, quick communication options, such as phone hotlines, email contacts, live chats, and more are provided. 
  • Inform : The university notifies staff and students of the next steps, including options for staying on campus. A clear timeline ensures clarity and reduces panic. 
  • Act : The university takes action to ensure the plan goes as planned. For instance, they put needed resources in place, such as more COVID-19 testing stations. They also bolster remote learning technologies to ensure a smooth transition. 

5. Return to Full Operations

Set goals, guidelines, and actions for a return to normalcy, even if the issue hasn’t fully resolved itself. This requires a willingness to adapt. It also requires you to make strategic decisions based on what’s best for your unique scenario. 

Example of a Return to Full Operations

A cable company returns to full capacity following the early days of the Coronavirus pandemic. But full capacity doesn’t look the same. 

To ensure their customers and staff stay healthy, the cable company implements a remote working strategy and social distancing measures. To further reduce interactions, they improve self-installment options, create equipment drop-off and pick-up boxes, and add video chat to their customer support channel.

To assist customers struggling with finances, they implement more flexible payment options and downgrading to cheaper services. To maintain healthy cash flows, the cable company also takes out a Paycheck Protection Program loan and reduces office costs.

financial forecasting plate

Win the future with contingency planning

Contingency planning gives you a backup plan if things go wrong. Formulating a contingency plan involves risk analysis, contingency prioritization, scenario building, contingency plan development, and continuous monitoring and improvement. 

With so much that goes into contingency planning, it’s vital that your organization develops a shared understanding of risks and understands the actions you need to take. To do that, you must see the impact of various scenarios. 

This is why you need a powerful contingency planning tool. Because the fact is, spreadsheets aren’t sophisticated enough for building contingency plans. You’ll be left with an incomplete view of the scenarios. Or worse, you’ll end up with bad data from spreadsheet errors, which could lead to disastrous decision-making.

With Synario, you can test countless amounts of scenarios quickly and easily. This way, you can clarify what events pose the greatest risk and what decisions can help avoid disaster. You can also uncover emerging opportunities that you may have missed before.  

Synario helps you do this through features such as: 

  • A simple toggle feature : Change inputs without altering the underlying model.
  • Patented layering technology : Test multiple variables at once.
  • Automated object orientation and financial statements : Limit errors and increase efficiency.
  • Pre-mapped algorithms : Our solution can also be quickly customized to run limitless ‘what-if’ analyses.

All these features make your contingency planning more thorough, efficient, and effective. This will bring your organization greater clarity and direction when planning around uncertainty. Isn’t that what you want?

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From Long-Term Planning to Contingency Planning

In an uncertain situation like the current COVID-19 crisis, a contingency plan is the key to being able to keep providing services. Organizations of all sorts—governments, private companies, universities, etc.—need to followed a detailed process that will allow them to plan the best possible response to the various scenarios that may come to pass. In this article, Borja Santos outlines the process of designing a contingency plan—which should include a basic plan, contingency-specific responses, and support functions—and discusses the need for regular updates and improvements.

The crisis due to COVID-19 makes us live in a context full of uncertainties. Many of our countries are at different levels of quarantine and lockdown, and whether we work for a government, a private company, or a university, we are not sure how we will have to provide our services or carry out our planning.

De la planificacion a largo plazo a la planificacion de contingencias

In some countries, crises like diseases, drought, or floods happen recurrently but their impact varies every year. Thus arises the question of how best to plan a response to a situation where uncertainties are present. Contingency planning is an effective approach and it is advisable to know how to design a plan of your own.

According to the United Nations Office for Disaster Risk Reduction ( UNDRR ), a contingency plan is a management process that analyzes specific potential events or emerging situations that might threaten society. These plans establish arrangements in advance to enable timely, effective, and appropriate responses to such events and situations.

Contingency planning is a process in which stakeholders work together to identify potential crisis scenarios and develop a shared understanding about the risk. This style of planning helps establish a common set of principles and mechanisms as to how an organization would make decisions during a potential crisis.

The team should build relationships, collaboration, and confidence, which can lead to understanding, with the aim of obtaining a better response in the event of an emergency.

Preparation of the plan

In order to design and implement a contingency plan, it is important to choose a collaborative team that includes experts from all relevant departments or units of your organization. It should also include civil society representatives if the plan targets a particular region. The team should build relationships, collaboration, and confidence, which can lead to understanding, with the aim of obtaining a better response in the event of an emergency. The process of preparing a contingency plan is shown in the following chart.

De la planificacion a largo plazo a la planificacion de contingencias eng - Recuadro

How is it structured?

A contingency plan can be divided into three main sections:

  • Basic plan: The basic plan provides an overview of the institution or company’s approach to emergency operations and describes the purpose, scope, and general emergency coordination (information and communication, finance , logistics, etc.).
  • Contingency-specific responses: This section describes the best and worst scenarios for the contingencies prioritized, establishes early warning indicators and triggers, and defines the resources and functions required for particular hazards.
  • Emergency support functions: This section describes the expected mission execution for various functions (e.g. communication, finance , IT, marketing , etc.) and identifies tasks assigned to the person responsible in each case.
Contingency planning is a process in which stakeholders work together to identify potential crisis scenarios and develop a shared understanding about the risk.

First, the basic plan should describe the most important aspects of any emergency coordination. Who has the authority to activate the plan or to take particular decisions? Who should be responsible for directing different response activities (and who can they delegate responsibility to)? How will they coordinate amongst themselves? For example, at IE University, there is a task force formed by representatives of the different departments, who meet on a daily basis and coordinate to make decisions based on the new circumstances.

Furthermore, it is important to describe information and communication management. How will information will be collected, analyzed, and disseminated? What are the main mechanisms used to identify and assess the needs of your community, your clients, or your staff? What are the alert and warning mechanisms at the institution?

It is also very important to define the possible emergency funding sources and the logistics and management mechanisms used to identify and acquire resources in advance and during emergency operations, especially to overcome gaps in capacity. What resources are needed? What resources are available? What are the different processes and timelines for allocating resources and who oversees these processes?

Finally, we need to know the main aspects and factors of our risk. What is the location, intensity, frequency, and probability of the main hazard(s)? How great is our exposure and vulnerability? What are our main coping mechanisms and capacities?

Specific responses

Second, we need to analyze contingency-specific responses. We need to provide details of the probable impact(s) and negative consequences of each contingency, that is, the characteristics of the different potential scenarios, including the number of people affected in different population groups and the various negative effects and losses for society or for your institution or company. Knowing the losses gives us a clear idea of the magnitude of the likely impact and allows us to estimate various planning assumptions for likely needs, in terms of both response capacity and resource needs. It is very important to plan not only for a likely scenario but also for an undesirable scenario.

This section should also provide specific early warning indicators and triggers for action based on realistic startup times for emergency interventions. A number of quantitative or qualitative early warning indicators and triggers should be identified for each scenario—for example, different levels of a state of alarm and how they would affect society or your company.

It is very important to provide information about the resources required to respond to the emergency in each scenario.

Finally, we should indicate which emergency support functions will be activated for each scenario (and each hazard, if there is more than one).

It is very important to plan not only for a likely scenario but also for an undesirable scenario.

Support functions

Third, we must take into account the emergency support functions (ESFs). We need to define the critical operational functions necessary for an emergency response. Each ESF should include a description of the processes, roles, and responsibilities that the respective departments or stakeholders should carry out for preparedness and to achieve early recovery from a likely crisis situation. ESFs should focus on specific responsibilities, tasks, and operational actions needed for each function. We can have different ESFs depending on the context. If we are a national government, we might have defense, health, transport and mobility, foreign affairs, economy, and others; if we are a sales company, we might have marketing , communication, finance , and IT; and if we are a university, we might have admissions, faculty and teaching, student communication, etc.

Each ESF should include a checklist of actions identifying and describing the actions that will be taken in the event of an emergency (response and early recovery) as well as activities to be taken before the incident (preparedness).

Regular updates and improvements

Finally, contingency plans should be adapted to the current situation, as we are seeing nowadays with the COVID-19 outbreak. As it appears that this situation will last for several months, institutions and companies should design and test their contingency planning processes. This will allow them to make efficient, effective, and equitable use of resources.

The situation is uncertain and the potential scenarios are numerous. Even though we are already responding to the current emergency, we can still think about potential scenarios in the near future. This may not be traditional long-term planning, but it is a strong contingency planning proposal.

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What Is a Contingency?

  • How It Works

Types of Contingency Plans

Special considerations, banks and contingencies, the bottom line.

  • Corporate Finance

What Are Contingencies and Contingency Plans? Definition and Examples

contingency plans for various scenarios

Charlene Rhinehart is a CPA , CFE, chair of an Illinois CPA Society committee, and has a degree in accounting and finance from DePaul University.

contingency plans for various scenarios

A contingency is a potential occurrence of a negative event in the future, such as an economic recession, natural disaster, fraudulent activity, terrorist attack, or a pandemic.

Although contingencies can be prepared for, the nature and scope of such negative events are typically unknowable in advance. Companies and investors plan for various contingencies through analysis and implementing protective measures.

In finance, managers often attempt to identify and plan using predictive models for possible contingencies that they believe may occur. Financial managers tend to err on the conservative side to mitigate risk, assuming slightly worse-than-expected outcomes.

A contingency plan might include arranging a company's affairs so that it can weather negative outcomes with the least distress possible.

Key Takeaways

  • A contingency is a potentially negative event that may occur in the future, such as an economic recession, natural disaster, or fraudulent activity.
  • Companies and investors plan for various contingencies through analysis and implementing protective measures.
  • A thorough contingency plan minimizes loss and damage caused by an unforeseen negative event.
  • Contingency plans can include the purchase of options or insurance for investment portfolios.
  • Banks must set aside a percentage of capital for negative contingencies, such as a recession, to protect the bank against losses.

How a Contingency Works

To plan for contingencies, financial managers may often also recommend setting aside significant reserves of cash so that the company has strong liquidity, even if it meets with a period of poor sales or unexpected expenses.

Managers may seek to proactively open credit lines while a company is in a strong financial position to ensure access to borrowing in less favorable times. For example, pending litigation would be considered a contingent liability . Contingency plans typically include insurance policies that cover losses that may arise during and after a negative event.

However, insurance policies may not cover all of the costs or every scenario. For example, business interruption insurance doesn't usually cover pandemics, which many businesses suffered through as a result of the coronavirus pandemic.

The Federal government had to step in and pass the  Coronavirus Aid, Relief, and Economic Security (CARES) Act , which provided financial relief to businesses, families, and local governments to stem the economic hardship caused by the pandemic. In particular, the Paycheck Protection Program (PPP) offered $349 billion in aid to small businesses to help them maintain their payroll and expenses.

Insurance companies might also limit coverage or put exclusions in place for an act of God, which is an exogenous event, meaning outside of human control, such as a flood or an earthquake. Also, insurance can't replace the customers that were lost to competitors due to an event, particularly if it was an internal systems issue such as a data breach.

As a result, businesses need to have contingency plans established to help minimize the lost revenue and increased costs that are involved when business operations have been disrupted. Typically, business consultants are hired to ensure contingency plans consider a large number of possible scenarios and provide advice on how to best execute the plan.

Contingency plans are utilized by corporations, governments, investors, and central banks, such as the Fed. Contingencies can involve real estate transactions, commodities, investments, currency exchange rates, and geopolitical risks.

Protecting Assets

Contingencies might also include contingent assets , which are benefits (rather than losses) that accrue to a company or individual given the resolution of some uncertain event in the future. A favorable ruling in a lawsuit or an inheritance would be an example of contingent assets.

Contingency plans might involve purchasing insurance policies that pay cash or a benefit if a particular contingency occurs. For example, property insurance might be purchased to protect against fire or wind damage.

Investment Positions

Investors protect themselves from contingencies that could lead to financial losses related to investing. Investors might employ various hedging strategies such as stop-loss orders, which exit a position at a specific price level.

Hedging can also involve using options strategies, which is akin to buying insurance whereby the strategies earn money as an investment position loses money from a negative event.

The money earned from the options strategy completely or partially offsets the losses from the investment. However, these strategies come at a cost, usually in the form of a premium, which is an upfront cash payment.

Investors also employ asset diversification , which is the process of investing in various types of investments. Asset diversification helps to minimize risk if one asset class, such as stocks, declines in value.

Contingent Immunization

Contingent immunization is a type of contingency plan used in fixed-income investing. It involves the fund manager switching to a defensive position if the portfolio drops below a predetermined value.

Business Continuity and Recovery

As part of a contingency plan for disasters, such as a pandemic, companies need to plan ahead to ensure that the business can operate during and after an event. This type of contingency plan is often called a business continuity plan (BCP) or a business recovery plan.

Typically, a business continuity team is formed to plan for any possible contingencies and manage the continuity and recovery plan during a disruption . Businesses need to identify their critical business functions and perform an analysis of how an event might impact the company's operations and processes.

The contingency plan would include implementing the recovery of critical business functions such as systems, production, and employee access to technology such as computers.

For example, a contingency plan for a pandemic would include developing a remote work strategy to help prevent the spread of disease and provide employees with secure access to their work.

As a result, companies would need to invest in technology, which could include providing laptops and video-conferencing access to employees, creating cloud-based data storage, and facilitating access to company-wide communications such as email and internal data.

Cybersecurity

With any type of disaster, cybercriminals often try to take advantage of a crisis to hack into a company’s systems and steal data or disrupt business operations. Contingency plans are used to outline the procedures for cybersecurity teams to protect an organization from threats and malicious attacks.

A contingency plan should also prepare for the loss of intellectual property through theft or destruction. As a result, backups of critical files and computer programs, as well as key company patents, should be maintained in a secure off-site location.

Contingency plans need to prepare for the possibility of operational mishaps, theft, and fraud. A company should have an emergency public relations response relating to possible events that have the ability to severely damage the company’s reputation and its ability to conduct business.

How a company is reorganized after a negative event should be included in a contingency plan. It should have procedures outlining what needs to be done to return the company to normal operations and limit any further damage from the event.

For example, financial services firm Cantor Fitzgerald was able to resume operation in just days after being crippled by the 9/11 terrorist attacks due to having a comprehensive contingency plan in place.

Benefits of a Contingency Plan

A thorough contingency plan minimizes loss and damage caused by an unforeseen negative event. For example, a brokerage company may have a backup power generator to ensure that trades can be executed in the event of a power failure, preventing possible financial loss.

A contingency plan can also reduce the risk of a public relations disaster. A company that effectively communicates how negative events are to be navigated and responded to is less likely to suffer reputation damage.

A contingency plan often allows a company affected by a negative event to keep operating. For example, a company may have a provision in place for possible industrial action, such as a strike, so obligations to customers are not compromised.

Companies that have a contingency plan in place may obtain better insurance rates and credit availability because they are seen to have reduced business risks.

As a result of the financial crisis of 2008 and the Great Recession , regulations were implemented requiring bank stress tests to be performed to test how a bank might handle various negative contingencies. The stress tests project how much a bank would lose—if a negative economic event occurred—to determine if the bank has enough capital or funds set aside to survive the event.

Banks are required to have a specific percentage of capital reserves on hand, depending on the total risk-weighted assets  (RWAs). These assets, which are typically loans, have various risk weightings applied to them.

For example, a bank's mortgage portfolio might receive a 50% weighting, meaning the bank—in a negative scenario—should have enough capital that's valued at 50% of the outstanding mortgage loans.

The capital, called Tier-1 capital , can include equity shares or shareholders' equity and retained earnings, which are accumulated savings of prior years' profits. Although there are various components that go into the tier-capital ratio requirement, the ratio has to be at least 6% of the total risk-weighted assets.

Let's say as an example, Bank XYZ has $3 million in retained earnings and $4 million in shareholders' equity, meaning the total tier-1 capital is $7 million. Bank XYZ has risk-weighted assets of $70 million. As a result, the bank's tier-1 capital ratio is 10% ($7 million/$70 million). Since the capital requirement is 6%, the bank is considered well-capitalized when compared to the minimum requirement.

Of course, we won't know if the banking sector's contingency plan will be adequate until another recession occurs, which is a limitation of these plans since it's difficult to plan for every contingency.

Why Is an Environmental Contingency Plan Important?

Businesses that are at risk for environmental accidents–particularly spills of hazardous materials–should always have a plan in place detailing their response actions. Being prepared can help minimize the total damage done to the environment, minimize accident-related costs, and limit liability.

What Is Contingency Theory?

Contingency theory is an approach to management that suggests the best way to run an organization is dependent, or contingent, on that particular situation. In other words, a specific management style can work well in one company and fail completely in another one.

What Are the Steps in Creating a Contingency Plan?

To create a contingency plan, first, identify the key risks to your business and order them in regard to the likelihood of occurring and severity. Next, conduct a business impact analysis (BIA). From there, start shaping your plan, which should include preventive controls, an incidence response plan, a disaster recovery plan, and a business continuity plan. Make sure to provide training to employees, frequent testing, and updating of your plan.

A contingency is a potentially negative future event or circumstance, such as a global pandemic, natural disaster, or terrorist attack. By designing plans that take contingencies into account, companies, governments, and individuals are able to limit the damage done by such events.

U.S. Congress. " H.R.748 - CARES Act ."

Cornell Law School. " Minimum Capital Requirements ."

contingency plans for various scenarios

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Scenario and Contingency Planning

What is it.

Scenario planning provides a structured method for managers to evaluate alternative views of what may happen in the future as an aid to strategic, operational, and financial planning. Scenario planning focuses largely on answering three questions:

What could happen?

What would be the impact on our strategies, plans and budgets?

How should we respond?

Like many planning tools, such as strategic and tactical planning, scenario planning has its origins in the military. The adoption of scenario planning in the commercial world started in the oil and gas industry, notably at Royal Dutch Shell in the 1970s when it helped them to prepare for the oil crisis. The use of scenario planning by both businesses and public sector entities has expanded widely over the ensuing 40 years.

Four broad types of scenario questions include:

Political: How will the expansion of the European Union change the political power of governments within the union?

Economic: How will the rapid economic growth of China and India change global markets?

Social: What are the implications of increasing obesity?

Technological: What will be the impact of increasing adoption of smart phones on desktop and laptop computer usage?

Contingency planning is a risk mitigation process for developing back-up plans in anticipation of events that might disrupt ‘business as usual’. Business continuity planning is an expanded version of contingency planning that typically encompasses a more comprehensive and extended response plan for getting back to ‘business as usual’.

Common types of scenario planning include:

Single variable sensitivity analysis – This is possibly the most common and the logical starting point for an organisation. Changing one variable at a time while holding others constant may not necessarily fully reflect complex interdependencies, but sensitivity analysis can be very valuable in understanding the potential impact of a key variable on business.

Multi-variable narrative-based analysis - This form of analysis takes the form of a plausible theme that might play out in the economic, competitive, regulatory or social landscape, and considers the impact of multiple variables and uncertainties occurring jointly.

Initiative-based scenario planning – Scenarios that layer various combinations of initiatives on top of a baseline enable an organisation to understand the incremental impact of growth or cost containment initiatives and set priorities within the overall strategic goals of the organisation.

Three typical approaches to defining scenarios are:

Along a spectrum of possible outcomes, such as a plan with upside and downside possibilities

A binary, either/or approach

A matrix of two variables with relatively high degrees of uncertainty that yield four potential outcomes when plotted in the quadrants of a matrix.

What benefits does scenario planning provide?

Scenario planning provides improved insight about the choices, opportunities and implications that uncertainty presents. It brings better quality strategic plans, budgets and forecasts, and it enables a clearer understanding of the sensitivity of the key drivers of the business and the potential impact of future events.

Scenario planning also provides a foundation for explaining performance variations by reference back to drivers incorporated into the scenarios. It can be an early warning system for potential threats and opportunities for the business.

Questions to consider when implementing scenario planning

What is the issue that we are trying to assess? Over what time horizon?

What are the major external factors likely to impact on our scenarios?

What are the key internal drivers that need to be addressed?

Do we have the right data, technology, bandwidth and skills to develop and maintain scenarios?

Actions required

Actions to take / dos.

Secure senior management commitment and participation

Organise scenarios around key issues to be addressed

Define assumptions and preconditions clearly

Limit the number of scenarios created

Make sure each scenario presents a plausible and logical alternative view of the future

Focus on material differences between scenarios

Use a balance of quantitative and qualitative data

Establish leading indicators or ‘trip’ points for signalling key scenario assumptions

Refresh scenarios and update assumptions on a periodic basis

Actions to Avoid / Don'ts

Avoid developing scenarios without defining the issues first

Don’t develop too many scenarios

Do not attempt to develop the perfect scenario – more detail does not mean more accuracy

Avoid becoming fixated on any one scenario

Try not to hold on to a scenario after it has ceased to become relevant

In practice: Scenario and Contingency Planning

Navigating through today's uncertain world (David A J Axson, Journal of Accountancy, March 2011)

See full case study

The case of ElectricIQ, a software company that develops software for smart energy use, illustrates the application of scenario planning in practice (the name and details have been changed to maintain client confidentiality).

The company embarked on a scenario planning project to help understand the alternatives as an input to R&D, marketing and product development plans in anticipation of its expansion into the smart grid market for environmental energy management systems.

The team identified primary and secondary drivers of demand for renewable energy sources; analysed relevant underlying data; and developed four likely scenarios across the two axes of public policy and public opinion.

Using the scenarios as a baseline, ElectricIQ’s finance team recast the company’s five-year plan and annual budget under each scenario to assess the financial implications and identify key performance metrics that could provide the organisation with an early warning as to which scenario is actually playing out.

Lessons learned

Scenario plans provide the context for review of actual and forecasted results and better understanding of variations in performance.

Scenario plans allow a company to make fast, confident decisions by providing a sound basis for evaluating the impact of changing market conditions.

Related and similar practices

Strategy mapping

Developing non-financial key performance indicators

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CMR INSIGHTS

Contingency scenario planning using generative ai.

by Daniel J. Finkenstadt, Jake Sotiriadis, Peter Guinto, and Tojin Thomas Eapen

Contingency Scenario Planning using Generative AI

Image Credit | Marianne Bos

Businesses and governments alike employ foresight methodologies such as scenario planning to better anticipate future challenges, enabling them to make informed decisions in a rapidly changing world. While traditional scenario planning works on a horizon of two to five years or more, COVID-19 saw the global requirement for contingency scenario planning (CSP) – compression of the scenario planning timeframe into weeks or even days initiated by contingent or emergency events. Firms face challenges anticipating all possible disruptions in the future, selecting which to best plan for in a resource constrained environment, and responding to these future disruptions when they come to pass in ever-compounding volumes.

Related CMR Articles

Schoemaker, P. J. H., & Day, G. (2021). Preparing Organizations for Greater Turbulence . California Management Review, 63(4), 66-88.

Cornelius, P., Van de Putte, A., & Romani, M. (2005). Three Decades of Scenario Planning in Shell . California Management Review, 48(1), 92-109.

A well-known exemplary use of CSP is the exigent application of scenario planning for the 2020 Olympic Games 1 in response to rapidly changing health conditions relating to COVID-19. 2 Traditional scenario planning has been criticized for being too time-consuming or ineffective for helping managers take decisive action – these limitations are exacerbated in the case of CSP. Fortunately, with the rise of generative AI (GenAI), we have tools to improve the effectiveness of CSP. In this article, we describe how GenAI tools can help in revisioning strategic foresight through scenario planning and formulating business continuity plans (BCP).

CSP is employed when the situations on the ground are changing quickly -possibly even minute by minute. These types of events are becoming more and more prevalent in the global market. Recent data from Resilinc’s Event Watch platform shows that the time between consecutive extreme weather events disrupting supply chains was heavily skewed below the 6-day response window (shown by the red bar):

contingency plans for various scenarios

Firms must learn how to anticipate anomalies by engaging with their environments early and often. And they have to be able to react quickly to shifts in environments. 3 Employing foresight-based tools and analysis, Shell has created a history of trying to understand potential risks and adapt its strategies accordingly, which some have credited with putting Shell ahead of its competitors during the energy crisis of the 1970s. 4 Shell’s ability to consistently practice scenario planning and the mindset it requires has allowed them to catch on to emerging changes in markets and culture. Further, sustained scenario planning practices helps organizations become more comfortable with ambiguity in taking a futures perspective by countering hubris, exposing implicit assumptions, contribute to shared and systemic sense-making, and foster quick crisis adaptation capabilities. 5 This repeated practice increases their innate abilities to respond and exposes them to more possible futures, making them more prepared to adapt quickly. These attributes allow firms to better develop continuity plans of action that offer a range of responses to maintain operations during disruption – or rapidly recover to pre-disruption operation levels by focusing on plausible futures versus predicted outcomes.

Business Continuity Plans (BCPs) enable firms to react effectively in the face of potential disruptions. Many firms develop BCPs after experiencing a certain type of disruption for the first time, but the most successful businesses develop BCPs proactively for new types of disruptions uncovered through scenario planning. In these turbulent times, larger firms may have the resources to run dozens of ‘what-if’ scenarios with teams of experts. But small to medium-sized firms lack the resources necessary to build robust scenario planning events and materials and often lack risk management professionals to create strategic risk management plans. And even larger firms may suffer from an inability to decide on how to act when a CSP event occurs.

A promising alternative is emerging that can overcome these challenges. It entails enlisting the assistance of cutting-edge generative AI systems powered by large neural network models. From experiments we have conducted, and as recently published, we believe generative AI can significantly enhance an organization’s capability to conduct robust contingency scenario planning faster and at a much lower cost than conventional processes. 6 Some Fortune 500 firms are beginning to incorporate generative AI in continency planning, but we believe this approach would also be beneficial for resource-constrained organizations like small and medium-sized enterprises (SMEs) that are operating in highly challenging environments, such as those prone to extreme weather events.

Limitations in Traditional Scenario Planning

Traditional limitations for scenario planning can be clustered around the three relevant stages of scenario planning: (1) generating scenarios, (2) selecting scenarios, and (3) preparing for scenarios. Each of these limitations are exacerbated in the case of contingency scenario planning.

Generating Scenarios . One limitation of the traditional scenario planning outlined above is that it provides little formal guidance on where the trends and uncertainties can be found. Without a structured process for identifying and analyzing potential trends and uncertainties, organizations may fall prey to tunnel vision and overconfidence, which are two of the biases that scenario planning is tasked with helping managers avoid.

Selecting Scenarios . The next set of challenges in scenario planning relates to how the best set of scenarios may be selected. There are clear trade-offs to consider in this process. Business continuity plans need to robust to contingency scenarios – which means picking the right scenarios to prepare for in detail becomes daunting.

Preparing for Scenarios . The third set of challenges in scenario planning relates to preparing for the decision scenarios. A key limitation of traditional scenario planning is that it doesn’t offer guidance on how organizations can prepare for multiple potential realities simultaneously with different strategies that may be at odds with each other. Organizations have several options to prepare for multiple, potentially contradictory scenarios.

  • One approach is to focus on actions consistent with the most likely scenario based on available data and insights. However, this approach may not always be sufficient as the future is inherently uncertain.
  • Another option is to take actions for an intermediate scenario, which involves finding a balance between the different scenarios. This approach can be useful in situations where the company is unsure which scenario is more likely or when the cost of preparing for one scenario is too high.
  • Finally, the company can develop competencies to adapt actions based on emerging information about scenarios. This involves building a culture of agility and flexibility where the company can quickly pivot and adjust its strategies based on new information and changing circumstances.

Embracing Generative AI Tools to Address Key Limitations of Scenario Planning

To improve the effectiveness of contingency scenario planning, organizations can leverage generative AI tools, including large language models (LLMs).

These powerful tools offer valuable support in several ways:

  • Identifying Baseline Scenarios: Generative AI tools can assist in identifying baseline scenarios by analyzing historical data and recognizing patterns, providing a solid foundation for the scenario planning process.
  • Formulating Scenarios based on Trends: By utilizing the vast knowledge and predictive capabilities of LLMs, organizations can formulate scenarios that align with emerging trends, allowing for more accurate and forward-looking planning.
  • Generating Innovative Ideas: LLMs can spark creativity by generating innovative ideas and potential courses of action that might not have been considered otherwise, enriching the organization’s strategic decision-making.
  • Combining Scenarios: With AI-powered assistance, organizations can efficiently combine scenarios and assess their potential implications, enabling more comprehensive scenario planning and risk analysis.
  • Evaluating Ideas: Lastly, generative AI tools can aid in evaluating various ideas and actions generated for different scenarios, providing valuable insights into the most promising strategies for enhancing survivability.

GenAI Augmented Contingency Scenario Planning in Action

Next, let us consider a hypothetical CSP exercise at an automotive manufacturer with supply chain issues in 2023 that explains the use of a generative AI framework. To begin generating scenarios we developed a custom GPT within ChatGPT 4.0 to follow our process. 7 The AI categorizes these concerns into levels of significance to the automotive manufacturing business. The following prompt was used to create a list of relevant resources, forces, and observers:

We received the following output:

contingency plans for various scenarios

The next step involves creating hypothetical trends. We prompted ChatGPT to generate hypothetical trends that could affect this automotive manufacturing firm.

We received the following output with detailed definitions of each that are removed for brevity:

Human Resources Trends a. Increased Automation and AI Integration: A significant shift towards more automated manufacturing processes and integration of AI in design and testing. b. Focus on Sustainable Practices: Growing emphasis on sustainability within the industry. c. Remote Work Adaptations: Expansion of remote work capabilities in areas like design, administration, and sales.

Market Competition Trends a. Shift to Electric Vehicles (EVs): An accelerated transition towards electric vehicles. b. Entry of Tech Companies: Involvement of technology giants in the automotive sector. c. Global Supply Chain Realignment: Post-pandemic supply chain restructuring, leading to more regional manufacturing hubs.

Customer Trends a. Increased Demand for Customization: Growing customer expectations for personalized vehicles. b. Sustainability as a Purchase Factor: A significant rise in consumer preference for environmentally friendly vehicles. c. Adoption of Connected Vehicle Technologies: Customers seeking advanced connected features in vehicles.

Next, we wanted to assess three different types of scenarios from this consideration set of trends assigned to varied probabilities and impacts (labeled T1-T3).

contingency plans for various scenarios

The next step is to use the trends T1 to T3 to create a set of learning scenarios LS11 to LS33 by assessing the relationships between the trends and the resources, observers, and forces of the firm.

contingency plans for various scenarios

We immediately get the below analysis that is a great starting point for scenario development.

Trend T1: Shift to Electric Vehicles (EVs)

Relevant Resources (LS1)

  • Skills Development: The need for skills in electric vehicle technology, including battery technology and electronic systems, is paramount. This involves training existing employees and recruiting new talent with these specialized skills.
  • Workforce Transition: As the focus shifts from combustion engines to electric powertrains, some roles may become redundant, while new roles will emerge, necessitating workforce adaptation and potential restructuring.
  • R&D Investment: Significant investment is required in the development of electric vehicle technologies, especially in battery technology and electric drive systems.
  • Capital Allocation: Shifting financial resources from traditional combustion engine technologies to electric vehicle development, which might involve reallocating budgets and securing new funding sources.
  • Infrastructure Overhaul: Upgrading or establishing new production lines for EVs, which includes acquiring new manufacturing technologies and adapting existing facilities.
  • Research and Development: Investing in research and development facilities equipped to innovate in the field of electric vehicles.
  • Supplier Network: Developing new supplier relationships for EV-specific components, such as batteries and electric drivetrains.
  • Supply Chain Adaptation: Adjusting the supply chain for changes in sourcing, manufacturing, and distribution that come with electric vehicles.

Finally, we can utilize the LLM to provide a scenario that would benefit businesses of any size. Now we can prompt the LLM with something like the following:

Scenario: "Revolution on Wheels: Embracing the Electric Shift in Auto Dynamics"

In 2025, Velocity Motors, a prominent automotive manufacturer with a rich legacy, faces a defining moment in the industry's shift towards sustainability and electric vehicles (EVs). This transition is not merely about producing electric cars but reimagining the company’s core identity in the context of innovative and sustainable automotive technology.

The firm's sprawling manufacturing facilities, traditionally focused on combustion engines, are undergoing a significant transformation. The workforce, a mix of experienced engineers and new talent, is gearing up to adapt their skills to the evolving demands of EV production. This pivot raises critical questions about skill development and workforce readiness for the future of automotive manufacturing.

Financially, Velocity Motors is redirecting its investments. Funds previously allocated to traditional automotive technologies are now flowing into research and development for electric drivetrains and battery efficiencies. This financial shift represents the company's commitment to leading the EV market, balancing immediate operational needs with long-term strategic goals.

Technological innovation is at the forefront of this transformation. The company’s research labs, once dominated by the sounds of internal combustion engines, are now filled with the hum of electric motors and advanced computing systems. Velocity Motors is not just creating vehicles but integrating software and hardware to deliver intelligent, user-centric automotive experiences.

This shift to EV production necessitates a reconfiguration of manufacturing lines and a revamping of the supply chain. The procurement team is actively seeking suppliers for high-quality battery cells and sustainable materials, redefining long-standing partnerships and forging new alliances.

As Velocity Motors embarks on this journey, the company faces several critical questions. How will it ensure its workforce is equipped for this technological shift? What strategies will maintain financial health during the transition? How will technological evolution impact internal processes? What changes will this shift bring to the supply chain dynamics?

Generating Ideas for Scenario Solutions

We can also directly prompt the AI to solve for us. We prompted ChatGPT 4.0 to generate three ideas to assist scenario planners and managers with the above scenario, provide pro/con analysis based on factors of efficiency, resilience and prominence (ERP) and then suggest if one or more of the ideas would best be suited to assist in the scenario. Efficiency is about optimizing utilization of valuable resources, resilience focuses on an organization’s capacity to withstand and navigate through force-induced stresses, and prominence deals with the organization’s ability to create positive attention while avoiding negative attention from observers. ChatGPT generated the following output, selecting AI-driven predictive maintenance as the top strategy :

contingency plans for various scenarios

In effectively preparing for multiple scenarios, striking a balance among ERP-related tradeoffs is paramount. This includes considering diverse ideas within a specific scenario, as well as evaluating these tradeoffs across various scenarios. To achieve this, the following steps are recommended:

  • Unearthing Inconsistencies: Thoroughly scrutinize the required levels and directions of strategic factors across different ideas within a single scenario, as well as across distinct scenarios.
  • Evaluating Adaptability: Determine the degree of adaptability needed to address these identified inconsistencies effectively. Adapting strategic factors is crucial, as preparing for one potential scenario may inadvertently make the organization less equipped to tackle other plausible scenarios.
  • Adjusting Actions: Based on the insights gained from scenario analysis, fine-tune the set of actions for each scenario. This iterative process ensures that each scenario’s strategies align cohesively with the organization’s overall strategic objectives.

The integration of GenAI in the CSP process can be vital, assisting in identifying baseline scenarios, formulating trends, generating innovative ideas, combining and evaluating scenarios, and providing valuable insights into the most promising strategies for success. Optimally, GenAI tools can help organizations of any size conduct scenario planning ensuring that business continuity planning accounts for new and evolving disruptive events to minimize impacts to operations. Small firms and large firms can benefit from detailed tactical planning necessary to make optimal decisions rapidly.

  • “IOC Executive Board Steps Up Scenario Planning for Tokyo 2020” olympics.com .
  • “Health and Safety Paramount as IOC Executive Board Agrees to Continue Scenario Planning for the Olympic Games Tokyo 2020” olympics.com .
  • “The Power of Anomaly” hbr.org
  • Liam Fahey, Robert M. Randall, Learning from the Future: Competitive Foresight Scenarios (Wiley, 1997) 285-295.
  • “Living in the Futures” hbr.org
  • “Use GenAI to Improve Scenario Planning” hbr.org
  • WhatIf-WhatNow GPT can be found at: chat.openai.com

Daniel J. Finkenstadt

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Smart Meetings

4 Contingency Planning Scenarios You Need to Prepare For Today

by Malik Anderson

April 3, 2020

contingency

The social and business rollercoaster of the last few weeks has left a record number of people jobless and even more wondering how they could have prepared for such an unpredictable event. Surely, the effect that coronavirus (COVID-19) has had on the events industry, and the hospitality industry more widely, is a curveball for the history books. But that doesn’t mean it is time to throw your hands in the air in despair.

Carol Davis, owner of CPER Productions & Incentives specializes in contingency planning for experiential events and incentives and she has some suggestions that could make the next black swan a little bit less jarring.

According to Davis, there are four types of events meeting planners need prepare for : force majeure, literally acts of God; man-made interruptions, such as car crashes; continuity of operations plans, such as internet interruptions and street closures; and medical issues.

Think Like a Pessimist (Even if You Aren’t)

“Planning and designing for the unknown means understanding the very basic structure, then round tabling with anyone and everyone to get their wildest ideas of what could go right and what could go wrong. Understanding and accepting that only a small percentage of things can be controlled means having an understanding that there is a great deal and high percentage of things that can go wrong. It is part of the structure of planning anything,” Davis said.

More :  #HospitalityStrong Your Coronavirus Resource Guide

She recommends keeping a log of everything you and your team has thought of that could go wrong and making it part of your contingency plan. Nothing is off limits.

No “What If” Is Too Small

When it comes to the world of contingencies, there is no “what if” too small. The key is thinking that literally anything can happen, that is a surefire way to always be prepared.

Davis recalled a time where she mapped out a plan for an indoor mall. This mall had a small airport nearby, so she wrote an exercise for a small plane crash landing on top of the roof. Eight months later, a car veered off the freeway, that was just a bit taller than the roof of the mall and crashed into the store below. Although it seems like an unlikely scenario and it wasn’t a plane, the mall was ready for this man-made situation.

Quite literally anything can happen in the world of events and you can only be so ready. Even the most thorough contingency planner could miss a possibility, as there is virtually no limit to what could happen. But the more protocols you have thought out in advance, the more likely you will be able to deal effectively with what occurs.

Last year, Davis had an event in Italy, during which there was a hiccup. “Even though prep was very thorough, information from the country and its citizens was not exactly forth coming, therefore it was not until I was there during the 2nd week that I learned all banks in Northern Italy operate under Communistic Banking Concept and that to get money I either had to work with 200 Euros per day or travel 2 hours from Italy to France to get funds.”

What to Consider in Your Plan

There are several things Davis recommends you keep in mind when coming up with your contingency plan.

  • Always consider Murphy’s Law. Even the best plans can go wrong so prepare for it.
  • Even if you think it can’t happen, include it in your list.
  • Learn to appreciate and enjoy thinking of the diabolical.
  • Ask questions, ask questions, ask questions!
  • The time to be afraid is when you don’t have a contingency plan.

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Contingency Planning Emergency Response and Safety

Although there is some recognition of the importance of contingency planning, far too few firms have anything beyond a contingency plan that sits on a shelf in the CEO’s office. Even in those companies with crisis management teams (CMTs), the members often do not meet to plan or even discuss how the team would function in an actual situation.

The most progressive firms offer the team members, fire brigades, and employees an opportunity to preplan (contingency planning) through mock exercises that replicate industrial disasters, explosions, fires, or tornado alerts. The end result is a better-prepared team of employees ready to respond to any contingency. Unfortunately, many firms have not gone this far.

Contingency planning may not have been a traditional security process, but in today’s global business environment the security organization is assuming a much greater role and responsibility for its implementation. Even prior to the events of September 11, 2001, many organizations were becoming more conscious of the need to have contingency plans. A complete contingency planning program has three major elements:

  • 1. Emergency Response
  • 2. Crisis Management
  • 3. Business Continuity: Business Recovery and Business Resumption

Emergency response activities involve responding to an incident, crisis or disaster and managing that incident at the scene. Should an incident escalate to the crisis or disaster stage, a CMT should take over managing the crisis to its conclusion. If the crisis or disaster does cause damage to a company building, facility or operation, the CMT should hand over to a business continuity team the responsibility of recovery and resumption. After a disaster, it is critical that the business recovers and resumes normal (pre-event) operations as soon as possible. Customers, shareholders and stakeholders expect nothing less. Executive management has the obligation to ensure contingency planning is properly considered and addressed within their company. The consequences of not planning for contingencies can be catastrophic with numerous liability issues.

Introduction

No facility protection program is complete without clear, well-defined policies, and programs confronting the possible threat of fire or any other natural or human-made disaster. While planning for such contingencies is the responsibility of top management, in most situations the task of carrying out emergency response falls specifically on the security management team; specifically those resources dedicated to incident management response now considered boutique specialty in many multinational companies. This is primarily due to the essence of the security mission—that is, to observe and report. In the best of all possible worlds the responsibility is a shared responsibility among security, fire, and safety departments. Regardless of the functional placement of responsibility, security, fire, and safety personnel must work together when they are confronted with preparing for and responding to disasters.

According to a 2006 IOMA Safety & Security Reports briefing, 39% of US companies lack a basic crisis plan and 56% have not conducted crisis drills or simulation in the last year. Follow up research in 2017 reveals not much has changed regarding general readiness for many companies. In fact, some companies consider crisis planning and drill exercise a bit of a nuisance and do so at their own peril. Under an amendment to a 9/11 bill passed by the House, the Department of Homeland Security and the American National Standards Institute established a set of “best practices” for disaster preparedness. This includes a certification process to verify compliance [1] .

According to Dr. Dennis F. Sigwart, Emeritus Professor, Western Illinois University, current and future security professionals should be aware of the absolute necessity of disaster planning and preparedness as a viable component of the many facets (fire, earthquake, explosions, flooding, and so forth) of which they will have to perform as a practitioner. Those assigned disaster preparedness tasks must continually play the “what happens if” game [2] . Said another way, drill scenario and testing is akin to being a player on a practice field. Practice often makes perfect, builds confidence and comradery among players and streamlines the incident management response process. Drill scenario testing on a frequent basis cannot be overemphasized enough. Firesafety (discussed in Chapter 12, Fire Prevention and Protection), and emergency (contingency) planning is designed to anticipate what might happen to endanger people, physical assets, and information (thus causing damage and interruption to normal business) and to take the necessary preventive measures and make provision—through the use of appropriate hardware and/or personnel response—for prompt and effective action when an emergency does occur. While the emphasis in this chapter (as in most actual practice) is on physical safeguards, it is important to emphasize the human aspect. Disastrous losses often occur not from the failure or absence of physical safeguards, but from human error—the failure to close a fire door, to maintain existing protection systems in good working condition, to inspect or to report hazards, and, at the management level, to ensure through continuous employee education and training that the organization remains prepared at any time for any emergency. The Occupational Safety and Health Administration (OSHA), National Fire Protection Association (NFPA), and Life Safety Codes dictate certain safety requirements for all businesses.

Contingency Planning

The Association of Contingency Planners (ACP), which is an association dedicated to the evolution of business continuity, describes contingency planning in the following way: “Business continuity planning integrates knowledge from related disciplines such as information technology, emergency response, and crisis communications to create a strategy that ensures a business will remain resilient in the face of adversity.” [3]

The purpose of contingency planning is simple. Essentially, contingency planners work to prepare their business, organization, or institution to be better able to mitigate any disruption to normal business activities. As an example, if a natural occurrence (e.g., hurricane, fire, or earthquake) disrupts normal business activities, having plans in place for responding to and recovering from such an occurrence will allow for a faster resumption of business, thus reducing the amount of time the business is disrupted.

For our purposes, we will discuss contingency planning in the construct of four major components: emergency response, crisis management, business recovery, and business resumption. The fundamental elements of each component and the need for an effective integrated contingency planning process will be addressed. Furthermore, categories and types of crises, along with basic preparation and awareness needs, will be discussed. You will note that emergency response, crisis management, business recovery, and business resumption processes have much in common (e.g., communications requirements); however, each is handled as a standalone process.

Security and the Contingency Planning Process

The traditional role of security in the contingency planning process has been to develop emergency evacuation plans for the business and to respond to emergency or crisis situations. Acting as the eyes and ears for an organization, business, or facility and maintaining a 24 hours a day, 7 days a week presence, the security organization is best positioned to respond to an emergency and manage a crisis through the concept of C3: command, communication, and control. As crises escalate, they are best managed by a multidisciplined team.

Due to the ever-ready posture of many security organizations and the increased emphasis on emergency preparedness and contingency planning following the tragic events of September 11, 2001, in New York City, Arlington County Virginia, and Pennsylvania, many security departments have expanded their contingency planning capabilities to include the following components: emergency response, crisis management, business recovery, and business resumption.

Depending upon the scope of the effort, a contingency planning program can take into consideration many activities, events, conditions, and processes. Depending upon the size and complexity of a business the process of contingency planning can be quite extensive. Planning for a contingency generally means assessing and understanding all aspects of the business, particularly the business critical processes and supporting information systems. To do this effectively requires the participation of many people from different disciplines, including management, employees, suppliers, and sometimes even customers. It may also include representatives from external organizations such as representatives of an insurance underwriter or the local fire departments.

Having a variety of knowledgeable people involved from different functional disciplines calls for establishing common parameters. To be effective, everyone involved must have a common understanding of the elements and objectives of the contingency planning program and all must have a common understanding of the process. The first consideration in establishing common parameters is to develop a set of common definitions of terms. When discussing any aspect of contingency planning it is essential that all parties have a common understanding of what is being discussed. Just what does someone mean when he or she refers to the incident management, business recovery, or any other elements of the contingency planning process?

Below are a set of contingency planning terms defined in such a way as to be useful for any organization in establishing a common baseline, points of reference, and common jargon for the end to end contingency planning process. Definition of terms must be part of the organization’s formal or institutionalized contingency planning process to ensure continuity of planning and success in achieving common preparedness objectives.

  • • Business continuity : Minimizing business interruption or disruption caused by different contingencies—that is, keeping the business up and running efficiently. Business continuity plans encompass actions related to how an organization prepares for, manages, recovers, and ultimately resumes business after a disruption.
  • • Business recovery : Refers to the short-term (less than 60 days) restoration activities that return the business to a minimum acceptable level of operation or production following a work disruption. Commonly used interchangeably with the term disaster recovery .
  • • Business resumption : The long-term (more than 60 days) process of restoration activities after an emergency or disaster that return the organization to its preincident condition. (Keep in mind that restoration to the exact preincident condition may not be necessary or even desirable. However, making this determination may not be possible without proper planning or going through the actual resumption process.)
  • • Contingency : An event that is possible but uncertain in terms of its occurrence or that is likely to happen as an adjunct to other events. Contingencies interrupt normal business activities. In some cases the disruption is minor, while in other situations the disruption can be catastrophic.
  • • Contingency planning : The process of planning for response, recovery and resumption activities for the infrastructure, critical processes, and other elements of an organization based upon encountering different contingencies.
  • • Crisis and incident management : The process of managing events of a crisis to a condition of stability and ultimate recovery. This is proactively accomplished by local, regional, corporate, and executive incident management response teams working hand in hand to successfully manage the incident. The “step up” or “step down” process is a key element of the incident response process. Let us take, for example, local flooding in a foreign country where the infrastructure cannot handle large amounts of rain from a typhoon. When conditions deteriorate “locally,” one would “step up”, and C3 the incident from the “regional” level. However, this does not preclude the local, regional, corporate, and executive incident management teams from activing simultaneously.
  • • Critical processes : Activities performed by functions, departments, or elements within a business or organization that, if significantly disrupted due to an incident, emergency, or disaster, would have an adverse impact on organizational operations, revenue generation ability, production, and/or distribution schedules, contractual commitments, or legal obligations.
  • • Emergency response : The act of reporting and responding to any emergency or major disruption of the business organization’s operations.
  • • The Situation Watch Protocol : Chasing not pacing the world of incidents is not an optimal strategy for a company. Hence the birth of the Situation Watch protocol. This protocol demands that incidents are proactively monitored and communicated to key business partners when there is a potential-tangential or direct impact on a company that may need to be incident managed. In fact, most incidents are predictable. For example, if a company is housed within the pacific ring of fire it is easy to understand that there will be earthquakes followed by a potential tsunami. Take, for example, Superstorm Sandy in 2012 which caused severe flooding along the eastern seaboard of the United States. It first began as a tropical wave in the Caribbean then formed into a tropical storm easily monitored and easily communicated. That in a nutshell is the Situation Watch protocol in action. More specifically, proactively monitoring and communicating a potential incident from its inception. In this case, monitoring, tracking, communicating, and then proactively responding to Superstorm Sandy before it is at a Company’s door step.

Contingency Planning Program

The purpose for contingency planning is to better enable a business or organization to mitigate disruption to the enterprise. Should disruptions occur, and they do all too often, the enterprise must be able to resume normal business activities as quickly as possible. The inability to restore normal operations will have an adverse economic impact on the enterprise. The extent of the impact will correspond to the extent of the disruption or damage. If the damage is severe and the mitigation of such damage has not been properly planned for, the effect could be catastrophic, even to the extent of failure of the business.

Essentially, contingencies fall into three categories:

  • 1. Those that impact the business infrastructure (fire, severe weather, and earthquakes: see the definition of hazards further in this section) causing physical damage.
  • 2. Those that impact people, such as accidents, seasonal illnesses (influenza), epidemics, or pandemics causing harm to employees, rendering them unavailable to work.
  • 3. Those that impact the reputation of the business (such as a product defect leading to a recall), causing resources to be diverted from normal operations to recovery and/or restoration. Each contingency has the potential to disrupt normal business operations to some degree. A minor building fire may disrupt operations in a limited way for only a couple of days, whereas a major fire may destroy an entire factory, completely stopping operations for an extended period.

Contingency planning is a continuous process. It is not something that can be done once and put away only to be retrieved when needed. It is a continuous process requiring periodic updates and revisions as appropriate to, and consistent with, changing business conditions. It also involves implementing and maintaining awareness and training elements. Those personnel with contingency planning responsibilities require periodic familiarization with plans and processes and training on new techniques and methods. The process of contingency planning should be designed to achieve the following:

  • • Secure and protect people. In the event of a crisis, people must be protected (employees, visitors, customers, and suppliers).
  • • Secure the continuity of the core elements of the business (the infrastructure and critical processes) and minimize disruptions to the business.
  • • Secure and protect all information systems that include or affect supplier connections and customer relationships.

Throughout the remaining sections of this chapter, elements of the contingency planning process and program ( Fig. 11.1 ) are presented and explained.

An external file that holds a picture, illustration, etc.
Object name is f11-01-9780128053102.jpg

Elements of a business continuity planning program.

Contingency Plans

Contingency plans formally establish the processes and procedures to protect employees, core business elements, critical processes, information systems and the environment in the event of an emergency, business disruption, or disaster. These plans should be developed and designed to consider specific categories and types of emergencies and disasters and address the mitigation, preparedness, and response actions to be taken by employees, management, and the organizations charged with specific response and recovery tasks. These plans should contain basic guidance, direction, responsibilities, and administrative information and must include the following elements:

  • • Assumptions : Basic assumptions need to be developed in order to establish contingency planning ground rules. As a baseline for planning, it is best to use several possible “worst-case” scenarios relative to time of event, type of event, available resources, building/facility occupancy, evacuation of personnel, personnel stranded on site, and environmental factors such as weather conditions and temperature. Furthermore, consideration should be given to establishing response parameters for emergency events. Define (for your enterprise) what constitutes a minor emergency, a major emergency, and a disaster.
  • • Risk assessment and vulnerability analysis : Identify known and apparent vulnerabilities and risks associated with the type of business and geographic location of the enterprise. An assessment of risk and vulnerabilities should be made prior to developing or upgrading contingency plans. All planning will be accomplished in accordance with a thorough understanding of actual and potential risks and vulnerabilities. For example, in a petroleum refining facility, contingency plans for petroleum spillage, contamination, and fires must be considered. Furthermore, if located in an earthquake zone, planning must address associated hazards. The risk assessment and vulnerability analysis must also include an assessment of enterprise–critical relationships. That means involving suppliers and customers in the contingency planning process. If a critical supplier or many key suppliers are not also prepared for various potential contingencies, their inability to recover will adversely impact your enterprise.
  • • Types of hazards : Planning for each and every type of hazard is not practical, nor desirable. Grouping them into similar or like categories will allow for planning to address categories of hazards which can easily be categorized as natural occurrences, health/pandemic, infrastructure, and social, civil or political disruption. Since many hazards have similar consequences and result in like damages, it is best to plan for them in categories. The following is a list of common hazards: Medical Emergencies; Fires; Bomb Threats; High Winds; Power Interruptions; Floods; Hurricanes; Snow/Ice Storms/Blizzards; Hazardous Materials Issues; Aircraft Crashes; Civil Disorders; Earthquakes; Terrorist Threats/Activities; Workplace Violence; Explosions; and Tornados.
  • • Critical process identification : Critical processes must be ranked in accordance of criticality and importance to the productivity and survivability of the enterprise. Process of recovery must be focused on those critical processes that, when resumed, will restore operations to a minimal acceptable level. In essence, these processes are identified to be the first processes restored in the event of a major interruption to business operations. Failure to restore them presents the greatest possibility of damage or loss to the enterprise and could lead to the loss of a competitive edge, market share, or even the viability of the enterprise.
  • • Business impact analysis : A business impact analysis must be accomplished to accurately determine the financial and operational impact that could result from an interruption of enterprise operations. Moreover, all critical interdependencies, those processes or activities critical processes are dependent upon, must be assessed to determine the extent to which they must be part of the contingency planning process.
  • • Emergency response : All participants in the emergency response process, particularly emergency responders, must understand their role. Expectations and responsibilities of emergency response personnel must be well defined and documented. Guidance for all employees on how to react in the event of an emergency and what their individual and collective responsibilities are must be documented and shared. Organizational responsibilities must also be established, to include the development of department-level emergency plans, generally for mid-size and large organizations. Events such as building evacuation and roll-call assembly need to be well defined so, in the event of an actual emergency, there is no confusion or uncertainty as to what must be accomplished.
  • • Incident management or crisis management : As an incident escalates, a crisis management team (CMT) should assume responsibility for managing the crisis. If the crisis is international or global in nature, it is important that the incident response process is fluid to address it. For example, activing a local or regional team and stepping up or stepping down as necessary as was discussed in a prior section of this chapter. How this process works and who has what responsibilities must be clearly stated in the contingency plans. In the event of an actual emergency, some unqualified people will attempt to manage the incident or participate in crisis management; however, they should not have any role in this process unless they were previously identified and trained as part of the CMT. Without established and well-defined incident management protocols and procedures, confusion is likely to erupt. It must be clear at all times who is the designated incident commander and his or her back up if necessary with C3 for the incident. Essentially, incident management, and crisis management personnel must be trained and must understand their responsibilities including decision-making authority in the teeth of a crisis real time. Without this authority, the timely response to an incident gets booged down in the bureaucratic quagmire which could jeopardize employee safety and well-being. Lastly and where here practical, back-up supporting personnel should be identified and trained in the event that primary personnel are not available.
  • • Incident/event analysis : After an event occurs and the situation is stable, an analysis of what occurred and why should be conducted to determine the immediate extent of damage and the potential for subsequent additional damage.
  • • Business resumption planning : The process of planning to facilitate recovery of designated critical processes and the resumption of business in the event of an interruption to the business should be performed in two parts. The first part focuses on business recovery in the short term while the other part focuses on business restoration in the long term. This process will also include establishment of priorities for restoration of critical processes, infrastructure, and information systems.
  • • Post-event evaluation : An assessment of preceding events to determine what went well, what did not go so well, and what improvements to existing plans need to be made must also be part of the process. Learning from real events is an unfortunate opportunity. There is no better way to learn how to handle an emergency than to actually handle one. The evaluation or after action report should always be documented to serve as an organization’s memory of the event in order to proactively address improvements in the incident response process.

Emergency Response

When an emergency occurs, and unfortunately emergencies occur at even the most prepared businesses, being able to effectively respond is critical. Respond in this context means to call up the necessary incident response team regardless of the time of day or weekend and even holiday. As such accessibility of responding incident management team decision makers are paramount. The type and nature of emergencies that can occur vary widely. From a medical emergency in which an employee becomes injured or sick, to a natural or person-made disaster causing extensive damage to buildings and equipment, being prepared to respond will usually lessen the damage or impact of the event. Preparedness takes many forms. Being prepared to respond to a medical emergency is different from being prepared to respond to a natural disaster. The medical emergency may only require applying first aid to a victim or it may require the assistance and services of medical professionals. A natural disaster may require support from emergency medical services along with law enforcement, fire departments, search and rescue operations, and hazardous material crews.

When planning for emergencies, types of emergencies should be grouped into like categories so that planning is accomplished for only categories of emergencies, as opposed to each and every possible emergency occurrence. This strategy recognizes the similarities of different types of emergencies and is efficient in terms of creating fewer and flexible plans.

The purpose of preparing an emergency response plan is to document the planning accomplished in preparation for an emergency. This documentation provides the ground rules for emergency response activities. It also provides a reference for all who need to know how the process works. The plan will identify general and specific responsibilities for emergency response personnel and for all employees, both management and nonmanagement. Having a plan in place will assist emergency response personnel in their effort to return the business to normal operations. However, it is important to remember that the plan should be easily accessible, streamlined, and ready for action. A plan too burdensome in the number of pages and instructions will only serve to hamper the incident management response process.

  • • Reporting emergencies : Employees must know how, and to whom, emergencies should be reported. If handling an emergency is beyond the internal capability of an organization, additional external assistance can be sought. For example, a seriously ill employee may require immediate medical attention. If paramedic capabilities exist within the company then the in-house paramedic should be the first respondent. If the situation calls for more sophisticated expertise and capabilities, external emergency medical services can be called for.
  • • Fire alarm systems : These systems are generally the most widely used. Linked to a variety of sensor detectors and manual pull stations, fire alarms do just that: sound an alarm. These systems are sufficiently unique in sound and volume as to clearly indicate the need for building and facility evacuation. Employees must be conditioned to respond immediately.
  • • Public address systems : These systems can be used to augment the fire alarm system. Announcements can be made alerting employees to the danger of fire. Announcements alerting employees to other types of dangers can also be made. Public address systems are particularly useful during emergencies when a building or facility evacuation is just the opposite of what is needed. For example, in the event of a chemical discharge or other environmental hazard, it may be necessary to keep people inside the facility and shut down all air movement systems, thus preventing employees from exposure to hazardous airborne substances. Since employees are conditioned to evacuate a building or facility when a fire alarm is sounded, they can be conditioned to wait and listen for specific instructions provided over a public address system. New to the market in 2017 are Internet Protocol (IP)-based public address systems. Public not in the traditional sense but rather internet sense in that the address protocol works integrally with your desk phone and smartphone and will “chase you down” by communicating to multiple devices.
  • • Emergency Response Team (ERT) Leads : The use of employees to augment the emergency notification system has much value. Specially selected and trained employees can be given responsibility to act during an emergency to spread the word to evacuate a building or facility during an emergency. Assigning each a specific area of responsibility, the ERT Leads ensures complete coverage of the building or facility. Communications between floor ERT Leads and emergency response personnel or a security emergency operations center can be easily established. ERT Leads can be alerted by IP technology solutions radio, smartphone, or other means in the event of an emergency and be instructed to react to the specific situation. ERT Leads can and should be empowered and trained to react on their own in the event they recognize danger. Authority should be provided to ERT Leads to evacuate a building or facility based upon their judgment and assessment of an emergency situation. In the event of a complete communications failure, it may be necessary to empower them to dispatch people to a safe environment.
  • • Response to emergencies: Since security officers are located throughout the facility and operate on different shifts, they are usually the first to respond as often times they are the eyes and ears to an event unfolding or one that just occurred. Being on the front lines, the security officer can assess the situation and make a determination if additional assistance is necessary. In some cases, they may not be able to make an assessment and may require support from others. For example, in the event of a hazardous chemical spill, it will be necessary to have an expert in environmental and safety issues on the scene to make the assessment. It may even be necessary for a hazardous materials (HAZMAT) crew to respond to handle the event. Clean up of a chemical spill should only be done by skilled and certified personnel. Another example may be the unfortunate death of an employee in the workplace. This will require the security officer to make immediate notification to OSHA as well as cordoning off the scene and directing law enforcement to the scene. In rare cases, it may require the preservation of evidence and stand by for the corner to clear to the body. Clearly, defining who has what response capabilities and responsibilities will impact the effectiveness of any response. Without a doubt, capable and training security officers are a key ingredient to the efficient handling of the incident management response process.
  • – A roster of department employees
  • – Emergency contact/notification roster (not all emergencies occur during working hours so it may be necessary to reach people at home)
  • • Identify floor wardens
  • • Evacuation routes, procedures, and assembly areas
  • • Roll-call instructions
  • • Procedures for evacuation of people requiring assistance
  • • People identified as members of a search-and-rescue team
  • • Additional manager- or employee-specific responsibilities
  • • Incident management : Personnel trained in handling emergencies should manage the incident at the scene. If the incident escalates to a crisis, a company CMT should be convened to manage the crisis. The senior emergency response person, when at the scene, should manage the incident with the assistance of specialists as appropriate.
  • • Evacuation and assembly : A critical objective during any emergency is employee safety. In the event it is necessary to evacuate a building or facility, having an established and orderly process is essential. Once a warning system sounds the notice to evacuate, employees must be aware of preestablished procedures for quick evacuation, including primary and alternate evacuation routes and where they should assemble. Maps or diagrams with this information should be included in the plan and posted throughout the work area. A floor warden or an employee with the assignment to facilitate evacuation should make a sweep of the area prior to their own evacuation to ensure all personnel have exited the building or facility. Once in the predetermined assembly area, a roll call must be taken. Primary, secondary, and tertiary responsibilities should be assigned to ensure someone is available to take roll call and report the results to security. If someone did not evacuate the facility, a search-and-rescue team or other emergency personnel may be required to reenter the facility and provide assistance.
  • • Emergency evacuation drills : The efficient and complete evacuation of personnel from a building or facility in the event of an emergency is such an important event that periodic drills should be conducted to reinforce the process and its importance. At least annually, each building or facility should undergo an evacuation drill where employees respond to a warning and completely evacuate the building or facility. This may be required by law in some states or jurisdictions. Lastly, a roll call should be conducted and results reported to security and senior management.
  • • Search and rescue : In the event of serious damage such as a fire or collapse of building, it may be necessary to search and account for employees. Search and rescue is the responsibility of responding emergency personnel who have proper protective equipment such as the fire department persons not trained in search-and-rescue techniques or who do not have proper equipment should not enter hazardous areas and conduct searches. Heavy lifting should always be left to the professionals such as properly trained search and rescue teams and fire department personnel. Heavy lifting in this context means security personnel should not supplant the proven experience of responding agencies and do it themselves without the proper training. This can cause critical delays in response and could even jeopardize lives. At its core, the job of the security officer is to observe and report.
  • • Return to work : The process for returning to work after a crisis should also be included in the emergency plan. After any incident where employees are required to leave their work area and evacuate a building or facility, a process for having them return to work is necessary. For example, in the event of a false fire alarm where employees have evacuated a building, a means of communicating to them an all-clear, safe to return to work signal, is needed. This can be accomplished in many ways. Public address announcements can be made or security personnel can go to assembly areas, directing employees to return to work the good old fashion way by use of a bull horn. As appropriate, other methods may also be employed such as IP-based communication systems. In the event there is actual damage and employees cannot return to work, a process should be established identifying who makes the decision to send employees home—most likely Human Resources—as well as how that is communicated to them and how they are kept apprised of event updates. For example, if a building was severely damaged due to fire and cannot be occupied for several days, posting daily direction and guidance for employees on the company website or on an emergency toll-free phone line will allow employees to call each day for specific instructions. For this to be effective, employees must know this process, must know the phone number to call or website to access and, as with all other processes, this one must be updated regularly. Extended remote work authorization can also be of great assistance to a company keeping it operating efficiently while longer term infrastructure needs are addressed. This type of remote work authorization especially works well where natural occurrences most happen such as severe snow storms, hurricanes (when evacuation is not necessary), and typhoons. In some instances, keeping employees at home working remote while there is civil, social, and political unrest can save lives by keeping employees off the roads or away from the office.
  • • Document the events, circumstances, and chronology.
  • • Prepare a lessons-learned review. Include key personnel involved in responding to and managing the emergency so as to assess what occurred and how it could have been better handled.

Crisis or Incident Management

Emergencies, contingencies, business interruptions, and other unplanned events happen. Sometimes the event itself is a crisis, such as a fire burning a building or facility. In other cases, an incident not responded to or managed properly at the scene may turn into a crisis. For example, failing to respond promptly to that small fire may allow for it to turn into a large fire.

Incident management is the process of managing events of a crisis to a condition of stability. Emergency response personnel at the scene of an incident manage the incident. If the incident escalates, becoming a crisis, it is then necessary to have a different group take charge. Ideally, a CMT, consisting of experienced personnel from multiple disciplines, would come together to manage the incidents that develop beyond the capability and decision authority of emergency response personnel. Essentially, the CMT manages the crisis to closure.

After emergency response planning, crisis management planning is the next step in the continuum of the contingency planning process. A crisis management plan should address the following activities and concerns:

  • • Crisis management teams : Managing a crisis can’t be left to emergency personnel only. When an incident escalates into a crisis, the situation becomes more complex, affecting different aspects of the business if not the entire business and requiring different skills to manage it. Employees with a broad understanding of the enterprise and its mission, goals, and objectives are much better suited to manage a crisis than those with a more narrow perspective of the business. Ideally, a CMT is like an integrated process team. Skilled professionals representing different disciplines come together on a short-term basis to work on a specific issue or tasking. In the case of CMTs, the task is to serve as a deliberative body to plan and prepare for a crisis and, when a crisis occurs, manage that crisis so as to mitigate damage or its impact. CMTs should include members with expertise in the following areas: security, human resources, site management, safety and environmental and safety services, business management and communications.
  • • Disaster operations : In the event of a crisis or disaster, it is to be expected that some personnel may not be able to immediately leave the site. For example, following an earthquake the surrounding area may not be safe for travel. Employees may have no choice but to seek shelter at the workplace for hours or days. Furthermore, emergency personnel may be needed on site for an extended period to assist in recovery operations. Being prepared to deal with this or similar scenarios is essential. Preparation will include ensuring sufficient supplies are on hand to meet the needs of a reasonable number of stranded or support personnel. It is necessary to ensure that sufficient food, water, medical supplies and emergency sanitation, and shelter facilities are available. All of these items can be acquired and placed in a long-term storage condition, providing they are regularly checked for serviceability, spoilage, and maintained within the expected shelf life. During a crisis, much uncertainty exists. Consequently, it will be necessary to communicate to employees, keeping them as up to date as possible about the situation and events and providing guidance concerning their safety and work expectations. During a crisis, employees are naturally anxious. Prompt and clear communications can help reduce this anxiety and keep employees informed. Communication may need to extend beyond the duration of a crisis into an undefined subsequent period. Using the previously referred to emergency contact and notification number, or company Web site, can be very effective. Messages can be updated regularly as needed so the information is current. Also, information broadcast on local news radio stations can reach a large population of employees. At the point in time where an incident escalates into a crisis, the CMTs become involved, managing the crisis to closure. At some point during a crisis, a deescalation of events will occur and eventually the crisis will terminate. If the impact or damage from the crisis is significant, the CMT will commence with restoration activities. These activities may be led by the CMT or passed on to a business continuity team. How this can work will be discussed further in the next section.
  • • Media relations : During a crisis, it is possible that the local, national, or even international media will become interested in events. For example, large industrial fires always draw the attention of local media. Natural disasters also draw much media attention. Even isolated events such as incidents of workplace violence can draw significant media attention. It is therefore important to have a media relations plan. The company media representative should be part of the company CMT. Since there is always a degree of unpredictability during a crisis, it is best that all CMT members understand how to deal with the media and be prepared should they be thrust into such a situation.
  • • Damage assessment : During a crisis, emergency personnel will make ongoing damage assessments, reporting status back to the CMT. These assessments are useful in determining actions to be taken next. However, these assessments are situational and due to the circumstances and nature of a crisis, do not have the luxury of thoroughness. The true extent of damage is not determined until after the crisis has terminated and a complete building, facility or site assessment can be made. Immediately following a crisis, a damage assessment for infrastructure safety and functionality must be made. Without this, a return-to-work decision cannot be made. The damage assessment is also the starting point for all restoration and resumption activities.
  • • Business continuity team : Earlier reference was made to the transition of responsibility from a CMT to a business continuity team. This is an important step in the effort to resume business. While the CMT’s focus is on managing through the crisis, the business continuity team’s focus is recovery and resumption. The role of a business continuity team will be discussed further in the next section.

Business Continuity

Earlier in this chapter, we defined business continuity as the effort to minimize business interruption or disruption caused by different contingencies. When contingencies occur, business recovery and resumption needs to happen as rapidly as possible. In essence, business must continue. Business disruptions can be costly and even catastrophic. Customers, shareholders and stakeholders demand the business remain viable. Preparation to deal with contingencies is a critical component of keeping the business going and maintaining the viability of the enterprise.

Business continuity is a two-stage process. Business recovery is the first stage. Business resumption is the second. The recovery effort is the process of getting the business up and running again but only in a minimal acceptable condition. It is not a recovery to a preevent condition, but rather a recovery to produce product, make deliveries to customers and accomplish the basic activities to keep the business going.

The business resumption stage is the effort to recover from a contingency and resume business in a preevent condition. This is not to say that all critical processes and other processes will be exactly the same as they were preevent. Resumption planning may call for new or modified processes. The intent is to resume business operations to a level similar to the preevent operations level, but not necessarily exactly the same.

A business continuity team should be established to provide oversight of the development of business resumption plans. Representation from each of the major business functions should be part of this team. Manufacturing, business management, finance, engineering, information technology, human resources, legal and others major areas, and disciplines within the business, depending upon the nature of the business, need to participate. Business resumption teams lead the effort and planning process to ensure the business is prepared to recover from contingencies and resume full business operations. In some cases it may be necessary to have a major supplier or customer participate as a member of this team. Business recovery and resumption planning have common elements. The difference is the stage of recovery and the time necessary to get there. Following are common elements of the processes for business recovery and resumption:

  • • Define critical processes : Each major business area, function and discipline should provide to the business continuity team a listing of all critical processes. The business continuity team should then review these processes for criticality and prioritize them, creating an official critical process list. Planning for recovery of the critical processes is the primary concern. Noncritical processes should be recovered and resumed after the critical processes. Resource and time limitations do not allow for resumption of all processes at the same time. Processes critical to the business must have top priority. Any processes determined not to be critical should be planned for during the later stages of the resumption effort.
  • • Critical process interdependencies : As part of the critical process assessment, particular emphasis must be placed on information systems and process interdependencies. For example, an information system in and of itself may not be determined by its process owner to be critical. However, if it supports a critical process and that critical process can’t be completely restored without the information system, then that information system itself becomes critical. Examining processes as part of a system is essential in the assessment of criticality. Interdependencies need to be identified in order to properly assess criticality to the business. Other interdependencies may exist in the form of relationships with organizations outside of the enterprise. These too must be considered. Different methodologies can be used to estimate potential impact a contingency or disaster may have on a critical process. When considering the criticality of a process, the financial effect, operational effect and any less tangible or quantifiable concerns, such as customer satisfaction, must be addressed.
  • • Resources : Critical process recovery requires an assessment of resources. Planning for process restoration means considering what resources may no longer be available and will need to be acquired or obtained to get the critical process up and functional again. What type of facilities will be needed and where? Will additional hardware, software, or equipment be required? Will people capable of managing and working the processes be available? Will there be effective means of communications? If not, what must be done to provide a minimum capability of communications until full communications can be restored? These are some of the resource issues and questions the team must grapple with.
  • • Mitigation strategies: For those processes identified as critical, preevent actions can be taken to help mitigate the impact, both operationally and financially, of interruptions to the business. When developing contingency plans for critical processes, strategies will become apparent that may be implemented prior to an event that will lessen the impact of an event if and when it occurs. A cost/benefit analysis may be required to assess the feasibility of implementing a preevent action and if the analysis shows it to be an effective action, it should be taken. For example, an old building not built to current building codes may be vulnerable to damage from an earthquake. If that building supports a critical process, it may be more cost effective to retrofit the building with the necessary structural supports and bring it into compliance with current standards than to risk severe damage in the event of an earthquake, rendering a critical process inoperative.
  • • Vital records : The ability to recover vital records is critical to the recovery and restoration process. Having a vital records protection and management program will enable the recovery of essential information during a contingency.
  • • Customers and suppliers : The importance of considering input, participation, and impact to customers and suppliers cannot be overstated. Any business continuity planning must take into consideration customer and supplier relationships. Moreover, it is important to work with your suppliers and providers of goods and services to ensure they too have contingency plans in place. In the event a supplier supports one or more of your critical processes, a disruption to their business will impact your business operations.
  • • Communications : Communicating during the recovery and resumption process can be just as important as communications during other phases of a contingency. Employees who may have been affected by the events of a crisis or disaster need to be kept abreast of developments affecting them and their employment. Customers and suppliers need to understand the progress made toward resumption of business, as it may have a serious impact on their operations. Even the external worlds of stakeholders and shareholders have an interest in these events.
  • • Lessons learned : There is an old adage that lightning doesn’t strike twice in the same place. If only that were certain and true, and applicable to the critical processes of a business. However, it is not. Therefore, much can be learned from each phase of managing and recovering from a contingency. Documenting the process of recovery and restoration will help in identifying the things learned, both good and bad, and will go a long way toward helping to deal with other crises when they occur.

Business Recovery

The previous section addressed areas and issues common to resumption and recovery aspects of the total contingency planning process. This section will discuss areas specific to recovery and the short-term process of resuming normal business operations.

Recovery plans focus on getting the business up and running—in essence, the actions that need to be taken within the first 30–60 days to restore critical processes and resume operations. These should be the most critical processes focused on infrastructure, product delivery, and keeping damage or loss to an absolute minimum. As difficult as it may be, people need to be part of this equation. For example, should a natural disaster occur, causing severe damage to a building or facility, there is a good chance that some key employees may have experienced something similar. Some may be preoccupied with their own issues of recovery and restoration and may not be able to support the company. Generally, you can expect this to be limited to a few, but it could be a critical few. Part of the critical process planning should take this into consideration and identify alternatives.

Vital records recovery is very much part of the recovery process. Being able to access off-site records storage, hard copy, and electronic, is critical to expediently moving this process forward. Many companies use outsource providers to handle, store and, retrieve their vital records. This process allows for separate storage, away from company facilities, and reduces the possibility of damage or destruction to these records. There are many capable and reliable companies throughout the world who perform vital records handling, storage, and recovery.

Business Resumption

Issues and areas of focus and concern that are common with recovery and resumption were addressed earlier. This section discusses areas specific to resumption and the long-term process of resuming normal business. Long-term priorities are addressed in business resumption plans with the intention of restoring operations to a preevent condition. Restoration to a preevent condition does not necessarily mean that all is the same or equal to the conditions prior to contingency occurrence, crisis, or disaster. During the process of recovery and restoration it may be learned or discovered that the implementation of a critical process or other processes can be accomplished differently, in the sense that improvements can make the process more efficient and more cost effective. Consequently, changes can and should be made. Furthermore, it may be learned that some processes can be eliminated altogether. Recovery and resumption in many ways are similar to a reengineering process. Process owners are usually the best source for ideas and as they participate in resumption they may develop new approaches and methods to implement and execute their process.

If the process is simple, changes can be implemented quickly with little or no additional review from management or the business continuity team. If the process is complex, affecting, or dependent on other processes, a cost-benefit analysis is warranted to accurately assess the impact of any proposed changes.

Defined, “a pandemic is a global disease outbreak.” (end-note WebMD). This has driven governments and private organizations to take mitigating steps to address the pandemic threat. Pandemic preparedness continues to receive much attention most recently the middle east respiratory syndrome (MERS), the H5N1 Avian Flu and the H1N1 Swine Flu viruses remain active in various parts of the world, with the H5N1 being active mostly in Asia [4] . Pandemics are not new, having been with us since humankind’s earliest time. They don’t occur frequently but when they do, the effects can be devastating. The last devastating pandemic occurred in 1918, when the Spanish flu affected more than 30% of the population, killing between 50 and 100 million people worldwide and disrupting the normal lives of societies around the globe [5] .

Planning for a pandemic requires an emphasis on people. The focus is on planning to keep employees, and their families, healthy and in the workplace where they can be productive. Pandemics affect people, not infrastructure, although without people operating an infrastructure is at best difficult, and may be nearly impossible. Consider running the air transportation infrastructure without people. With a 30% reduction in the number of air traffic controllers, pilots and maintenance personnel, would this system work effectively, or would it even work at all? How would your business be affected if air transportation was limited or shut down for operating for 30 days?

The Center for Disease Control and Prevention (CDC) has created a Pandemic Severity Index to assist local and state governments in assessing the severity of a viral outbreak. The level will help officials determine the extent of school closure, quarantines, and work-from-home assignments.

  • • Category 1 involves less than 90,000 deaths and would not require school closures.
  • • Category 2 and 3 would recommend school closures and limiting personal contact for up to one month.
  • • Category 4 or 5 would potentially involve over 1.8 million deaths, school closures of up to 3 months and limits on public events [6] .

Within this chapter, the authors have attempted to provide the reader with a framework for understanding the complexities of contingency planning and the development of contingency plans. A particular point we attempt to make lies with the importance of planning for categories of contingencies. It is a daunting task to attempt to plan for each and every possible contingency. However, contingencies can be grouped into categories and planned for accordingly. This allows for consistency in preparedness and best utilization of resources. Types of contingencies develop and change over time as societies and organizations change and progress. Prior to the 20th century, nuclear contamination was not a concern, but today countries with nuclear power generation capabilities have in place extensive contingency plans that are regularly tested. More common hazards such as severe weather and other natural events have caused enough damage to drive organizations to better preparedness. State and local governments along with private enterprises in states like California and Mississippi spend large sums of money to prepare to mitigate the effects of earthquakes and flooding.

  • 1. Emergency response
  • 2. Crisis management
  • 3. Business continuity: business recovery and business resumption

Emergency response activities involve responding to an incident, crisis, or disaster and managing that incident at the scene. Should an incident escalate to the crisis or disaster stage, a CMT should take over managing the crisis to its conclusion. If the crisis or disaster does cause damage to a company building, facility, or operation, the CMT should hand over to a business continuity team the responsibility of recovery and resumption. After a disaster, it is critical that the business recovers and resumes normal (preevent) operations as soon as possible. Customers, shareholders, and stakeholders expect nothing less. Executive management has the obligation to ensure contingency planning is properly considered and addressed within their company. The consequences of not planning for contingencies can be catastrophic, with numerous liability issues

Critical Thinking

Can a business be successful without having contingency plans?

Review Questions

  • 1. What are the key elements of any contingency plan?
  • 2. What should be the role of security in developing a contingency plan?

IMAGES

  1. 40 Detailed Contingency Plan Examples (& Free Templates) ᐅ

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  2. The 5 Key Elements of Successful Contingency Planning

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  3. A Step-By-Step Guide to Creating A Contingency Plan

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  4. 40 Detailed Contingency Plan Examples (& Free Templates) ᐅ

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  5. FREE Contingency Plan Template

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  6. 40 Detailed Contingency Plan Examples (& Free Templates) ᐅ

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COMMENTS

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  2. What Is Contingency Planning? [+ Examples]

    Manage cookies What Is Contingency Planning? [+ Examples] Flori Needle Published: January 13, 2023 The COVID-19 pandemic has shown, more than ever, the importance of being prepared with a contingency plan for the unexpected, especially when it comes to business continuity.

  3. What is a contingency plan? A guide to contingency planning

    A contingency plan is a proactive strategy to help you address negative developments and ensure business continuity. In this article, learn how to create a contingency plan for unexpected events and build recovery strategies to ensure your business remains healthy. What is contingency planning?

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    A contingency plan is a "plan B" that helps a business address specific situations or incidents that may or may not be out of its control. A contingency plan is the way that your team...

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    Big 5 Personality Test Learn how to leverage your natural strengths to determine your next steps and meet your goals faster. Take quiz What is contingency planning? Contingency planning is a part of a business' risk management strategy. It's how companies foresee potential disruptions to the business. What is contingency planning?

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    Scenario Analysis and Contingency Planning is a process that allows executives to explore and prepare for several alternative futures. It examines the outcomes a company might expect under a variety of operating strategies and economic conditions.

  8. How To Create A Good Contingency Plan

    A contingency plan is a plan for a "what if" scenario that could ruin your project or business. A simple example of a contingency plan is to back up all website data in case a website gets hacked. If this scenario happens, it's easy to restore the data after regaining access and changing passwords.

  9. What is Contingency Planning: A Guide

    Contingency planning refers to creating a proper contingency plan for the organization or the project in case things go south. These plans are usually customized for the needs of a project or organization. So, just about every contingency plan will look different from the others. On top of that, contingency plans can be both small and large scale.

  10. 5 Steps Your Contingency Planning Should Include

    Minimize operational losses during worst-case and unexpected scenarios. Improve your ability to adapt and maximize opportunities. Improve trust with team members and stakeholders. Enable the organization to emerge from disaster stronger. In short, contingency planning makes your organization proactive.

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    Contingency plan examples. It might be beneficial to look at contingency plans covering different businesses and scenarios. Each of them describes several potential risks, the impact the risk might have, potential preparations for risk mitigation, and potential responses if the risk event occurs.

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    Contingency planning is a process in which stakeholders work together to identify potential crisis scenarios and develop a shared understanding about the risk. Basic plan. ... the characteristics of the different potential scenarios, including the number of people affected in different population groups and the various negative effects and ...

  15. What are contingency plan examples? (With definition)

    Examples of business continuity contingency plans. Scenario 1: A data centre goes down, causing major business disruptions. Contingency plan: Synchronise data with a second data centre and switch operations to the second data centre in the event of the first one going down. Scenario 2: A key member of staff who is the sole person in charge of ...

  16. What Are Contingencies and Contingency Plans? With Examples

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  17. Scenario Thinking and Contingency Planning for Decision Analysis

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  19. Contingency Scenario Planning using Generative AI

    While traditional scenario planning works on a horizon of two to five years or more, COVID-19 saw the global requirement for contingency scenario planning (CSP) - compression of the scenario planning timeframe into weeks or even days initiated by contingent or emergency events.

  20. 4 Contingency Planning Scenarios You Need to Prepare For Today

    According to Davis, there are four types of events meeting planners need prepare for: force majeure, literally acts of God; man-made interruptions, such as car crashes; continuity of operations plans, such as internet interruptions and street closures; and medical issues.

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    The most progressive firms offer the team members, fire brigades, and employees an opportunity to preplan (contingency planning) through mock exercises that replicate industrial disasters, explosions, fires, or tornado alerts. The end result is a better-prepared team of employees ready to respond to any contingency.

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