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Contingency Planning


Things don't always work out as firms would like them to and could cost the firm a lot of money in lost business. This means that firms need a plan for when there is a problem (contingency) to limit the amount of money they lose. This plan is known as a contingency plan and usually covers things that the firm cannot control. Small firms will probably have one contingency plan but large firms will have a number of contingency plans to cover each of their departments and sites.

The picture below is an example contingency plan

Example Contingency Plan

Examples of Events “Beyond a Firm's Control”

There is an endless list of things that can stop it being “business as usual” for firms. Firms will find it impossible to stop the following things happening:

Drawing up a Contingency Plan

As the events listed above are difficult to prevent it is prudent to draw up a contingency plan to manage their impact. The steps in writing a contingency plan are as follows

Managing and Communicating Your Contingency Plan

Choose a person to make sure that the actions (solutions) to set up the contingency plan are completed by the agreed deadlines. This person should regularly review action completion and take necessary action if completion is not on track. It is also very important to tell all your employees and anybody that is included in your plan e.g. suppliers, distributors, and retailers about the contingency plan. This will help people understand what they need to do if one of the events (in the plan) happens. Communication should also reduce the number of people “panicking” when things don't go to plan. There are a number of ways to communicate the plan including training sessions and posters.


The good news is that the majority of days are “business as usual” but on the rare occasion that a day is not as normal, a contingency plan will minimise business disruption. A good contingency plan will limit losses and enhance your firm's reputation. Contingency plans may take time to set up but you will get more than the time you invested (in the plan) back, the first time you use the contingency plan. Finally to make sure your plan continues to be an effective solution, review it periodically to make sure it still meets business needs.


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