An Overview of Business Contingency Plans

An Overview of Business Contingency Plans

He has published business content in Angling Trade Magazine and writes white papers and case studies for multiple corporate partners. Nurture and grow your business with customer relationship management software. 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. Her work has appeared on Business.com, Business News Daily, FitSmallBusiness.com, CentsibleMoney.com, and Kin Insurance.

If even 1/3 of those who reported — not experienced — the issue went on to switch brands, that’s millions of dollars in lost revenue. Zach Lazzari is a freelance writer with extensive experience in startups and digital advertising. He has a diverse background with a strong presence in the digital marketing world. Zach has developed and sold multiple successful web properties and manages marketing for multiple clients in the outdoor industry.

Step 7. Maintain the Plan

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. It prioritizes the systems that are imperative to the business functions. The Covid-19 pandemic forced many businesses to come up with a contingency plan on the fly.

As you write a contingency plan, it should include visuals or a step-by-step guide that outlines what to do once the event has happened and how to keep your business running. Include a list of everyone, both inside and outside of the organization, who needs to be contacted should the event occur, along with up-to-date contact information. Think of contingency planning as a proactive strategy, whereas crisis management—the other piece of the business continuity puzzle—is more of a reactive strategy. A contingency plan helps to ensure you are prepared for what may come; a crisis management plan empowers you to manage the response after the incident occurs.

Do You Need a Business Contingency Plan?

Contingency planning and risk management are closely related but different processes. Contingency planning addresses the “what if” situations and develops a plan that will work around those situations. Risk management is a proactive approach that companies use to prevent loss or disasters. So rather than being reactive like a contingency plan, a risk management plan looks to stop adverse events from happening in the first place. BC plans are designed to facilitate the recovery and resumption of business activities to as close to normal operations as possible.

Working to own your most basic and necessary assets when revenue is at a peak means you aren’t chasing payments to stay afloat during a crash. 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. 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. Even with the best intentions, your contingency plan may get off to a rocky start. Many businesses rely on a supply chain to provide certain materials in order to create and deliver their products.

steps to create a contingency plan

However, if your area doesn’t experience many earthquakes, you wouldn’t want to spend all your time preparing for this event. If your area is prone to flooding, you should spend more of your resources preparing for floods. As you draft each plan, ask yourself what steps would have to be taken for the organization to resume normal operations. Consider things like communications, employee activity, staff responsibilities and timelines (what needs to happen when). Meet with employees, executives, IT and other key personnel to gain a holistic idea of the events that could impact your resources. If necessary, consider bringing in a consultant who specializes in identifying risk.

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 does come, 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.

Involve other team heads, subject experts, and even outsiders like business consultants to get a deeper understanding of things that may cause problems and jeopardize the direction. An earthquake can bring your whole shop to the ground, your biggest client can choose your competitor over you, your system suddenly can crash making you lose important data etc. There are endless possibilities of disasters if you really think about it.

• You likely already know what these areas are, but you want to do enough research to identify them all.
• During this phase, identify all critical areas essential to keeping your business up and running every day.
• As with all plans, it’s essential to continuously test (more on that in the next section) and update them over time.
• An earthquake can bring your whole shop to the ground, your biggest client can choose your competitor over you, your system suddenly can crash making you lose important data etc.
• A contingency plan is a large-scale effort, so hold a brainstorming session with relevant stakeholders to identify and discuss potential risks.
• Add expandable workflows to any table to ensure everyone follows the same approach.

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. A contingency plan helps you prepare for worst-case scenarios and https://bookkeeping-reviews.com/what-is-a-business-contingency-plan/ keep your project afloat when everything goes wrong. Our flexible digital workspace provides everything necessary to ensure contingency plans get followed. Building a contingency plan for a small business is simple, because the business has fewer employees and moving parts.

What Is A Business Contingency Plan & How To Create One

A few years ago, people would have brushed off companies that prepared for global pandemics and government lockdowns. 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. 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. 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. Rather than fretting about what you should do, you can simply follow the steps you’ve laid out ahead of time.

• Consider what needs to be done in order to resume normal operations after the impact of  the event.
• This article will cover what a  contingency plan is, why it’s essential, and provide step-by-step instructions for creating one immediately.
• As you write a contingency plan, it should include visuals or a step-by-step guide that outlines what to do once the event has happened and how to keep your business running.
• 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.
• Of course, there are a million possibilities that might occur at any time.
• Rather than fretting about what you should do, you can simply follow the steps you’ve laid out ahead of time.
• Where can you cut some fat immediately without losing ground on processes?

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 https://bookkeeping-reviews.com/ of whatever scenarios arise. 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.

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

After you have each scenario and response on paper, it’s time to prioritize. In the case of a financial crisis, what contingency steps are the most important? What equitable assets can be sold or used as collateral against a temporary loan or line of credit? Where can you cut some fat immediately without losing ground on processes?