A contingency plan refers to a process that keeps an organization prepared for logically responding to a sudden/unplanned event. This plan is often termed as ‘Plan B’, as it can also be alternatively used when a specific plan does not come up with expected results. Contingency Plan is a part of regular operations planning, disaster management, risk management and business continuity. In other words, this plan can be termed as a blueprint for dealing with sudden or unexpected events. Regardless of the size and structure, every organization should prepare a proper contingency plan.
What is the purpose of contingency planning?
The main purpose of a contingency plan is to help an organization conduct its daily activities as soon as possible after an unexpected event. A proper contingency plan protects the organizational resources, minimizes the inconveniences of the customers, identifies the staff members and assigns responsibilities that are relevant in the context of recovery. For instance, the human resource team can develop employee evacuation plans, support the benefits program of the employees and hire contractual workers as and when it is necessary.
A contingency plan also minimizes the loss of an organization. When a company experiences an unforeseen event, this plan helps in minimizing the loss of production. The plan may consist of data re-routing, emergency power generators, escape routes for the employees.
Besides minimizing the loss of production, a contingency plan is also extremely important in preventing panic. Very often, at the time of a disaster, people tend to panic if they do not have a proper plan of action to follow. A well-formulated contingency plan will allow the employees to evade the situation quickly, instead of waiting for instructions. When everyone has an idea of what to do and where to go, the proper order can be maintained. Averting panic and tension helps the managers to focus on efforts to conduct recovery operations.
When a company has a concrete contingency plan, the individuals in charge will be forced to evaluate every possible ramification during the time of the disaster. This plan will help an organization to observe the ‘big picture’ and devise a methodical process to handle a crisis. Devising and maintaining a contingency plan involves a certain cost. However, when compared with the cost of production loss, it will be minimal.
What threats are covered in a contingency plan?
Contingency plan covers a series of threats including;
- Crisis Management – Covers every kind of crisis that can affect the well-being of a company. Some of them are natural calamities, terrorist attacks, fire and job injuries
- Continuity plan – Covers a wide range of adverse situation, including the demise of an important officer, unforeseen events that can shut down the organization and all other adverse financial situations.
- Asset security – Refers to the theft or the destruction of the company’s intellectual property.
- Mismanagement – Refers to frauds, operational errors, thefts in the organization and scandals (both at personal and organizational level).
- Reorganization – After a devastating situation, the contingency plan also discusses how the company can once again re-establish normal operations.
Thus, it is very important to have a contingency plan that will help an organization to handle adverse and unexpected situations.