Written By: MB Group
As a business person, you probably face many uncertainties each operating day. Unfortunately, some of these uncertainties may threaten the success and existence of your business. Therefore, you need to have a solid plan in place to protect your business from unforeseen events.
Making a contingency plan helps you prepare better for the unknown. In addition, the process of preparing a contingency plan lets you evaluate your business critically to identify any risks to business continuity and find ways to mitigate them.
Read on to understand what a contingency plan is and vital factors to include in it.
A contingency plan is an actionable plan set by business executives or the management team describing how to respond to an unprecedented event that may disrupt operations. The plan sets out steps to ensure that a business can continue operations after a serious disruptive incident. With a contingency plan, business managers can navigate disasters, mitigate risks, and manage the business’s reputation.
Contingency planning is essential for maintaining business continuity. That is why most major companies create several contingency plans covering different events to ensure they can respond appropriately and timely when disaster strikes.
By preparing a contingency plan, your business can respond early enough to unexpected events, ensuring it will make few losses in the long run.
Related: Risk Management for Small Businesses
Contingency planning requires extensive research. After evaluating your business and brainstorming, here are some things you should include in your contingency plan.
Conduct a company assessment and list all the vital resources to your business operations. Consider human resources, capital, tech systems, business facilities, and other assets that are needed for your business.
Before planning your response, you must identify which disasters to prepare for. Consider all possible risks to your business, including natural disasters and threats to your business resources. Involve your department heads or team leaders and other key staff members in the brainstorming process to understand which events affect their operations most. You may also consult a professional to help you identify possible business risks.
Make a list of all the identified risks in order of their priority. Then, you can use a risk impact scale to estimate the likelihood of each risk occurring. The scale will help you prioritize risks that are more likely to occur in your contingency plan.
Besides estimating the likelihood of a risk event, a risk impact scale will also evaluate the consequences of each risk. You may also conduct a business impact analysis to identify the possible effects of a disruptive event.
Noting the risk impacts will help you develop appropriate responses for each risk event to promote your business’s resilience and continuity after a disruption. Ensure you cover all the possible impacts of the risk covered in your contingency plan.
Next, you want to include measures to prevent the occurrence of disruptions in your operational processes. You can do this by establishing policies and standards, separation of duties and physical asset controls, employee screening, and pre-approved transactions.
Sometimes, your preventive controls may fail. When that happens, you want to have a strategy that ensures your business can recover from a disruption. To develop effective recovery strategies, determine your resource needs after a disruptive event based on the recorded risk impacts.
You may also determine the effects of a disruptive event on business performance based on the risk impact scale. This will help you develop strategies to cover the performance gap created by business disruption.
Identify your recovery partners after identifying which recovery strategies your business can use to bounce back from disruptions. These are companies that may help you implement your recovery strategies. For instance, you may partner up with an IT security firm after a cyber attack.
Working with recovery partners is essential because they have the knowledge and resources needed to restore your business operations. Therefore, they can help you recover from unforeseen incidents faster. Your recovery partners may also offer advice on how to prevent some problems and inform you of other related risks to your business.
Ensure you partner with companies that offer reputable 24/7 services because crises may not always happen during business time.
List all the resources at your company’s disposal that you can use to recover from a crisis. For example, consider monetary resources, emergency contacts, human resources, and software.
After documenting your contingency plan, distribute it to all the staff and your management team. You can test the validity of your recovery strategies and train your employees to activate the plan during disasters. You may also enact the contingency plan to identify planning gaps and errors for better preparation.
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