Contingency planning is a risk management strategy that involves developing alternative plans or strategies in case the primary plan is disrupted by unforeseen risks or events. The purpose of contingency planning is to minimize the negative impact of disruptions and to ensure that an organization is able to continue operating as smoothly as possible.
Contingency planning involves identifying potential risks that could disrupt the primary plan, assessing the likelihood and impact of those risks, and developing alternative plans or strategies to mitigate their effects. This may include identifying backup resources, establishing communication protocols, and implementing procedures for dealing with unexpected events.
Contingency planning is an important part of effective risk management, as it helps organizations to prepare for and respond to unexpected events that could have significant impacts on their operations. By developing contingency plans, organizations can minimize the potential consequences of disruptions and increase their ability to recover quickly and effectively. The following are illustrative examples.
Disaster
A school near the sea plans for a tsunami. This includes a detailed evacuation route, procedures, roles & responsibilities, training and regular drills that are evaluated to drive improvements.
Environment
A city plans what it will do if air quality reaches dangerous levels. For example, they may identify sources of pollution that will be shutdown in an environmental emergency.
Infrastructure & Facilities
A firm plans what it will do if an entire data center goes offline for an extended period of time due to damage to infrastructure such as solar panels, electrical grids, telecom networks, roads and/or the facility itself.
Partners
A firm plans what to do if they lose a major partner. For example, an electronics manufacture that makes contingency plans for the loss of a core supplier.
Talent
A firm relies on the instincts and creative talent of a chief design officer who has consistently developed winning products. They plan what to do if the designer leaves the firm. For example, they may plan a professional development program that allows 6-12 designers to acquire the abilities required to one day assume the chief design position.
Markets
A firm plans what they will do if a major product update fails on the market.
Political
A company plans what to do if political instability impacts its supply chain in a particular country or region.
Trade
A company plans what they will do if a trade war and resulting trade barriers causes their products to be uncompetitive in foreign markets.
Prices
A farmer plans what to do if corn prices fall dramatically such that it is no longer a viable crop on her land.
