The vast majority of failed projects and bankrupt companies had a plan and followed it. So why do these projects and companies end up failing?
Unexpected things happen that companies don’t plan for, and many fail to adapt in time.
The key: having a sound contingency plan. A contingency plan is all about expecting the unexpected and preparing to deal with worst-case scenarios ahead of time. This article will cover why you need a contingency plan, and walk you through step-by-step instructions for creating one. We’ll also provide a contingency planning template you can implement and use on monday.com immediately.
A contingency plan, also known as an alternate plan or plan B, is a predefined set of actions that you will implement in response to specific future events that put your project or business at risk.
A simple example of a contingency plan is to back up all your website data. That way, if your website gets hacked, it will be easy to restore the data after regaining access and changing passwords.
Without that backup, the team might have to recreate the entire website from memory or build a website from scratch. That’s a significant expense and can mean several extra days (or weeks!) of downtime.
A contingency plan is about managing and lowering risk and setting yourself up for speedy disaster recovery.
There are two types of contingencies that you should plan for: budget contingency & schedule contingency.
Contingency planning and crisis management both aim to maintain continuity of operations but serve different functions. Contingency planning involves preparing detailed, strong contingency plans before issues arise, ensuring your business returns to normal operations as soon as possible.
While crisis management deals with imminent threats and the emergency response plans needed during an actual crisis. An example of this could be the Department of Justice’s post-disaster recovery plan.
While both are integral to strategic planning, contingency planning focuses on developing adequate plans and actionable responses for potential disruptions, like having a backup strategy for normal operations.
Risk management, on the other hand, involves ongoing oversight of potential risks and implementing practices to mitigate them, ensuring that business operations and essential services continue smoothly.
Here are a few examples of how contingency planning could help save the day, no matter what happens:
Imagine that a key team member unexpectedly leaves the project. If you were contingency planning for this scenario, you might outline the following steps you could follow if you lost a key project team member:
How about if a natural disaster disrupted operations at your primary office location? Could your business cope? With a continuity plan in place, you’ll turn things around quickly:
Do all your logistics depend on a few key suppliers? Then you should have a supply chain contingency plan in place, in case of unexpected production or shipping delays.
Murphy’s Law specifies that anything that can go wrong will go wrong. And any experienced project planner knows how true that is! Contingency planning can make or break your business:
Contingency planning helps to identify potential risks and get ahead of them with a proactive action plan. That way, even when things go wrong, you can minimize the disruption to operations and reduce your financial losses.
Having a contingency plan in place enables you to respond to the unforeseen more effectively, adapt to changing conditions, and recover from setbacks more efficiently.
In many industries, contingency planning is mandated by regulatory requirements, so you’ll need these plans in place to avoid penalties and maintain good legal standing.
Customers trust businesses that handle disruptions effectively. The ability to respond quickly and effectively when things go wrong will help build your reputation for great customer service.
Looking for a tool to make contingency planning easier? With monday.com, you can store all your backup plans in a central location, communicate changes with stakeholders, and create automated workflows in response to unexpected events.
Your contingency plan should include the following components:
Begin by making a thorough identification of potential risks that could realistically occur. Depending on what kind of contingency plan you’re putting together, these could be all the risks that could impact your business, or the risks that could delay or disrupt a specific project or product.
For example, in terms of business-level contingency planning, you could list out a variety of negative events including:
Your plan should then outline various responses that you could choose between, for each risk you’ve identified. These might be:
For each risk and response option, you should then add in a plan of action, including:
You’ll also want to make sure that you have a plan in place to communicate effectively with all stakeholders, including:
Decide in advance when you’ll activate a specific contingency response. For instance, you might have a particular threshold beyond which you’ll move to a contingency plan — such as the severity level of a natural disaster. You should also define who has the authority to make these decisions, and how the decision will be made (by committee or by chain of command, for instance.)
To keep your plan up to date, you should schedule regular tests and reviews. For instance, for a natural disaster contingency plan, you might want to run a drill once a year, to practice your response procedures and make sure that everything works as it should.
Let’s cover the basic contingency planning process and detail how to get yours up and running.
What processes are essential to your business and safely delivering your product or service to customers?
If you’re a manufacturing company that ships directly to consumers, a simplified process list might look something like this:
Looking at this list, you can see how vulnerable it is to natural disasters or even minor human errors.
Create an overview of every crucial process in your organization.
Once the process list is created, consider what might disrupt business continuity.
What can go wrong with each of these critical processes?
Let’s look at an example of what could go wrong with “last-mile delivery” …
And that’s only a preliminary list. Once you start thinking about it, you’ll realize how many things you rely on to avoid going wrong, even for fundamental processes.
Every business process is vulnerable to some sort of emergency or human error and requires a solid risk management process.
Once the key risks are identified, it’s essential to determine how they could impact your business.
Are they likely to happen? How large will the impact on your business be if they do occur?
Most companies use “qualitative risk assessment” to do this.
PMI uses the following risk exposure assessment table — also called the probability impact matrix — to evaluate … the probability and impact of potential risks.
First, rate the severity of the impact on a scale from 1–100. Then, multiply with a percentage based on how likely it is to occur.
The quantitative risk assessment approach is less common — but more practical — to assess the potential cost of each risk.
How much would each risk potentially cost your business? To get a better overview, add these 4 columns to the risk register template:
This means you can make an educated decision when budgeting contingency reserves into project plans and yearly budgets.
During the risk analysis, estimate the potential costs of the adverse event.
EXAMPLE: if your online store goes down, multiply the average online sales revenue per hour with expected downtime. Make one pessimistic and one realistic estimate.
Your hosting service may also have a flat fee for restoring sites, which would be your response cost. If these costs are unreasonably high and the event is likely, estimate the costs of a mitigation effort. In this case, it could be a firewall and extra procedures, like 2-factor authentication, an important security system, for all employees.
Budget in those costs. An accurate budget is the first part of emergency response and prevention. Without enough cash, your team won’t be able to put any response plans into action.
Create a response plan for events by exploring the following questions:
The specifics depend on your company’s unique processes and situation.
Once you create a detailed plan it’s super important to actually test it to make sure that it will work as your intend it during a crisis. These tests help identify any weaknesses and ensure that all parts of the plan are actionable.
For example, running simulations for your drought contingency plan or pandemic contingency plan enables you to reassess and refine your recovery strategies. This preparation is essential to keep normal operations intact and provide critical services like medical services and operational HR services without interruption.
A contingency plan only works if it’s used when things go wrong—and that means that everyone in your organization knows to reach for the plan in times of trouble. To make sure that happens:
If you want your contingency plans to protect your business, you have to keep them up to date. That means you’ll need to schedule regular reviews of the plan to check that it’s still relevant and aligned with your changing business.
This involves conducting a business impact analysis to update key elements of the plan and ensure that recovery strategies are robust. Regular reviews also provide the opportunity to incorporate new insights and improvements, guaranteeing that your contingency plan remains a reliable tool for maintaining business operations and navigating through times of crisis.
Remember to communicate updates or revisions to all relevant stakeholders, and provide opportunities for additional training if needed.
Having your business contingency plan on paper is an excellent place to start. But it won’t translate to how your entire company will tackle a crisis.
That’s where monday.com comes in. Our flexible digital workspace gives you everything necessary to ensure everyone follows the contingency plan when they need to.
Make sure that no employee is left clueless during a crisis. Our contingency plan template has everything you need to start the planning process.
With our pre-built template, you can feel confident you’re following best practice contingency planning, so your business will run smoothly even in the case of unexpected events.
With monday.com’s powerful integrations and automations, you can respond to unfavorable events more quickly.
For example, you can immediately create and assign a work item whenever a customer submits a bug report.
This approach helps avoid another potential problem: customer service failing to report bug reports to your development team.
The best time to start acting is before a catastrophic event that puts your entire project or business at risk.
You need to minimize potential threats to your business by creating a comprehensive contingency plan for each business unit for every unforeseen event.
To do that, your management team needs a clear understanding of the project’s status at all times.
Use the 30,000-foot view every manager needs to avoid predictable project delays and failures and check that project controls are working properly.
When starting a project or business, most people plan according to the status quo. Unfortunately, that’s a best-case scenario and not helpful in the real world.
A contingency plan helps you prepare for worst-case scenarios and keep your project afloat, should anything go wrong.
Rosanna is a freelance content writer who writes non-boring content for B2B SaaS clients like ThoughtSpot, Lattice and monday.com. She lives in Spain with her husband, her son, and a beagle puppy who eats her furniture. Learn more about her here: rosannacampbell.com
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