- Disruptions ranging from natural disasters to the departure of key staff can impact your business
- Creating a contingency plan to mitigate the scenarios you believe your business is most likely to face
- How contingency planning can benefit your business
By Denis Jakuc
Your business contingency plan details the course of action the people in your company will take after an unexpected event happens that could disrupt operations. This is your “Plan B,” or backup plan, to keep the business running in spite of an adverse event. It’s sometimes called a business continuity plan or disaster recovery plan.
Why you need a contingency plan
Every business needs a contingency plan, because every business can have its operations disrupted by an unforeseen event such as:
- Damage to the facilities caused by fire, accidental impact, or natural disasters such as windstorms and floods
- A computer system data breach
- Equipment damage or breakdown
- Extended utility outages that take out lights, heat, air conditioning, water, phones, or internet
- Key staff suddenly resigning or needing to take an extended absence
- Supply chain interruptions, including if an important vendor has a disruption of its own or goes out of business
- Blocked access to your location
- An economic crisis such as the Great Recession
- Or yes, even a pandemic which made you shut down for 12 months.
Some of these occurrences can have legal implications. For example, laws in all 50 states, D.C., and U.S. territories require businesses to notify all individuals whose personally identifiable information was stolen or released in a data breach.
How to create a contingency plan
1. Determine which disruptive events are most likely to happen to your business
Determine the impacts these events would have on your operations. For example:
- Lost or delayed revenue
- Increased expenses for overtime, outsourcing, and other costs
- Customer dissatisfaction or defections
- Contractual breaches or penalties
- Regulatory fines
- Delayed new business plans
2. Prioritize these events based on their impact to your business
Consider their timing and duration as well. For example:
- A disruption that occurs during your busy season will have more impact than one that happens during slower times
- A disruption that lasts a day has less impact than one that continues for a week or a month
3. Write down your contingency plan for each disruptive event
- What steps to take
- Who should take each one
- When to take them
- Any alternative backup steps
- Resources available
- People to contact
4. Roll up the contingency plans for each disruptive event into a company contingency plan
- Share it with everyone who will execute it
- Review and update as necessary
Benefits of a contingency plan
When a disruption occurs, your contingency plan will minimize your losses by restoring much, if not all, of your operations. This process will also take place much more quickly, since you’ve already decided on the resources you need and the actions you’ll take.
In addition, a contingency plan helps keep everyone calm. Instead of worrying about what can be done, people simply follow the steps for orderly recovery you’ve laid out ahead of time.
Ultimately, a contingency plan also bolsters customer and employee loyalty, as it shows that your business is prepared to deal with unexpected challenges, now and in the future.
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InnovatorsLINK Business Writer and Brand Strategist
A business writer his entire career and successful businessman. He was a partner in a top-10 Boston ad agency, a senior level executive at Young & Rubicam NY and Interpublic Group, and, since 2003, an independent consultant for companies from startups to global leaders, positioning their brands and writing all forms of content to promote their growth.
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