Five ways of creating an effective contingency plan for your business

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In its essence, a business contingency plan is a course of action or backup strategy that your company can utilize to deal with unpredictable, unexpected situations. While sometimes, a contingency can lead to positive business outcomes, other times, it usually reflects an adverse concern or event that might end up affecting your business’s financial health, credibility, reputation, and ability to stay open.

Typically, adverse events that require a contingency plan include data breaches, natural disasters like floods, fires, or earthquakes, and significant IT issues, to name a few. 

That said, a contingency plan is a vital aspect of any business continuity strategy. After all, it will allow you to ensure your company remains well-prepared for unforeseen challenges.  

Due to this, most government organizations and businesses create multiple contingency plans to tackle various threats via a well-researched action plan. With that said, developing a contingency plan involves a lot of planning and research. 

Not to mention, you can create one at various levels of your business. That way, if a particular adverse event affects specific business departments, your team can take swift action and come out unscathed. 

So, without further ado, let us look at a few ways to create an effective contingency plan for your business in the section below.

Develop an official contingency policy. 

A contingency policy statement will allow you to follow precise instructions and guidelines whenever your business goes through an unforeseen issue or something goes wrong. 

Developing a contingency or Plan B takes experience and knowledge, which is why it is crucial to hire qualified business managers with an MSOM degree to take the reigns of strategy implementation. 

An effective contingency plan ensures you, your managers, and employees remain on the same page when responding to an emergency or business disaster. 

As a result, your quality of response will drastically improve, and everyone involved in your business will be well aware of the guidelines if things go wrong. 

Create a list of risks. 

Before you can respond to issues and disasters, you must first determine their type and severity. So, start by creating a list of risks that might affect your business. However, don’t forget that there are varying levels of contingency planning. So, ensure that you plan at the program, department, and business level. 

Moreover, ensure that your contingency plans are well-aligned with the magnitude and scope of the adverse events you want to respond to. 

In the end, planning for contingencies is a large-scale effort. So, it is advisable to communicate with stakeholders, co-owners, and managers to brainstorm ideas and determine potential risks. 

That said, develop a stakeholder analysis map if you don’t know who should be included in communication efforts. Doing so will allow you to identify the individuals that should and shouldn’t be involved. 

Weigh in risks according to likelihood and severity.

There is no need to develop a contingency plan for every risk you face. So, once you outline potential threats and risks, work with your managers, co-owners, and stakeholders to determine the potential impact specific decisions might have on your business. 

Then, evaluate potential risks and threats according to two metrics; the likelihood of the risk occurring and the severity of the impact it can have. 

Assign every risk or threat with a severity and likelihood score out of ten when you do this. The higher the score, the more the likelihood and severity of the risk or threat. 

Determine important risks. 

Once you’re done giving each risk and threat a likelihood and severity score, the next thing to do is to identify significant risks. For instance, you can develop a contingency plan for a particular threat or danger with a high likelihood and severity score. 

You can ignore one that has a low severity and likelihood score. In fact, you should know where to draw the line. For instance, let’s imagine that you’ve given staff shortage a high likelihood and severity score; a threat can lead to decreased operational productivity and increased downtime. It would be wise to create a contingency plan for this threat. 

After all, every employee you’ve hired has a particular set of skills. So, it will be challenging to manage responsibilities if a specific employee decides to quit. 

Update your contingency plan if required. 

While it is all well and good to create a contingency plan for business emergencies such as staff shortages, you must also ensure that you consistently monitor your business for new threats and risks and update your contingency plan accordingly. 

If you find risks, give them a likelihood and severity score like other risks and dangers and create a contingency plan that caters to these particular ones. 

Moreover, revisit your existing threats and risks as the chances are that the ones you deemed significant before might no longer require a contingency plan. 


In the end, a contingency plan is an effective business strategy that allows you to get back on your feet and resume business functions after a disaster strikes. 

So, to ensure that your contingency plan is as effective as you want it to be, follow the ways mentioned above to ensure that you avoid common pitfalls while creating one. 

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