An Overview of Business Contingency Plans | Lucidchart Blog

 

contingency plan in business

A contingency plan is a proposed change in a company's strategic direction in response to unforeseen events that cause financial results to vary significantly from what was expected or forecast. Business owners prepare contingency plans because they recognize that it . A contingency plan is a roadmap created by management to help an organization respond to an event that may or may not happen in the future. The purpose of a business contingency plan is to help your business resume normal business operations after a disruptive event. Developing Your Contingency Plan. When you develop your contingency plan, remember that your primary aim is to maintain or restore critical business operations, so look closely at how these might be affected by each scenario. Be aware of knock-on effects.


What Is A Business Contingency Plan & How To Create One


Business owners prepare contingency plans because they recognize that it is difficult to accurately predict the future. During planning, companies make difficult decisions about how to allocate their resources, which include capital, personnel and productive capacity.

These decisions are based on assumptions about the business environment the company will face in the next year and beyond. Many times this environment changes after the plans are implemented, contingency plan in business. Competitors roll out their own strategies to gain greater market share. The general economy can turn up or down -- sometimes suddenly and with little warning.

Many companies prepare contingency plans during their annual planning when they are setting the strategic direction for the upcoming year and for the longer term. But some managers strive to incorporate contingency planning into their decision making throughout the year, recognizing it as a useful tool for dealing with both large and small issues.

A smaller issue would be a competitor convincing a key manager to leave the company to work for him. If the business owner already had contingency plan in business replacement trained or at least selected, contingency plan in business, the change would cause minimum disruption in department performance. Contingency planning requires creative strategic thinking -- being able to imagine what events could occur to push the company off its intended financial course.

During meetings, managers ask how the company would respond if a certain event happened, contingency plan in business. These meetings must be open and freewheeling, allowing all ideas to be expressed without criticism. Contingency planning should not be regarded as something intended solely to address negative occurrences. It is also a tool for planning ahead to take advantage of opportunities that might emerge during the year, contingency plan in business.

An example would contingency plan in business having capital sources in place that can be used to acquire a competitor whose owners unexpectedly announce they would be willing to sell. Having contingency plans in place enables quicker reaction to unexpected events and may lessen the damage to revenues and profit. A retail store could find its business disrupted by street repairs that make it difficult for customers to park and come through the front entrance.

The store should have a contingency plan in place to quickly rearrange the back entrance so customers can come in that way, including signage to alert customers to the change. Share It. About the Author. Photo Credits.

 

How to Create a Business Continuity Plan

 

contingency plan in business

 

A contingency plan is a proposed change in a company's strategic direction in response to unforeseen events that cause financial results to vary significantly from what was expected or forecast. Business owners prepare contingency plans because they recognize that it . A contingency plan is a designed planning for a potential circumstance. This planning document may contain potential risk and its management for exceptional level of risky events. The contingency plan can also include the alternative action plans for effectively implement the plans for significant future event. Actually the contingency plan is help to management & [ ]. A business contingency plan is a course of action that your organization would take if an unexpected event or situation occurs. Sometimes a contingency can be positive—such as a surprise influx of money—but most often the term refers to a negative event that affects an organization’s reputation, financial health or ability to stay in.