What is a Contingency Plan? 7 Steps to Rock-Solid Contingency Planning
17 min read
Vlad Kovalskiy
March 29, 2023
Last updated: April 5, 2023
What is a Contingency Plan? 7 Steps to Rock-Solid Contingency Planning

Table of Contents

Introduction

  1. Understanding and prioritizing risks
  2. Gathering essential information about your business
  3. Developing a response strategy
  4. Creating a backup plan
  5. Conducting regular reviews and updates
  6. Communicating your contingency plan
  7. Evaluating success and improving your plan
Preparing your business for the unexpected
FAQs


Every breakthrough in technology brings another set of risks that are threatening the very existence of businesses across all sectors. A contingency plan is a proactive approach to managing those risks and making sure that when the worst does happen, you can step in and save your company. 

A modern-day contingency plan definition is “a detailed strategy of how a business responds to potential risks and threats, including natural disasters, reputational damage, cyber-attacks, and economic downturns”.

In this article, we're going to provide a step-by-step guide to developing a rock-solid response plan. We'll explore the key elements of contingency planning and provide practical tips on how to continuously improve your strategy. 


1. Understanding and prioritizing risks

The first step in creating a contingency plan is to identify the risks that your business may face. 

Risks can be categorized as internal or external. Typical internal risks are those that arise from within your organization, such as data breaches, employee theft, or equipment failure. External risks, on the other hand, are those that come from outside your organization, such as hurricanes, pandemics, or economic crises.

Despite common contingency plan definitions, risks are not always catastrophic events. One of the most common risks is the freelance photographer you regularly book in isn’t available for your important press event. 

Remember that unless you’re a solopreneur, no one person can have eyes in all areas. So pull together representatives from each department and schedule a meeting to get a fuller picture. Your IT department will come up with tech-related risks, while your finance department will be more sensitive to shrinkage or fraud. 

After identifying potential threats, you need to prioritize your risks based on their likelihood and the impact they would have on your business. This will help you focus your resources on the most significant risks and develop effective response strategies. For example, a data breach may be more likely to occur than a hurricane, but a hurricane could more significantly affect your business. By considering both factors, you can prioritize your risks and develop successful response strategies.

Understanding and prioritizing your risks is the first step to any effective contingency plan. When you know what you’re up against, you can make informed decisions about how you deploy resources to reduce risk.


2. Gathering essential information about your business

With your risks in always front and center, the next step is to gather essential information about your business operations and resources. This stage isn’t something you can bash out in 20 minutes, but it will help you develop a solid response strategy and create a backup plan.

To understand your business operations, you need to document your key processes and workflows. Let’s take project management as an example. By analyzing your team’s performance, you’ll know how long every section of a project takes, as well as each task. If you know your processes inside out, you know what level of service you can offer.

This kind of information is vital to informing a contingency plan that works. The risk to your project is that your client’s vision changes and expands beyond the brief you initially agreed on. With the limits of your team at hand, you know you can’t be flexible on the project scope. Therefore, you could come to the conclusion that a legal document at the start of a project is the right way forward.

You also need to know how sections of your business are linked. For example, can your sales team still serve clients if your internet is down? What is the minimum service you can give on customer service if half your team is off sick? How long your business can realistically continue to operate when hit by the potential risks you’ve pinpointed?

This information-gathering mission will give you a clear-eyed vision of the fabric that holds your organization together. From people and resources to processes and KPIs, you now have a base on which to build an effective response strategy.


3. Developing a response strategy

Armed with an understanding of your risks and your business operations and resources, the next step is to develop a response strategy. Here, we’ll outline steps to take to make an effective response plan for each threat, identify response teams and responsibilities, and establish communication protocols.

Plan for each threat indvidually

For each possible eventuality, you should develop a response plan that outlines the steps your business will take to mitigate the impact. Your response plan should include specific actions to be taken, timelines for implementation, and contingencies in case Plan A doesn’t work.

Identifying response teams and setting responsibilities

When it comes to contingency plans, accountability is key. You can’t be faced with a situation where you receive reputational damage because nobody took responsibility. Therefore, identify response teams to lead the charge in each situation. Each team should have a designated leader and clearly defined roles and responsibilities.

Establishing communication procedures

Clear, effective communication is critical during a crisis, and it's important to establish communication procedures in advance. Create a communication hierarchy with the designated leader of each strategy at the head, and identify which channels you can reliably use. You may also want to tailor your policy for each risk, such as defining what information can be shared during a cyber attack.


4. Creating a backup plan

If you’re serious about risk management, you’ll know that you can’t rely on a single strategy for each risk. Yes, you may have planned it perfectly to the letter, but if there’s one thing for sure in this world, if something can go wrong, it most likely will. 

When creating a backup to your initial contingency strategy, it’s best to look to the bare basics. You know what essential functions you need to keep going, and your backup is a last-ditch effort to stay afloat. A great place to start is with physical harddrives. The cloud is a pretty secure place if you’ve got two-step authorization and other security measures, but in the event it is hacked, there’s no excuse for not having backups of your data. 

Make testing these last-resort efforts part of your routine with automated reminders every quarter. The last thing you want is to launch your backup plan, only to find your harddrives don’t work. By creating a backup plan, you can move forward with confidence, knowing that even if your risks come to fruition, you’re in a great position to absorb them. 


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5. Conducting regular reviews and updates

Contingency planning is not a one-time event. To ensure that your plan remains effective, you should conduct regular reviews and updates. As we mentioned before, checking harddrives is a wise idea if that’s your last resort, but there are many more strategies you can implement for increased security. 

When you run tests, take a close look at what works and what doesn’t. Your regular business functions will change rapidly over time, and many of these changes will affect your risk management approach. For example, if you’ve recently implemented fingerprint-sensitive door locks, is there an override in the event of a fire? 

This section is all about staying relevant and effective. And if a response strategy leader left the company half a year ago, they’re far from relevant and effective. That’s why its so important to be thorough about testing your approach. 

The best way to stay on top of things is to be strategic about your testing. Create a workflow that takes you through each strategy step by step, making sure nothing falls through the cracks. Include checklists to make sure you all the right people are still on board, the technology you rely on still works, and the physical structure of your office is the same. 


6. Communicating your contingency plan

It’s great if you as a leader know your Plans B and C inside out. But its not so helpful if you don’t share that knowledge with your team. Unless everybody knows their role and responsibility, you will inevitably run into confusion. Communicating your plan is a key factor to success, so you need to know how to train employees on the plan and offer updates when necessary.

It's essential to communicate your contingency plan to your employees as well as any providers or clients who will be working on your premises or network. The best time for training is during onboarding. Make sure to explain the what, why, who, where, when, and how of your plans, and brief each individual on their role. Reserve any key duties for permanent members of staff and keep other instructions as simple as possible. 

Whoever is involved is likely to forget your plans, so the first step is to leave them with a copt of your materials on the cloud. Accessible by desktop, laptop, tablet or mobile, you can update your documentation and point people to it when any changes have been made. 

It is still highly unlikely that your teams share your contingency passion, so be sure to run test drills or simulations to give people a more hands-on reminder. 


7. Evaluating success and improving your plan

Finally on our list, and something you may not expect to hear when asking “what is a contingency plan?” — evaluating your success. Your backup plans don’t exist in a vacuum, ready to be brought into action when needed, then forgotten about again. Similarly, your plans aren’t infallible, and you can always learn from past experience. 

Just as you would with your day-to-day projects, run performance data analytics on your plan. This data can include metrics such as response times, the number of disruptions, and the effectiveness of response strategies. Analyzing this data regularly can help identify areas for improvement and keep your plan up to date.

If your performance data highlights problematic areas, you may need to modify your plan. With a structured workflow for every strategy in place, you can pinpoint the stage that things went wrong and adapt your approach. 

However, the problem may not have been a structural issue. If the failure was due to human error, you can take steps to rectify it. This can include additional training on response strategies, communication procedures, and the use of backup resources. Retraining workers can help ensure that they are prepared to respond to any disruptions effectively, and give them more confidence for when they’re needed. 


Preparing your business for the unexpected

It’s clear to see that when having a solid contingency plan in place is essential for businesses to minimize the impact of potential disruptions. However, despite the clear advantages, many businesses overlook risk management as a whole, always believing it won’t happen to them.

So if you’ve got a cautious eye open for your organization, how do you start implementing effective change? 

Begin by creating a plan yourself. Once you have made headway, you can either convince superiors to implement your strategy, or ask your team for feedback. 

The best way to write up a contingency plan is with Bitrix24 — one tool that unites all areas of your business. From gathering performance data and studying your internal processes, to storing contingency documents and communicating across all channels, you can get all the tools your business needs in one easy-to-use place. 

So if you want to make your business resistant to risk, get your first line of defense by signing up to Bitrix24.


FAQs

What is a contingency plan, and why is it important?

A contingency plan is a set of predictive procedures to be implemented when possible negative situations occur. It is essential because it helps businesses continue operating during unexpected events and reduces the financial impact of any disruptions.

How often should a contingency plan be updated?

A business should review and update its contingency plan at least once a year, or whenever there is a significant change in its operations, technology, or industry.

Who should be involved in developing a contingency plan?

Developing a contingency plan should involve all relevant decision-makers, including senior management and department heads. However, all employees, suppliers, and customers need to be aware of their role in case of emergency.


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