What is a business contingency plan and how do you create one? (2023)

Definition of the commercial contingency plan

A business contingency plan identifies potential risks to your organization and outlines the steps or procedures your management team and employees should take to resolve them. Risks can include a global pandemic, natural disasters, the loss of a key employee, a supply chain collapse, a new competitor, and more. You can think of a business contingency plan as a plan B or a disaster recovery plan. This gives your business something to fall back on if things don't go as planned.

In a perfect world, your business would be immune to disaster. Unfortunately, this is not the case. such a disasterCOVID-19it can attack when you least expect it and leave you in a bind. The unforeseen are practically a guarantee in business.

This is where a business contingency plan comes into play. As well as yourBusiness planHaving helped you start your business, a business contingency plan can ensure that your business is well prepared when times get tough. Let's take a closer look at what a business contingency plan is and how you can create one.

What is a business contingency plan?

A business contingency plan is essentially a strategy that outlines the steps or courses of action your management team and employees should take in the event of a disaster. You can think of it as a plan B or a disaster recovery plan. This gives you something to fall back on if things don't go as planned.

Without a business contingency plan, you are exposing your business to huge losses and lost productivity. It can be the difference between continuing operations and shutting down completely. Unfortunately, many organizations forego business contingency plans because they prefer to invest all their time and energy in Plan A. They don't realize that having a Plan B will help them succeed rather than hinder them.

(Video) Contingency Planning

The importance of a contingency plan should not be overlooked. Because if your competitor has a strong business contingency plan and you don't, who is likely to survive if disaster strikes? your competitor

By investing time and thinking about your plan, you can overcome obstacles and keep your business stable in the midst of a downturn. A disaster recovery plan not only minimizes the impact of unforeseen events, but also creates a plan forrun your businessafter the end of the catastrophe.

When should a business contingency plan be developed?

Most organizations focus on contingency planning during their annual planning session. They discuss their successful strategies for the coming year and identify the risks they need to be prepared for. However, some organizations preferplan for the unexpectedthroughout the year, believing that this is an effective way to deal with various problems.

For example, if you discover in the middle of the year that a new competitor is stealing a large part of your market share, that is when you can create a contingency plan for that specific situation. There would be no point in waiting until the next annual meeting to address an issue that is now coming up.

How to create a business contingency plan

The key to a strong contingency plan is thoughtful brainstorming sessions and solid research. If you want to create a business contingency plan for your business, follow these steps.

Step 1: Take big risks

Think about the nature of your business, the types of products and services you offer, and the customers you serve. What types of events would negatively affect your business and employees,equipmentand other features?

During this step, it's a good idea to hold several meetings with your management team and key employees. If you have the means, it might be worth investing in a business adviser who can point you in the right direction. Your risks are likely to fall into these categories.


People are the soul of your company. Without them, it would be difficult for you to earn money and achieve your goals. consider themanagement team and employeesin your organization. Are there certain people who are important to your company? What would you do if you quit unexpectedly, get hurt or die? Is there a person who knows how to complete a specific task that no one else can?

(Video) Contingency Planning Explained | Business Strategy


Today, technology plays a crucial role in every business. If you are a sales-oriented company, what would you do if your customer relationship management (CRM) Does the system crash? If you offer software development services, what would you do if a particular program stopped working? Make a list of all the technologies and devices you need to function optimally.


chances are goodInventthat you want to protect in the event of a disaster. For example, if you sell women's clothing, this could be the merchandise in your store. If you're offering a service like nursing home, your inventory may consist of stethoscopes, alcohol swabs, and other supplies that your nurses bring with them to client visits.


HayFederaland local laws that your business must follow. Think about what they are, as well as the potential lawsuits you may be susceptible to. You may want to consult a lawyer to ensure that you have all legal aspects of your business covered.

Some of the most common examples of risks are:

  • Your top sales rep resigns
  • a fire strikes
  • A cheaper competitor enters the market
  • Your computer system fails
  • A hacker steals his client's personal information

Step 2: Prioritize risks

Once you've compiled your risk list, it's time to prioritize it. How do you do it? Examine each risk on your list and calculate the probability that it will materialize. Then determine how much it will affect your business if it occurs. The risks that are most likely to occur and can cause the most harm should be at the top of your priority list.

Step 3: Develop an emergency plan for each risk

Once your risks are prioritized, you'll need to develop a separate action plan for each. Start with the highest priority risks and work your way down to the lowest priority risks. Any contingency plan you create should describe what you will do to prepare for that risk and the steps you will take to minimize the damage.

Here's an example of a business contingency plan: Let's say your business includes a call center, and one of your risks is that too many employees are likely to call at the same time. You need these people on the phone or your business will slow down and you will lose money. In this scenario, you can prepare by creating a "backup list" of employees that you can fill out on short notice.

The employees on your "backup list" are people who are always happy to work an extra shift. You have to call them and fill in any employees that don't show up. By creating a contingency plan for each risk, you can gain much-needed peace of mind and relieve stress when you don't have all the resources you need to succeed.

(Video) Create Your Business Contingency Plan

Step 4: Share and change the plan

Your business contingency plan is useless if you're the only one who knows about it. Once you've completed it, save it somewhere your management team and employees can easily access. Also, set up a meeting to introduce everyone and address any questions or concerns they may have. You'll likely find that sharing your business contingency plan with others opens your eyes to new ideas and insights that can improve it.

It is important to note that your contingency plan is not set in stone. Sadly, it's not one of those things you do once and never play again. As your business evolves and time passes, you may identify new risks and solutions to your plan. Set a time each quarter or year to review and modify your business contingency plan as needed.

Business contingency plan models and templates

If you're new to the concept and need guidance, this contingency plan template can be invaluable. You can use it to create a game plan for each risk you need to strategize about.

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What is a business contingency plan and how do you create one? (1)

When choosing a business contingency plan template, it can be helpful to choose from a few different visual options. each model belowcreativeit offers a completely different viewing experience and features several examples of business contingency plans. Depending on your business needs and personal style preferences, one might be more suitable for you than another. Take a look at each template and see which one is easier to follow visually.

Example 1

What is a business contingency plan and how do you create one? (2)

(Video) Top tips to create a business contingency plan

Example #2

What is a business contingency plan and how do you create one? (3)

Example #3

What is a business contingency plan and how do you create one? (4)

How does a business emergency fit into your overall business plan?

While a contingency plan is vital to any business, it's only one part of your overall business plan. The other components of your plan should include financial planning and strategic planning.succession plan. Having a business contingency plan associated with them can give you a good idea of ​​where your business is headed.

You will find that contingency planning complements your financial and strategic planning. After all, if you don't have a backup plan, your big picture may not come to fruition. A business contingency plan takes a proactive approach to running a business and can enable you to weather almost any crisis.

Business-Notfallplan vs. Business-Continuity-Plan

A business contingency plan is used to identify potential business risks and clearly lays out steps for employees to take should any of these risks become a reality. A business continuity plan has a similar name and, like a business contingency plan, is intended to mitigate risks to the business. Business continuity plans describe a process that can help an organization prevent and recover from major business threats. Ideally, this type of plan will help protect employees and company assets in the event of an emergency.

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While you may not realize the importance of having a business contingency plan when things are going well, you'll be quite glad you have one in case an unforeseen circumstance arises.

(Video) Key Steps to Develop a Business Contingency Plan

If you want to protect the health and safety of your employees and customers, minimize interruptions andfinancial lossesTo get back up and running quickly, you need a business contingency plan. In today's unpredictable economy and competitive landscape, a plan B is not a luxury. it is a necessity


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5. Developing a Contingency Plan - Course Trailer - TalentLibrary™
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