contingency plan example in business plan

What Is Contingency Planning? [+ Examples]

Published: January 13, 2023

The COVID-19 pandemic has shown, more than ever, the importance of being prepared with a contingency plan for the unexpected, especially when it comes to business continuity.

While some unexpected interruptions can be due to situations outside of your control, some issues arise that may be caused by internal errors. Unexpected problems can also be positive, like a sudden influx of interest in a new product.

Regardless of the scenario, it's essential to prepare for everything, and contingency planning helps you do so. This post will explain what contingency planning is, outline the steps you can follow to create your own plan, and give examples that you can use for inspiration.

• Contingency Planning
• Business Contingency Plan
• Making a Contingency Plan
• Contingency Plan Timeline
• Contingency Plan Example

Contingency Plan Definition

What is a contingency plan? Simply put, a contingency plan is an action plan designed to help organizations respond to a potential future incident. Think of it as a backup plan, or plan B to guide organizations through a worst-case scenario.

Contingency plans are helpful for all types of organizations, from businesses to non-profits, to government organizations. While these scenarios may never come to fruition, it’s important to have a plan in place so that your team isn’t panicking or scrambling to deal with an unfavorable event at the last minute.

What is contingency planning?

Contingency planning is a proactive process of creating a strategy to help you prepare for any scenario that can affect your business, regardless of the likelihood of its occurrence.

These plans shouldn't focus solely on situations that may harm your business. For example, you may experience a significant increase in revenue during a specific period due to changes in market behavior. This is a good scenario, but you will still need to adapt your operations to scale and appropriately meet the new demands of your growing audience.

Contingency Planning vs. Crisis Management

Contingency planning is also different from crisis management , as it is not a reaction to something that has already happened but more so a plan for if and when something may happen. However, a contingency plan can help you with crisis management when issues arise.

Contingency Planning vs. Risk Management

Risk management is the identification, mitigation, and assessment of potential risks that may affect your organization. This process helps an organization prevent losses before they occur and aids in assessing whether or not certain risks are worth taking. Contingency planning can be a component of risk management since that process helps organizations survive these potential risks.

To ensure your business is prepared for everything, it's crucial to understand how to create a contingency plan.

What is a business contingency plan?

A business contingency plan is a strategy that outlines the steps your business’ teams will take in the event of a crisis occurring. It is essentially the backup plan that goes into action when the worst-case scenario occurs. The goal of your contingency plan is to help your business stay up and running after an issue arises.

Business Continuity Plan vs. Contingency Plan

Although their names vary by few letters, business continuity and contingency plans are different concepts. Continuity is the ability of your business to continue functioning after an incident that has disrupted operations occurs. A contingency plan is an action plan that goes into place if an incident were to happen.

Contingency plans can significantly impact whether your business can achieve continuity. Being able to react and take action during a crisis can dictate whether or not your business can emerge from the other side and continue normal business operations.

You can think of it like this: your continuity plans contain five sections: program administration, governance, business impact analysis, strategies and requirements, and training and testing. If your business also uses contingency plans, it could be part of the strategies and requirements section, which dictates how your business will respond to a crisis if it occurs.

Contingency Planning: How to Make a Business Contingency Plan

Creating a contingency plan is responding to the question of "What if?"

What if your storefront floods? Or what if your supplier goes out of business? The responses to the what-ifs are contingency plans. These scenarios aren't necessarily going to happen, but if there is a possibility that they'll affect your business, you're prepared if they do.

Below we'll discuss the steps that go into contingency planning.

Contingency Planning in 7 Steps

1. identify critical business functions..

This first step is the most important aspect of your planning, as it sets the tone for why your plans need to exist in the first place.

During this phase, identify all critical areas essential to keeping your business up and running every day. As these operations are imperative to success, you need to have plans to ensure that these operations continue, regardless of whatever scenarios arise.

You can think of it like this: these critical areas keep your business up and running on a day-to-day basis. Other areas are important, but these are the main functions that keep you afloat. Given this, you want to be prepared for anything and everything that may happen that can affect the critical areas, whether positive or negative. Contingency planning is exactly that.

Identifying these areas helps you move on to the next step as you begin brainstorming possible scenarios that can impact them.

2. Conduct a scenario assessment.

Once you've identified the critical operations of your business, you'll want to conduct a scenario assessment to identify situations that will affect these functions and put stress on your day-to-day operations.

For example, if your business operates out of a storefront, keeping your storefront up and running is a critical area of your business's success. Maybe you launch a new product that attracts more interest than you thought, and you need to deal with higher in-store traffic and a lack of products to satisfy the market. While it is a positive situation that will draw in more revenue, it can still have negative repercussions for your business if you don't deal with it when it happens.

You can think of this stage as similar to a risk assessment, but the possibilities are positive and negative. It may be helpful to meet with people who work in these critical areas and understand what they think may cause interruptions to their job duties and barriers to their success. Ask them how they feel situations will impact them and how they would deal with each scenario.

If you come up with a long list of threats, you can prioritize them based on their likelihood of occurring and how significant their impact would be on your business.

3. Create contingency plans for each scenario.

During this phase, you'll create contingency plans. Begin with the highest priority "threats," or those most likely to occur and most likely to cause significant stress to your business.

Outline the scenarios, people to inform, and the roles and responsibilities involved parties will have when they respond. We'll go over an example below, but a helpful template to follow can be:

• Outlining the scenario,
• Determine the probability of it occurring,
• Explain how you'll prepare ahead of time,
• Detail what the response will be if and when it happens.

Once you've created your plans, distribute them to key stakeholders in each scenario, so everyone understands what they are responsible for and can prepare ahead of time.

4. Get your plan approved.

Once you’ve come up with a desired plan of action, it’s time to get approval from stakeholders and management. If you’re creating both department-level and company-wide plans, this is especially important. Your plan won’t be a success unless there is buy-in from key members of your team and management. Once all parties agree that the course of action described in the contingency plan works for everyone, you can move forward with confidence.

5. Share the plan with your team.

Once your plan is approved, it’s time to distribute it. Putting it in a shared folder accessible to everyone creates transparency and makes it readily available if the time comes.

Make sure the parties involved know what they’re responsible for in the plan, that way you can execute the plan seamlessly should the worst-case scenario occur.

6. Test your plans.

As with all plans, it's essential to continuously test (more on that in the next section) and update them over time. As businesses scale and change, your business needs will likely change, and specific scenarios will no longer have as significant of an impact. There may also be new scenarios to plan for that you hadn't anticipated or thought of when you were a smaller operation.

It can be helpful to create a timeline that you'll use to spend dedicated periods reviewing your plans, testing them, and communicating with the necessary stakeholders about any changes you've made to the plans.

7. Update your plan as needed.

Consider your contingency plan a work in progress. You’ll need to adapt it as new risks arise and to ensure it still makes sense for your business needs. Whenever a new manager or executive joins the team, be sure to share it with them as needed so they know what (if anything) is expected of them.

Contingency Planning Timeline

As planning is always an involved process, you may be wondering how much time you should devote to each step. Let's discuss a timeline below.

Week One: Identify Key Operations

Give yourself about a week to identify the operational areas essential for business function. You likely already know what these areas are, but you want to do enough research to identify them all.

Weeks Two & Three: Brainstorm Scenarios

Take two to three weeks to brainstorm the scenarios you're going to create plans for. Spend as much time as possible speaking to the necessary stakeholders to understand their ideas about the scenarios and how they'd like them dealt with. You'll want to conduct probability assessments and market research to understand if your competitors have ever dealt with something similar. You want to make sure you have all the necessary information before drafting your plan, so this step should be the longest.

Week Four: Draft Plan

Give yourself a week to draft your plans. The first two steps should give you all the information you need, so the third step is simply fine-tuning your research and creating the final plan. You can also share what you've created with your stakeholders and iterate on what you have based on their feedback.

The final step to creating your plan, maintaining and testing, is a continuous effort. As mentioned above, your business will likely be impacted by different things at different times, so it's always important to review plans and ensure they still relate to your needs. For example, maybe you plan to do quarterly reviews and training so new hires, and existing employees, are all on the same page.

Contingency Planning Example

It may be helpful to have an example of a contingency plan, so we'll go over one below. The examples are of a positive and negative situation, so you can get a sense of how a plan applies to both.

Contingency Planning Mistakes to Avoid

Even with the best intentions, your contingency plan may get off to a rocky start. Here are some common mistakes to avoid when creating one of your own.

Not securing executive buy-in first.

Before you can get your team or department onboard, you must get buy-in from the executive team. Otherwise, you risk creating a doomed plan from the start.

Get their feedback on potential risks and other factors that may impact guidelines in the plan. Having executive support from the start ensures the plan put forth is approved and also can motivate those at the department level to buy-in as well.

Failure to cover multiple scenarios.

When assessing potential risks and scenarios, it’s important not to cut corners or slack. Scenario planning is key to your contingency plan’s success. All potential risks should be taken into account. You can rank them by likelihood, but you should by no means leave less likely events out. Otherwise, you leave yourself vulnerable should the event happen.

Think about how many businesses were affected by supply chain issues during the pandemic. Most probably never predicted such a catastrophe, but the ones that had a plan in place for such an obstacle were better prepared.

Set it and forget it.

It’s really easy to get comfortable once your contingency plan is in place — after all, if you did your due diligence from the start, you’re ready to tackle any obstacle thrown your way.

Unfortunately, it’s not a one-and-done process. A contingency plan should be looked at as a living document and updated as needed. Your business needs will change over time and so will its obstacles and risks.

Create Business Contingency Plan

All in all, contingency plans help you prepare for a host of what-if scenarios, whether they happen or not. As you never want to be caught in a challenging situation, being prepared is the best thing you can do to ensure your business continues to succeed, regardless of whatever happens along the way.

As the saying goes, better safe than sorry .

Editor's note: This post was originally published in November 2021 and has been updated for comprehensiveness.

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What Is A Contingency Plan & How Do You Create One?

Updated: Jun 15, 2024, 12:20pm

Table of Contents

What is a contingency plan, benefits of contingency planning, 3 contingency plan examples, how to create a contingency plan in 7 steps, bottom line, frequently asked questions (faqs).

Many companies take the time to create a business plan and then follow it. This is touted as a way to achieve your goals successfully. However, unexpected incidents can derail the plan’s progress. This is why a contingency plan is so important. Learn what a contingency plan is and how to go about creating one for your company.

A contingency plan is a “plan B” that helps a business address specific situations or incidents that may or may not be out of its control. A contingency plan is the way that your team should react if there is something that interrupts the normal course of business. Contingency plans are often found as part of emergency planning, disaster recovery and risk management. It’s important to know how you want to proceed when the situation prevents you from running things as business as usual.

Contingency Planning vs. Crisis Management

Contingency planning is the process of creating a backup plan or several possible plans. This differs from crisis management, which is the actual response to a crisis. The actual response often utilizes one of the contingency plans created but addresses the incident in real time.

Contingency Planning vs. Risk Management

Contingency planning and risk management are closely related but different processes. Contingency planning addresses the “what if” situations and develops a plan that will work around those situations. Risk management is a proactive approach that companies use to prevent loss or disasters. So rather than being reactive like a contingency plan, a risk management plan looks to stop adverse events from happening in the first place.

Businesses need to be agile to remain successful in a variety of market and work conditions. Here are some benefits of contingency planning that you should consider:

• Saves time: Management is not stopping to develop a plan. All they need to do is assess the situation and implement the contingency plan.
• Saves money: Downtime for a business is costly. Contingency plans limit the costs of being forced on the sideline.
• Quick recovery time: Contingency plans redirect everyone so what they are doing is productive despite the adverse incident.
• Minimizes damages: A contingency plan can reduce the effects of a disastrous situation that would otherwise lead to massive damages to the business’s property and equipment.
• Avoid negative press: When things go wrong, the press can get wind of it, which can be negative publicity for the company. Contingency plans keep the business running with minimal impact on operations.

Let’s look at some examples to illustrate better why contingency plans are necessary and how businesses reacted.

Example 1. A Pandemic Hits

The Covid-19 pandemic forced many businesses to come up with a contingency plan on the fly. Many white-collar jobs were sent home for employees to do their job from the safety of their homes. Other businesses, such as restaurants, had to pivot to expanding their take-out operations and slowly opening up dining experiences.

Example 2. A Supplier Has a Delayed Shipment

Many businesses rely on a supply chain to provide certain materials in order to create and deliver their products. When there is an issue with the supply chain, the business must be prepared to deal with it. This could mean shifting a marketing focus on other products not affected or anticipating delivery delays and notifying customers of the issues and perhaps offering them a promotion for their patience.

Example 3. Majority of Staff Calls In Sick on the Same Day

When a bug is going around, it can be challenging to keep it from affecting your entire staff. If it happens that everyone gets sick on the same day, you need to have a plan in place to address the issue. This could mean having a temporary staffing agency already vetted out for help or having the employees who are on duty do double duty, taking on additional tasks to get the job done.

Creating a contingency plan doesn’t need to be difficult. Follow these seven steps to develop your contingency plan, from creating a policy state and implementing preventive controls to testing and training employees and maintaining your contingency plan.

Here’s how to create a contingency plan in seven steps:

Step 1. Create a Policy Statement

A policy statement is the outline of the authorization that exists to develop a contingency plan. This might be something as simply stating a possible scenario and noting that owners have put this plan in place.

Step 2. Conduct a Business Impact Analysis

This step digs into what would happen if no contingency plan existed. It prioritizes the systems that are imperative to the business functions.

Step 3. Implement Preventative Controls

This step is designed to mitigate any adverse scenario’s impact on the business. The goal is to reduce the costs associated with running the business on a contingency plan basis.

Step 4. Develop Contingency Strategies

These are recovery strategies that help the business ensure that it will recover quickly and efficiently after a disruption occurs. Contingency strategies may be specific to the type of disruption that happens.

Step 5. Write Out the Contingency Plan

This step takes the strategies and writes out an action plan that is designed to overcome the disruption. It is a detailed response that allows the business operation to continue to work.

Step 6. Test and Train Employees

Every contingency plan should be shared with employees well in advance of needing to enact the plan. Employees should be trained on what to do in specific scenarios and help keep the business operations running as smoothly as possible.

Step 7. Maintain the Plan

Keep the plan updated based on current systems and organizational changes. You don’t want to implement the plan and then run into a hiccup because a key employee is no longer with the firm or the system doesn’t allow you to do what you want to do.

You can’t control many disastrous situations that can occur, but you can plan for them. Remember to think about your resources and how you can overcome obstacles to keep your business operations running smoothly after a disaster happens.

What is the purpose of a contingency plan?

A contingency plan exists to deal with unexpected adverse situations, which are often disasters that disrupt your ability to run your business.

What is a good contingency plan?

Good contingency plans address the many possible disasters that may happen. It might address natural disaster scenarios or supply chain issues. A good contingency plan helps you address many different types of disruptions.

What is another term for contingency?

Other terms for contingency planning include crisis management, emergency planning and risk management.

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Contingency Plan Examples

40 detailed contingency plan examples (& free templates).

Good strategies always involve a contingency plan in case the original plan backfires. In some cases, the original plan may not be as successful as you expect which is why you need a contingency plan example to achieve the same goal . We have heard the term “Plan B” before and this in its simplest way, is a contingency plan.

Table of Contents

• 1 Contingency Plan Examples
• 2 What is a contingency plan?
• 3 Contingency Plan Templates
• 4 When to use a contingency plan?
• 5 Using a contingency plan example in risk project management
• 6 Business Contingency Plan Templates
• 7 Steps in contingency planning
• 8 Creating your contingency plan
• 9 Contingency Plan Samples
• 10 The challenges that may come with contingency planning

What is a contingency plan?

The steps taken by an organization when an unexpected situation or event occurs is a contingency plan. A contingency plan example may be positive like when there’s an unexpected surplus in the cash flow. But more often than not, the contingency planning process mostly refers to negative events.

The events which might have a bearing on the organization’s financial health, reputation or on its ability to continue with business operations. Such events may include natural disasters, fire, network failure, and a data breach, to name a few.

Having a contingency plan template helps you make sure that there’s always a continuity in the business. Most of the bigger business organizations have sets of business contingency plan templates for various potential threats. These undergo extensive research and the resulting appropriate responses get subjected to full practice even before the crisis occurs.

You can consider a contingency plan as a proactive approach as compared to crisis management, which is more of a reactive approach. Having a contingency plan ensures that you’re always prepared for any eventuality. Conversely, a plan for crisis management enables you to control the response after the eventuality occurs.

Contingency Plan Templates

When to use a contingency plan?

Also, keep in mind that the design of a contingency plan template is only for risks that can you can identify and not for unknown or unidentified risks. This is for the simple reason that you cannot make a plan if you don’t know the risk.

It’s also worth noting that contingency plans don’t only exist in anticipation should things go wrong but you can also create one to make the most of strategic opportunities.

For instance, you have come to know of a new type of software for training that’s about to get released soon. Should this occur during the project, you can create a contingency plan on how to include this into the training stage of your project .

Using a contingency plan example in risk project management

As mentioned earlier, a contingency plan example responds to a negative event that might affect or tarnish the reputation of an organization or its financial standing. In business, however, a business contingency plan template isn’t always negative. There are cases of positive contingency plans too.

Also, keep in mind that the contingency planning process is a proactive strategy, unlike crisis management which is a reaction to something that has happened. A contingency plan accounts for any disruptive events to ensure that the company is always prepared if and when such events should occur.

Contingency plans are usually part of the risk management department and project managers should know that the plan is simply an outline. However, there are times when the project may extend beyond this. This means that the manager can be more prepared to make changes in the plan if he deems it would be more effective.

Risk management isn’t the same as the contingency planning process. Risk management is more about establishing, assessing, mitigating, avoiding, sharing, transferring, and accepting risks, whereas a contingency plan focuses on developing steps for when a risk occurs. But they share a common aspect. They both describe the steps to take in such an occurrence.

In its simplest form, a contingency plan definition is what you should do when an unexpected event takes place. Simpler still is “What if….?”, then creating an outline of the steps that answer this question.

Business Contingency Plan Templates

Steps in contingency planning

Project management always involves several entry points for risks that you have to consider for a contingency plan example. Here are some risk factors that you should take into account for a contingency plan template:

• The physical aspect where losses can happen caused by damage to facilities, equipment or information because of natural disasters or an accident.
• Technical issues may be a risk factor too, where the system stops functioning as needed for the delivery of the project as scheduled and within the budget.
• Human resources can be another risk too as teams may leave projects, get sick or get terminated.
• In a much larger scale, risk factors beyond the project manager’s control are social and political changes. As an example, you can work with a contract which can drastically change depending on who’s in control. Nothing remains stable with risk factors. Communities can even protest against projects and bring them to a halt.
• There are also liability issues where there are potential threats in the form of compensation plans and legal actions.

Here are the basic steps in the contingency planning process:

• Make it a point to know which resources can you use in the event of an emergency and in which part of the contingency plan you can apply these resources.
• Identify important dates that, if you miss, might negatively affect the plan. For instance, getting approval from committees which rarely meet.
• Know your plan. Check its weaknesses and strengths. Identify slack which you may find.
• Check for any points in the plan where you can apply alternative routes and evaluate each scenario to make your plan more flexible.
• Use your knowledge and experience in discerning patterns in the ebb and flow of the activities in your project to make it more efficient.

Creating your contingency plan

You need a lot of planning and research when creating a contingency plan example. But planning ahead, with each plan makes things easier for you. When creating one for your company, follow these steps:

• Identify your resources and prioritize them Do research throughout the organization so you can identify then prioritize the integral resources in your organization.
• Identify the most significant risks You need to identify any potential threats to the researched resources. If you need to, meet with executives, and employees to get more a holistic picture of how events can affect your resources. To be more precise, bring with you a consultant or a specialist in the identification of risks.
• Draft a contingency plan template Although you may come up with plans for each of the risks individually, it’s recommended to begin with the threats you consider high priority. This refers to the ones which have a high likelihood of occurring and would have the most significant impacts. As time goes by, you may start working toward coming up with plans for the lower-priority risks. When drafting plans for identified risks, start asking yourself about the steps to take so that the organization can go back to normal operations. Take into account factors like employee activity, communications, timelines , and staff responsibilities. Based on these, you can then make a plan for each of the risks.
• Share the plans Make sure that all employees and stakeholders have access to each plan as soon as you’ve completed them and had them approved. You may want to consider using a mobile application for this very important step. This could make the contingency plan together with similar documents directly available to all of the employees through their mobile service. This method also ensures that every employee has easy access to the updated plans for when the need arises.
• Maintain the plans As the organization undergoes changes, make sure that you reflect such changes in your business contingency plan template. There’s also a need to rehearse the plan with stakeholders regularly so that the key players know their roles and responsibilities.

Contingency Plan Samples

The challenges that may come with contingency planning

Managers will always get confronted with challenges that they should consider before and while creating contingency plans. These challenges include:

• Only focusing on “Plan A” By nature, people only want to work on a single solution. This may be the reason why a contingency plan doesn’t get the proper attention it deserves. They all hope “Plan A” succeeds and they think that focusing too much on “Plan B” might potentially be damage their success. As managers, they should stress how important a contingency plan is as it serves as your safeguard to help facilitate success instead of obstructing it. This means that the contingency plan should never get shelved. Instead, you must make it readily accessible.
• A small probability of using the plan Because of the small probability that you will ever use the contingency plan, many believe there’s no urgency in creating one. That means the plan could find itself at the very bottom of the company’s list of tasks if anyone will create it at all. There is a need for this plan for any project, even if the company has to invest a little more in it. When you decide to create a comprehensive contingency plan, you will feel the pay off when you end up needing it.

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The Easy Guide to Creating a Business Contingency Plan

Updated on: 2 November 2022

How to avoid disasters? Be prepared for them. 

When things are going well, you often forget to plan for the bad times. But when disaster strikes, you could lose everything in a heartbeat.

An earthquake can bring your whole shop to the ground, your biggest client can choose your competitor over you, your system suddenly can crash making you lose important data etc. There are endless possibilities of disasters if you really think about it. 

That’s why lack of a plan can be a disaster of its own. 

Let’s see why you need a business contingency plan and how to create one in a few simple steps.  

What is a Business Contingency Plan? 

But first, let’s define what a contingency plan is. 

A contingency plan is a proactive strategy that describes the course of actions or steps the management and staff of an organization need to take in response to an event that could happen in the future. It plays a significant role in business continuity , risk management and disaster recovery. 

It helps you stay prepared for unforeseen events and minimize their impact. It also outlines a plan for carrying out the normal business operations after the event has occurred.  

It’s also known in names such as plan B, backup plan, and disaster recovery plan. In case your primary plan doesn’t work, it’s time to execute the plan B.

Benefits of a Contingency Plan 

Without a contingency plan you’re opening yourself to unnecessary risks. Here are some important benefits of a contingency plan that you cannot look away from. 

• Helps react quickly to negative events. As a contingency plan lists the actions that need to be taken, everyone can focus on what to do without wasting time panicking.
• Having a contingency plan in place allows you to minimize damage that could happen from a disaster and minimize the loss of production. For example if you have emergency generators set up, even during a blackout, your team can work seamlessly. 

How to Make a Contingency Plan 

An effective contingency plan is based on good research and brainstorming. Here are the steps you need to follow in a contingency planning process. 

Step 1: List down the key risks

Identify the major events that could have a negative impact on the course of your business and on the key resources, such as employees, machines, IT systems etc. 

Involve other team heads, subject experts, and even outsiders like business consultants to get a deeper understanding of things that may cause problems and jeopardize the direction.

Use a mind map to organize and categorize the information you gather from the brainstorming session with the staff. You can easily share this with everyone in the organization to get their input as well.

Step 2: Prioritize the Risks Based on Their Impact 

Once you have created a list of all the possible risks that could occur in different areas of your business, start prioritizing them based on the threat they pose. 

The risk impact probability chart is a handy tool you can use here. It helps you evaluate and prioritize risks based on the severity of their impact and the probability of them occurring.

Step 3: Create Contingency Plans for Each Event

In this step you’ll create separate plans that outline the actions you need to take in case the risks you identified earlier occur. 

Consider what needs to be done in order to resume normal operations after the impact of  the event. 

Here you’ll need to clarify employee responsibilities, timelines that highlight when things should be done and completed after the event, restoring and communications processes and the steps you need to have taken in advance to prevent losses when the event has taken place (i.e. insurance coverage). 

You can use a visual format here to highlight the course of actions. It would be easier for everyone to comprehend.

Step 4: Share and Maintain the Plan 

Once you have completed the contingency plans , make sure that they are quickly accessible to all employees and stakeholders. 

Review your contingency plans from time to time and update them as needed. And it’s a best practice to inform your employees of the changes as well, as it may include updates to their roles and responsibilities.  

What’s Your Take on Contingency Plans?

That is how you make a detailed contingency plan. List down the major incidents that could harm your business operations, prioritize them based on their impact and probability, create an action plan explaining what you should do in case they occur, and review and update them frequently. 

What is the contingency planning process at your organization? Let us know in the comments section below.

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By Joe Weller | March 25, 2021 (updated April 24, 2023)

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Contingency plans offer organizations a proactive strategy for resuming daily functions and operations following unforeseen events. We’ve compiled the most useful contingency plan templates and tips on using them for various industries.

On this page, you'll find free contingency plan templates, including a simple contingency plan template , a software contingency plan template , a business contingency plan template , and a project management contingency plan template . Plus, learn how to use a contingency plan template .

Simple Contingency Plan Template

Use this simple contingency plan template to help your organization return to daily operations after unforeseen circumstances. Find sections for business impact analysis (BIA), recovery strategies, plan development, and testing and exercises. By completing these areas, you can stress-test your contingency plan. Assign contingency plan tasks to team members. Share the document with stakeholders to keep everyone apprised of the organization’s fail-safe contingency plan. 

Download a Simple Contingency Plan Template for  Microsoft Word | Adobe PDF | Smartsheet | Google Docs

For more resources on emergency response and contingency planning, see “ Free Risk Management Plan Templates .”

Simple Contingency Plan Presentation Template

Use this simple contingency plan presentation template to highlight the details of your contingency plan to your team members and other stakeholders. Slides include details for business impact analysis (BIA), recovery strategies, contingency plan development, and plan testing and exercises. It also includes a comprehensive version history slide including your presentation plan’s version, approved by, revision date, descriptions of changes, author, prepared by, and approved by sections. Keep everyone in the loop with this easy-to-use contingency plan presentation template. 

Download a Simple Contingency Plan Template for PowerPoint

To learn more, read this comprehensive guide on contingency planning.

Software Contingency Plan Template

Use this software contingency plan template to identify, describe, and categorize risks, create an impact level and impact description, and create a contingency plan for each, in order to mitigate risks. For each risk, the template also includes a Trigger Points column (e.g., “What triggers the contingency scenario?”) and End Plan Trigger column (e.g., “What triggers the end of the contingency plan?”), so that team members understand the need for the contingency plan. Software project managers can use this template to create contingency plans related to data security, user privacy, geographically discrete data centers, or apply it to software development and software testing. 

Download a Software Contingency Plan Template for  Microsoft Excel | Google Sheets   

Read this guide to contingency planning to find tips for improving your contingency preparedness.

Information Technology (IT) Service Contingency Plan Template

This easy-to-fill template focuses on keeping IT operations up and running in the event of a disruption. Use this template to document details of the scope, recovery objectives, recovery team, recovery strategy, and return-to-plan strategy of your IT department’s contingency plan. Be fully prepared for any incidents that cause downtime by using the proactive steps in this all-inclusive IT service continuity planning template. 

Download an Information Technology (IT) Service Contingency Plan Template for  Microsoft Word | Adobe PDF | Google Docs | Smartsheet

IT Service Contingency Plan Presentation Template

This easy-to-use information technology (IT) contingency plan presentation template is the perfect solution for presenting your IT contingency plan to key stakeholders. Slides include scope (service area, service offerings, and service areas that depend on the service at risk), recovery objectives (recovery time objectives, RTO; and recovery point objective, RPO), recovery team (service / role / function, responsibility, dependencies, and expected response time), and recovery strategy (initial recovery and overall recovery strategy). Easily gain buy-in from team members, management and other stakeholders with the all-in-one, IT-specific solution for outlining and refining your IT department’s service contingency plan.  

Download an Information Technology (IT) Service Contingency Plan Template for  PowerPoint | Google Slides | Smartsheet

Business Contingency Plan Template

Keep tabs on your organization’s comprehensive business contingency plan (BCP) with this distinctive business contingency plan template. It guides you through your business function recovery priorities, relocation strategy, alternate business site, recovery plan, recovery phase, records and backup details, restoration plan, recovery teams, and recovery procedures. This BCP template is useful for determining accurate planning and courses of action to ensure the success of your business’s contingency plan. 

Download a Business Contingency Plan Template for  Microsoft Word | Google Docs | PowerPoint | Adobe PDF | Smartsheet

Business Contingency Framework Template

This one-page template features a broad-strokes framework for performing a business impact analysis (BIA), along with working out your recovery strategy, plan development, and testing and exercises. You’re never far from the big-picture vision of your business contingency plan with this efficient one-page business contingency framework template, available in Microsoft Word, PDF, Google Docs and Slides, and presentation-friendly PowerPoint formats. 

Download a Business Contingency Framework Template for  Microsoft Word | Adobe PDF | Google Docs | Google Slides | PowerPoint

For more resources on business contingency planning, see “ Free Business Continuity Plan Templates .”

Project Management Contingency Plan Template

This project management contingency plan template is ideal for creating a comprehensive contingency plan for any type of project. The template enables you to create a high-level executive summary of your project’s contingency plan, including risk evaluation, a synopsis of your risk-prevention mitigation strategies process, and roles and responsibilities. Use this template to define risks and their events or triggers, consider budgetary implications, and define your potential plans of action. 

Download a Project Management Contingency Plan Template for  Excel | Google Sheets  

Visit our article on contingency planning in project management for more information.

Small Business Contingency Plan Template

It’s critical for small businesses to have a comprehensive contingency plan that team members can reference in the event of a debilitating event or emergency. Designed specifically for small businesses, this template uses a pre-built, all-inclusive contingency plan to provide guidance for modestly sized organizations. Take the guesswork out of creating a contingency plan from scratch, and leverage the advantages of this small-business-specific template. 

Download a Small Business Contingency Plan Template for  Microsoft Word | Adobe PDF | Google Docs

For more resources on emergency response and contingency planning, check out our roundup of disaster recovery plan templates .

Contingency Plan Checklist Template

This two-part, fully customizable contingency plan checklist template contains a pre-built contingency plan checklist based on disaster-recovery steps, and a step-by-step, linear recovery procedure section. Use the latter section to ensure that everyone is aware of your contingency plan, if there is an event or occurrence that triggers the need to implement your plan. Then, use the checklist section to ensure that all steps in your contingency plan are in place, should you need to execute your contingency plan. 

Download a Contingency Plan Checklist Template for  Microsoft Word | Adobe PDF | Google Docs

What Is a Contingency Plan Template?

A contingency plan template provides a step-by-step process to communicate actionable items in the event of a disaster or disruption. The document takes the guesswork out of emergency planning, so you can protect resources, minimize interruptions, and identify go-to team contacts. 

You can begin the contingency planning process by completing a contingency plan template so that you’re adequately prepared. By recording accurate and thorough information to ready yourself for an emergency, you can determine your priorities, relocation strategy, and recovery plan details. A contingency plan also helps you plan your organization’s recovery phases, work to ensure records backup, create a restoration plan, establish a recovery team, and assign roles to key individuals.

When to Use a Contingency Plan

You should use a contingency plan if there is the risk of an unexpected event that could impact your project’s success. A contingency plan is a backup plan that outlines steps for you to take in case the original plan encounters unforeseen obstacles. 

The following provides a list of typical scenarios where you should use a contingency plan: 

• Risky or Uncertain Situations: When there are potential risks or uncertainties that could impact the success of your project, it's a good idea to have a contingency plan in place to mitigate those risks. 
• Time-Sensitive Projects: When you have a tight deadline or critical timeline that you must meet, a contingency plan can help ensure that your project is completed on time, even if unexpected issues arise. 
• Resource Limitations: When you have resource constraints, such as budget or personnel, a contingency plan can help you effectively allocate resources. 
• Emergency Situations: When emergencies (e.g., natural disasters, pandemics, or other crises) can impact your ability to complete your project, a contingency plan can help you and your organization respond quickly and efficiently. 

Overall, you should use a contingency plan whenever there is a potential risk or uncertainty that could impact the success of your project or goal, or when there is the possibility of emergencies. When unexpected events occur, it's always better to be proactively prepared by having a plan in place, instead of scrambling to come up with a solution.

Sections of a Contingency Plan Template: 

While your contingency plan will vary to meet the needs of your project, below are the common elements of a contingency plan:

• Recovery Priorities: Enter contingency plan priorities, including recovering essential operations and restoring critical functions. 
• Relocation Strategy: Add the relocation strategy when your contingency plan requires moving your primary services. 
• Alternate Site: Document alternate site details when you determine the secondary site where you can continue operations. 
• Recovery Plan: Enter the step-by-step recovery-plan details to get your organization operational again. 
• Disaster Occurrence: Use this phase to identify what constitutes a disaster that requires your organization to activate the contingency plan. 
• Plan Activation: In this phase, your organization puts your contingency plan into effect, which continues until your organization secures an alternate site and can relocate operations.
• Alternate Site Operation: Operations continue at the secondary facility until you can restore them at the original site. 
• Transition to Primary Site: The organization prepares to move operations back to the original site.
• Records Backup: Enter contingency plan details about how you’ll back up records and make them accessible in the event of a disaster or disruption. 
• Restoration Plan: Add your plan for ensuring that all operations, records, etc., are able to be operational in the event of a facility disruption or disaster. 
• Recovery Teams: List the recovery team(s) and members. Assign contingency plan tasks based on job role and title. 
• Recovery Procedures: Enter details of specific activities or tasks required to adequately recover normal and critical operations. 

Additionally, a contingency plan template enables you to track changes to your plan through a section for version history, comprising the following data: 

• Version: Enter the unique version number for the most up-to-date iteration of the plan. 
• Approved By: Ensure that department heads or other stakeholders have approved the contingency plan. 
• Revision Date: Provide the date when a substantial revision was made to your contingency plan. 
• Description of Change: List details of the change(s) made to the plan. 
• Author: Record the name of the plan’s primary author.

How to Create a Contingency Plan 

When creating a contingency plan, be proactive, thorough, and adaptable. By anticipating potential risks and developing a well-documented plan of action, organizations can minimize the negative impact of unexpected events and ensure continuity of critical functions and key services.

Here are some key steps to follow when creating a contingency plan:  

• Identify Potential Risks: First, identify potential risks or unexpected events that could impact the success of your project. Brainstorm with stakeholders and team members to identify as many potential risks as possible. 
• Assess the Impact: Once you have identified potential risks, assess each risk’s potential impact. This will help you prioritize risks and determine which ones require immediate attention. 
• Develop Response Strategies: Based on your impact assessment, develop response strategies for each potential risk. This may involve developing alternative solutions or workarounds, identifying additional resources, or establishing clear communication protocols. 
• Assign Responsibilities: Determine who will be responsible for executing the contingency plan if and when it is necessary. Assign specific roles and responsibilities to stakeholders or team members to ensure that everyone knows what they’ll need to do. 
• Establish Communication Protocols: Establish clear communication protocols so that team members and stakeholders know how to report potential risks or unexpected events and receive updates on the status of the contingency plan. 
• Test and Refine Your Plan: Test the contingency plan periodically to ensure that it works effectively. Make adjustments as needed. 
• Document Your Plan: Document the contingency plan in a clear and concise manner and make it easily accessible to all relevant parties. 

Keep in mind that a contingency plan is only effective if you regularly review and update it to reflect changing circumstances and new risks that may arise.

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How To Create a Business Contingency Plan for the Unexpected

A business contingency plan is a strategy for how your company will respond quickly to disruptive events so it can keep operating.

A plan for the unplannable. It sounds like an oxymoron, but that’s the concept behind a business contingency plan: Preparing for potential risks to your company to ensure as much business continuity as possible, even when the unexpected happens.

Every business faces upheaval, disruption, and unanticipated setbacks, some more surprising or serious than others. No matter the scope of these potential events, you can take steps to protect your company. Here’s what to know about a business contingency plan and how to develop a successful playbook—even if you hope never to use it. 

What is a business contingency plan?

A business contingency plan (or business continuity plan ) is a strategy for how your company will respond quickly to disruptive events and keep operating. A comprehensive plan lays out the steps management, employees, and other stakeholders would take in multiple scenarios to help minimize the impact on day-to-day operations and quickly recover. Minor unexpected events might include a technical failure that leads to a website outage for several hours or an illness sweeping through your customer service team and leaving it shorthanded.

Contingency plan vs. risk management

Contingency planning is related to risk management , though they differ in several important ways. A business contingency plan provides for a tactical response to a specific disruption, and it’s focused on ensuring business continuity while helping the company recover as quickly as possible. By contrast, risk management is a broader and ongoing process: brainstorming all the possible risks to your company, assessing the likelihood of each one, and implementing strategies to reduce or manage the risks. 

Contingency plan examples

Planning for natural disasters is an example of a contingency plan. Say some of your employees are based in the Midwest, and a tornado touches down where three of your workers are based. The same might hold true if a hurricane strikes the Florida coast, where your business has a large office. A designated staffer contacts those affected and confirms they’re safe, but they can’t return to their duties until roads are passable, the power outage ends and Internet service is restored. Management then reassigns any critical operations like order fulfillment to other staffers, who have been trained and prepared for these tasks to ensure business continuity.

5 steps for creating a contingency plan

• Assemble the planning team and brainstorm key risks
• Perform a business impact analysis (BIA)
• Develop response and recovery strategies
• Test the plans and train staffers
• Regularly review new risks and update plans as needed

Here’s a step-by-step guide for developing a contingency plan:

1. Assemble the planning team and brainstorm key risks 

The contingency planning process should include not only management but key personnel: leaders from IT, procurement, human resources, sales, or any other relevant teams. Company-wide representation is an important aspect of any brainstorming session for identifying possible threats because these workers understand details of the organization’s operations and the biggest risks. An open dialogue about business risks is a good way to start to create contingency plans both comprehensive and successful.

2. Perform a business impact analysis (BIA)

Analyzing your business’s normal operations can help you identify the most significant potential threats across the entire organization. Which business functions and systems are most critical? What’s the potential financial, operational, or reputational impact of each specific risk? What’s the worst-case scenario for each aspect of the company’s operations? How could that cascade to other parts of the business? Answering these hypotheticals will help you prioritize and begin shaping mitigation plans.

3. Develop response and recovery strategies

You can now develop a mitigation plan and recovery strategies for each of the scenarios you’ve identified so far. The process will vary depending on the crisis you’re facing, but it could include establishing emergency response procedures, data backup, alternate supplier options, remote work arrangements, natural disaster recovery, and supply-chain crisis management. This process can include designating who’s in charge of crisis communications after an unfavorable event.

4. Test the plans and train staffers

Conduct plan testing through simulation exercises to assess your contingency plan’s strengths and weaknesses and to determine if there is any need for changes, or even a backup plan or Plan B. If the plan is revised, inform key staff and train them in the new protocols. This could include natural disaster and fire drills, mandatory employee training on cybersecurity best practices and crisis response, or cross-training some staffers to perform other duties if needed. 

5. Regularly review new risks and update plans as needed

Because risks evolve, revisit and revise your plan to be better prepared to avoid disasters. Periodically reviewing new risks is an essential step in plan maintenance and includes implementing lessons from internal or external incidents, adjusting for changes in staff and operations, and considering new technology or tools. 

6 types of contingency plans

• Information systems
• Crisis communications
• Health/pandemic
• Supply chain

Contingency plans are unique to each business, but there are several major types of contingency plans, including:

1. Information systems

This is a primary plan for many companies because most organizations depend on computers, data storage, and the internet for daily operations. Risks include system outages, cyberattacks, and data breaches. The contingency plan may cover data backups and recovery, system redundancies, and hacking response procedures.

2. Disasters

These plans often address both smaller-scale disasters and major so-called act-of-God events. Lower-impact possible risks might include incidents like a burst pipe that renders the main office unusable for several days, while high-impact potential risks may be a major natural disaster like a hurricane that destroys an office or ruins warehouse inventory. Mitigation strategies may involve ensuring worker safety, restoring information technology (IT) systems, shifting staffers or critical business functions to other sites, and other steps to get business back to normal as quickly as possible.

3. Financial 

This part of the contingency plan addresses financial events that may be internal to the company or macro external factors. Risks include inevitable periodic economic downturns, which can hurt customer spending power and demand for your products. Other risks may be internal and potentially more damaging, like employee theft of funds or inventory. Each results in financial loss for the company. Contingency plans might include maintaining a minimum cash reserve, tapping a bank line of credit to improve your cash position, or boosting sales with strategies like new revenue streams or adjusted pricing.

4. Crisis communications 

This portion revolves around clear internal and external communication in times of crisis. Risks include a lack of internal alignment on messaging, confusion among employees about the company’s response or their part in it, and negative external attention or press coverage that harms your brand or reputation. This plan should include processes for clear communication channels to staffers and external stakeholders, training and briefing of designated spokespeople, and establishing a chain of command to manage messaging and keep important parties up to date on the crisis as it evolves.

5. Health/pandemic

The sudden spread of COVID-19 spurred most companies to develop plans for managing a pandemic or other health crisis. Measures could include employee safety protocols, rules for entering the workplace, communication with stakeholders, and shoring up remote-work support and technology.

6. Supply chain 

Your company’s ability to produce products and services may depend on access to materials or suppliers. If so, risks include disruptions like raw materials shortages, supplier failures, and trade restrictions. Mitigation plans may involve securing backup suppliers, tracking logistics challenges in the market, and maintaining an emergency supply of inventory or materials.

Business contingency plans FAQ

Why does a business need a contingency plan.

Every business faces upheaval, disruption and unexpected setbacks. Preparing for these events with a contingency plan can help the entire team work together to stay calm, execute the plan, and ensure as much business continuity as possible.

What’s the difference between contingency planning and crisis management?

These concepts are related but not the same. Contingency planning is about a proactive strategy: developing a plan for coping with potential disruptions or crises in the future. Crisis management, by contrast, is reactive and in the moment: the actions taken in response to an event, which often includes implementing steps in the contingency plan, if one exists.

How do I avoid contingency planning pitfalls?

Businesses can take a few steps to avoid pitfalls in contingency planning: involve key stakeholders inside and outside the business to develop the plan; prioritize risks based on likelihood and impact on the business; test the plan and revise it as needed; conduct periodic, comprehensive risk assessments; and train employees and make the lines of communication clear in case of crisis.

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Businesses need a plan to get back on track when a disaster interrupts daily operations. Contingency plans, also known as “business continuity plans,” “emergency response plans” and “disaster recovery plans” help organizations recover after a disruption.  

Whether they’re preparing for a global outbreak of a deadly virus, crisis management around a data breach or the loss of an important client, contingency plans help organizations bounce back after a negative event.

Companies create many kinds of recovery strategies for everything, from the merger of key competitors to the insolvency of the bank that processes its employee payroll. In India, the government was busy designing a contingency plan as a drier-than-expected monsoon season approached.¹ Meanwhile, in Hong Kong, a large bank was preparing a plan b in case a host of new sanctions were levied as the result of a recent geopolitical development.²

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Here are five steps companies use to create effective business contingency plans.

The contingency planning process begins with a risk assessment to gauge the potential impact of each risk. Typically, business leaders and employees conduct risk analysis.

Team members begin with a brainstorming session where they discuss potential risks, courses of action and the company’s overall preparedness. During this stage, it’s important to be clear about the scope of the project and invite all relevant stakeholders to give input. Companies don’t need to create a risk management plan for every threat they face, just the ones deemed highly likely and with the potential to interrupt business operations.

Effective business impact analysis (BIA) is critical to understanding different business functions and how they will react to unexpected events. For example, while a shortage in micro-processors might be devastating to a part of a business that deals with the manufacture of gaming consoles, it likely has little to no impact on the same company’s HR department.

To assess the urgency of creating an action plan for this specific threat, the company would need to know how much of its revenue was being generated from the part of the business threatened by the microprocessor shortage. If gaming consoles are a high percentage of their revenue, they will put a strong plan in place soon.

A well-developed BIA helps stakeholders assess risk and better understand which parts of their business are most critical to daily operations.

After identifying the risks their company faces, determining the likelihood and severity of each risk and conducting a BIA, business leaders can follow a simple, three-step process to build their backup plan.

Identify the triggers that set their plan into action: For example, if a hurricane is approaching, at what point does the approaching storm trigger the contingency plan? When it’s 50 miles away or a 100? They must make clear decisions so the teams they put in charge of execution know when to start their work.

Design an appropriate response: The threat the business prepared for arrives. Teams must know exactly what’s expected of them so the company can recover quickly. Compile clear, accessible instructions, protocols that are easy to follow and a way for everyone to communicate with each other.

Delegate responsibility clearly and fairly: Like any other initiative, contingency planning requires effective project management to succeed. In the case of an existential threat such as a natural disaster, everyone involved in helping the company recover must know their role and be properly trained to perform it.

For example, in the case of a fire, it wouldn’t be fair to expect employees untrained in firefighting to pick up a hose. However, with the right training, they might conduct headcounts or go floor-to-floor to ensure that other employees have evacuated.

One way to improve workflow among teams when designing a plan is to create a RACI chart . RACI stands for responsible, accountable, consulted and informed and is a widely used process to help teams and individuals delegate responsibility and react to crises in real time.

While it can be hard to justify the importance of putting financial resources into something that might never happen, these past few years have taught us the value of good contingency planning. Think of all the supply chain problems, critical shortages of personal protective equipment and financial havoc wreaked by the pandemic. What would have been different if organizations had had effective contingency plans in place?

Cost and uncertainty are significant barriers when convincing business leaders of the importance of making an investment in contingency planning. Since all costs for contingency plans are estimated—there’s no way of knowing precisely how events will disrupt a business—decision-makers are understandably hesitant.

Different industries have different ways of approaching this problem. In the construction industry, it’s common to set aside 10% of the overall budget of a project for contingencies. Other industries use different methods.

One popular method estimates risks according to a percentage of how likely they are to occur. By this method, if there’s a 25% risk of an event occurring that will result in USD 200,000 in recovery costs, the company must set aside 25%—or USD 50,000—to be in compliance with their contingency plan.

Markets and industries are constantly shifting, so the reality that a contingency plan faces when it is triggered might be different than the one it was created for. For example, after the 9/11 terror attacks, many of the contingency plans that the US government had in place were suddenly irrelevant because they had been prepared decades before.

To avoid a similar disconnect between plans and threats, businesses need to constantly test and reassess the plans they’ve made. For example, IBM’s guidelines mandate that plans should be tested at least once annually and improved upon as necessary. If new risks are discovered and their severity and likelihood is deemed high enough, the old plans might be scrapped altogether.

When businesses are hit with an unexpected disruption, a strong contingency plan gives much-needed structure to the recovery process. Disruptive events cause chaos and decision-makers and employees are often left scrambling to understand what is happening and how best to respond to it. Having a strong plan to turn to can help restore confidence and show the way forward.

Here are a few benefits business leaders who create strong contingency plans can expect:

Businesses that create strong plans recover faster from a disruptive event than businesses that don’t. When a negative event occurs, the faster the business recovers and gets back to business-as-usual, the lower the risk to the company, its customers and its employees.

A good contingency plan minimizes the damage to a company—both reputational and financial. For example, while a data breach will undoubtedly damage a bank’s reputation, as well as its bottom line, how the bank responds will play a critical role in whether its customers decide to continue doing business with it.

Many organizations use a strong contingency plan to show employees and customers that they take preparation seriously. By planning for a wide range of potentially damaging events, business leaders can show investors, customers and workers that they’ve taken the necessary steps to minimize risk.

Many plans focus on natural disasters such as floods, earthquakes or fires. Others deal with data breaches, unexpected network downtime or the loss of a key employee such as a CEO or founder. Here are a few examples of contingency plan templates that deal with broadly different scenarios across a range of industries.

Severity and likelihood of risk: The manufacturers have been following the news in a region where they source specific airplane parts and have deemed the likelihood of disruption there “high.” They initially conduct a search for another supplier but quickly learn that it takes months—even years—to find one. Since the part is necessary for the construction of all their airplanes, they label the severity of this disruption “high” as well.

Trigger: Suppliers make the manufacturer aware that they will soon run out of the needed part due to a disruptive geo-political event in its country of origin.

Response: The manufacturer begins the search for a new supplier of the much-needed part in a more stable country.

Severity and likelihood of risk: The managers of a bank know of a vulnerability in their app that they are working to fix. If the app is hacked and their information systems are compromised, they are likely to lose vital customer data. They rate the likelihood of this event as “high” since, as a financial institution, they are a desirable target.

They also know from watching their competitors face similar situations that the potential for disruption to their business in an event like this is great. They rate the severity of this risk as “high” as well.

Trigger: IT makes the bank’s managers aware that the bank’s app has been hacked and their customers’ data is no longer secure.

Response: The app is immediately shut down and customers are notified that their data has been compromised. They are made aware of the steps that the bank is taking to ensure that they have access to their money and that their personal information is not available to anyone on the dark web. An on-call team of specially trained security experts come in to restore the bank's systems and secure customer information.

Severity and likelihood of risk: The plant’s managers know that severe flooding might spread un-treated water into the city’s streets and public waterways. Both the severity of this risk and its likelihood given the impending storm are deemed “high. ”

Trigger: The hurricane’s path turns toward the city and approaches to less than 100 miles away with wind speeds higher than the threshold rated “safe.” The plant’s contingency plan is put into action.

Response: All necessary workers are recalled to the plant 24/7 and measures are taken to treat as much of the water as possible before the hurricane arrives. According to their plan, whatever is left over will be pumped into holding tanks that are designed to withstand a hurricane. When windspeeds rise to a certain velocity, the plant itself is shut down and all workers evacuated.

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Learn more about the process of disaster recovery planning and Disaster-Recovery-as-a-Service.

Discover how global supply chains responded to the COVID-19 pandemic and are developing better ways to balance efficiency and resilience.

See how businesses are leveraging AI and other emerging technologies to maintain business continuity amid disruption and uncertainty.

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1  “ El Nino contingency plan being readied for farmers and output ” (link resides outside ibm.com), Elara Securities Pvt Ltd., 27 April 2023.

2  “ HKMA has prepared contingency plans in case of severe sanctions ” (link resides outside ibm.com), UBS Global Research and Evidence Lab, 5 May 2022.

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A practical guide to creating a contingency plan

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.

What is a contingency plan?

A contingency plan 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.

What are the two types of contingencies in project management?

There are two types of contingencies that you should plan for: budget contingency & schedule contingency.

• Budget contingency is an additional amount of money that you allocate to your budget, so you can cover extra costs that might come up as the project progresses. If you don’t have a contingency budget, you might run into an unexpected cost that could send you over budget and risk the profit margin of your project.
• Schedule contingency is an additional amount of time that you bake into your project schedule, to allow for any unexpected delays or hiccups in your project progress. Without schedule contingency, you risk running over your project deadlines and disappointing stakeholders.

Contingency plan examples

Here are a few examples of how contingency planning could help save the day, no matter what happens:

Project contingency plan

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:

• Identify who will take over the tasks of the departing team member, and what tasks still need doing
• Assess if any additional resources will be needed (such as an additional part-time project member from another team)
• Provide training sessions for other team members to ensure they can step in effectively
• Notify any stakeholders about the change and how it will be managed to minimize disruption and offer reassurance.

Business continuity plan

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:

• Make sure all your employees have access to the necessary tools and systems so that they can work remotely if necessary
• Regularly back up all essential data to the cloud, and have a data recovery plan in place, in the event of loss of the hardware in your primary office
• Identify backup office space or plan for remote work options if the primary location becomes inaccessible
• Define communication channels that you’ll use in the event of a major disruption so that you can reach your employees to provide updates and instructions on how to proceed

Supply chain contingency plan

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.

• Have more than one supplier for critical components, so this becomes less of a business risk.
• Maintain a buffer stock of your essential components, so that production won’t be held up by supplier delays
• Find a shipping company that offers expedited shipping options in case you have an urgent need
• Update your supplier contract to include penalties for delays and a procedure for resolving any disputes

Why contingency planning is important

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:

It helps mitigate risk.

Contingency planning helps to identify potential risks and get ahead of them with a proactive plan. That way, even when things go wrong, you can minimize the disruption to operations and reduce your financial losses.

It makes your business more resilient.

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.

It keeps you compliant.

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.

It increases customer trust.

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 contingency plans in a central location, communicate changes with stakeholders, and create automated workflows in response to unexpected events.

What are the characteristics of a good contingency plan?

Your contingency plan should include the following components:

List of risks

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:

• Natural disasters
• Technological failures
• Economic downturns
• Supply chain disruptions
• Sudden market changes

Response options

Your plan should then outline various responses that you could choose between, for each risk you’ve identified. These might be:

• Actions to mitigate the risk
• Ways to transfer the risk to another party (e.g. by buying insurance)
• Ways to accept and manage the risk

Plan of action

For each risk and response option, you should then add in a plan of action, including:

• Steps to take
• Who is responsible for each step
• Any resources you’ll need
• Any need to coordinate with other stakeholders or third parties

Communication management protocols

You’ll also want to make sure that you have a plan in place to communicate effectively with all stakeholders, including:

• Who needs to be notified
• The channels you’ll use for communication
• How often you’ll send out updates
• Any useful templates to use for messages

Trigger points

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.)

Testing and review

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.

How to create a contingency plan

Let’s cover the basic contingency planning process and detail how to get yours up and running.

1. Map out essential processes.

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:

• Getting raw materials from suppliers
• Manufacturing process
• Freight and shipping
• Packaging and warehousing
• Last-mile delivery

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.

2. Create a list of risks for each process.

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” …

• The driver can deliver single or multiple packages to the wrong address.
• The package can be damaged during delivery.
• The package could get lost at a distribution center.
• A truck full of packages could be involved in an accident.
• A flood could cripple the road system in a specific area.
• The driver could get delayed because a moose wants to lick salt splatter off the car (seriously, it’s a thing ).

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 .

3. Evaluate the potential impact and likelihood of each risk.

Once the 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 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.

( Image Source )

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.

4. Calculate costs and contingency reserves, and identify issues to mitigate.

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 :

• Full potential loss from the event
• Expected loss from the event
• Cost of response (post-event)
• Cost of mitigation (pre-event)

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.

5. Create a response plan for prioritized events.

Create a response plan for events by exploring the following questions:

• What can be done ahead of time to minimize any adverse effects on the event? For example, backing up data, carrying extra stock, or having more employees on call.
• What can be done immediately after the event to minimize the impact? For example, ordering more from a secondary supplier, rerouting another vehicle, or bringing in on-call staff.

The specifics depend on your company’s unique processes and situation.

6. Share the contingency plan.

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:

• Identify who needs to be aware of and involved in contingency planning.
• Choose appropriate communication methods for each stakeholder group. For instance, department heads may need specific meetings to focus on their section of the plan. Key employees might need a training session.
• Create the plan in an accessible, centralized location, such as a monday.com board. That way, everyone involved can access the plan, and you can keep it updated at all times.
• Encourage feedback on the plan, such as running an employee survey to check understanding and seek ideas for changes and improvements.
• Post reminders and updates on your shared internal communication channels.

7. Monitor and review the contingency plan.

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.

Remember to communicate updates or revisions to all relevant stakeholders, and provide opportunities for additional training if needed.

Manage your contingency planning process with monday.com

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.

Use our pre-built contingency plan template to get you started 

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.

Use integrations to notify someone of an event automatically 

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.

Monitor project status at all times in dashboards to avoid bottlenecks and domino effects.

The best time to start acting is before a catastrophic event that puts your entire project or business at risk.

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.

Contingency plans are a must-have.

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.

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5 Steps to Create a Contingency Plan for Your Business

Posted may 4, 2022 by sabrina parsons.

Any business that survived the pandemic had to adjust, readjust, and rethink their business as they dealt with shutdowns, supply chain issues, and ever-changing customer behavior. At the time, it could be seen as crisis or recovery planning . However, intentionally or not, these businesses were proactively creating contingency plans.

What is a business contingency plan?

A business contingency plan is an established strategy or backup plan designed to help organizations respond to possible future events. This contingency planning process encourages you to consider business and financial strategies for potential risks well in advance. It’s basically a lean business plan that takes into account unexpected scenarios that could affect your business. 

Doing so ensures that you aren’t caught off guard. Instead, when a negative event occurs, you can jump right into successfully navigating your business. A contingency plan can even address larger potential issues such as a natural disaster, a global pandemic, or a major security breach. 

Your contingency plan will want to address and cover:

Financial scenarios

Financial “what if” scenarios are based on the contingency you are planning for. The important part is to include your projected Profit and Loss statements as well as your Cash Flow Forecast. Adjust these financial statements around a potential issue to better understand what course of action you’ll need to take.

Are there increased costs of goods and services or do you need to change your pricing? Should you add a fuel surcharge if the contingency involves higher gas prices? 

Strategy adjustments

Understanding the financial effects is the first step. Next, you’ll need to address how you will adjust your business and marketing strategy to navigate the contingency, you are planning for. This is when you go from risk management to creating a plan that helps your business thrive rather than recover.

What changes will you need to make to your staffing, advertising, and marketing budgets? Will you need to change how you sell, market, and support your products and services to address the adverse events? 

Why is a contingency plan necessary?

By putting together a contingency plan and addressing risks to your business, you will be prepared and able to best address those risks when and if they happen. The last few years have taught all small business owners that we have no idea what is ahead. That the best possible way to plan for the future is to be ready for anything. 

A contingency plan for your business will help you step through the what-if scenarios that you might encounter. To start putting together solid plans that will help you overcome risks, fast-track disaster recovery, and even ensure there’s business continuity in place. 

What if gas prices double, and your run a delivery business? A contingency plan could help you model the financial scenario, make sure you have the right access to credit lines to pay for the increased costs, and plan for the right gas surcharge to add to your customer deliveries. 

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How to create a contingency plan for your business

Writing a contingency plan doesn’t have to be a huge or stressful ordeal. All you are doing is taking your lean business plan, and making some adjustments to the strategy and the strategic forecast to plan for uncertainty. Here’s a step-by-step guide to write your own contingency plan.

1. Identify and list the risks

In the past few years, all business owners have experienced risks they never saw coming. Trying to account for everything can be overwhelming and time-consuming. Rather than anticipating anything that could happen to your business, focus on the next few years. 

Start with a comprehensive list, putting everything down that could possibly happen to your business in the next 12-24 months. Loss of an employee, a dip in sales, equipment failure, rising shipping costs, insurance increases, etc. Depending on your business, it may also be beneficial to consider larger unforeseen risks such as natural disasters, cyber-attacks, and economic downturns.

We can all look back at the beginning of the pandemic and learn from the events. Use that knowledge to think about potential future risks and build your list.  

2. Prioritize key risks

Now that you have all those frightening potentials listed, it’s time to prioritize. You need to think about your key risks. The ones that are most likely to happen or will cause the greatest hardship to your business. Realistically you should prioritize no more than 3-5 key risks. 

Remember, you can always use these initial contingency plans to help you explore additional risks. More than likely, several risks will have similar effects on your business functions. It’s much easier to adapt your contingency plans once you have them rather than starting fresh every single time. 

3. Outline contingency plans for each risk

Now that you’ve done the prep work, it’s time to jump into developing your plan. Take your prioritized list and focus on building contingency plans that outline how you and your business will tackle each risk. Here is what you should include in your contingency plan:

Financial forecasts for each risk

To truly understand how a specific risk impacts your business operations, you’ll need a full financial forecast . This will account for what the risk will do to your revenue, expenses, or both. Having a clear picture of your potential financial situation will help you answer questions such as:

• Will you have enough cash to address the risk? 
• How does the risk affect your ability to collect cash, and pay your bills?
• Are there any obvious costs that you can minimize or cut? 
• Do you need to consider expanding a credit line or applying for a loan?

Don’t worry about creating these forecasts from scratch. Instead, start with your current financial forecasts, make a copy, and adjust projections based on what you expect to happen. Be sure to take note of what adjustments you make. This will make it far easier to update your forecast scenarios whenever you bring in more recent real-world performance data for your business. 

Looking for a better solution? Learn how you can save more time and ensure greater accuracy when adjusting to actual performance using LivePlan .  

The one-page plan

With your forecasts in place, you can begin to define the actions you will take. Keep things simple and easy to follow by creating a one-page strategic plan for each risk. In it, you’ll address how the effects of each risk will impact your operations, sales, marketing, milestones, and even funding needs. This will help you answer questions such as:

• What strategies in marketing and sales have to be changed or adjusted? 
• Do you have to hire new people? 
• Do you need to reduce costs and expenses to survive the risk? 
• What are the roles and responsibilities required to address the risk?

Document your 12-24 month road map and the key changes you need to implement to keep your business healthy. Keep it lean and actionable to ensure that you and your team will actually be able to use it when the time comes. The LivePlan Pitch page is a perfect place to outline your one-page strategy. 

4. Connect them to your overall business plan

You’ve considered the risks. You have contingency plans in place that include financial forecast scenarios and a one-page action plan. It’s now time to connect your contingency plans to your overall business strategy and business plan. 

Ideally, you should have a simple, lean business plan that is helping guide your business over the next 12-36 months. If not, take 30-minutes to develop one based on your current expectations for your business. This will make it far easier to update and use when facing the risks you’ve identified.

Take this business contingency plan example for instance. If your unexpected event is about a financial risk (such as a dip in sales), connect that contingency plan with your financial plan as a potential fork in the road. You can easily do this same exercise with the two to three more contingency plans you have already built out. 

The end goal is to make this quick and painless so that you can spend less time planning and more time acting when a crisis you’ve planned for occurs. 

Think of it like attachments for a tractor. Where you have all of the right buckets and tools to get your yard in tip-top shape. You’re prepared to jump right in and take on everything from mowing and digging to laying down new gravel. All you need to do is add the right attachments ahead of time. That’s exactly how you want your contingency plans to function with your current plan. 

5. Share, review and revise

Once you have integrated the contingency plans into your overall business plan, it’s time to get your team on board. You want to be sure that they understand the ins and outs of your business plan, and how each contingency should be executed when the time comes. 

So how do you get your team on board? Try these three simple steps:

• Share the plan with the contingency plans integrated into the appropriate places. 
• Invite team members to a meeting where you can present the business plan, the potential unexpected events your business might have to face, and the contingency plans that outline how you navigate around them. 
• Set the expectation with the team for regular, monthly review meetings. This is where you can review business health, compare actual results to the planned results and assess the need to implement a contingency plan.

You can check out our guide on how to conduct a monthly plan review meeting for a more thorough explanation of how to set up this process. 

Preparation is everything

The hard work is done. You have thought about potential hurdles your business might face and you have a plan. Your team is engaged and you now have a regular review schedule in place to keep your business on track. 

All you have to do now is implement your lean business plan, watch for obstacles, and be ready to use your contingency plans if needed. Don’t worry, your regular review meetings will help you track your actual results against your plan and will give you an opportunity to revise your plan if need be.  Check out how LivePlan can help simplify this process and help you make better business decisions in any scenario.

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Why Having a Contingency Plan Is So Important — and How to Develop an Effective One Let's discuss the importance of contingency planning, what a comprehensive contingency plan should include and how to implement one effectively.

By Greg Davis Edited by Chelsea Brown Apr 27, 2023

Opinions expressed by Entrepreneur contributors are their own.

In today's ever-changing business environment, business owners, entrepreneurs and franchise owners need to be prepared for the unexpected. Contingency planning is a critical component of business growth, enabling organizations to minimize disruptions and recover quickly from unforeseen events.

In this article, we will discuss the importance of contingency planning, the key elements of a comprehensive plan and how to implement a contingency plan effectively. By taking proactive steps to prepare for potential challenges, businesses can build resilience and ensure continued growth and success.

Related: 4 Ways to Prepare Now so Your Business Survives the Unexpected Later

Why contingency planning matters

Disruptions can come in many forms, from natural disasters to cybersecurity breaches, equipment failures or even changes in the competitive landscape. Without proper planning, these events can have a devastating impact on a business's operations, finances and reputation. Contingency planning helps businesses minimize the impact of disruptions, maintain operational continuity and recover more quickly from setbacks. This resilience is crucial for business growth, as it enables organizations to adapt to changing conditions and capitalize on new opportunities.

Elements of a comprehensive contingency plan

Developing an effective contingency plan involves several key steps:

Step 1: Identify potential risks and vulnerabilities

The first step in creating a contingency plan is to identify potential risks and vulnerabilities that could impact your business. This includes both internal and external factors, such as natural disasters , equipment or network failures, supply chain disruptions, cybersecurity breaches, changes in the landscape or the loss of key personnel. By identifying potential threats, businesses can better understand their exposure and develop targeted strategies to address these risks.

Step 2: Develop response strategies

Once potential risks have been identified, businesses should develop response strategies to mitigate the impact of these events. This may involve developing alternative suppliers, establishing backup systems or processes or implementing new security measures. Response strategies should be tailored to the specific risks faced by the business and should take into account factors such as the likelihood of the event occurring, the potential impact on operations and the resources required to implement the strategy.

Step 3: Establish a communication plan

In the event of a disruption, clear communication is essential to ensure that all stakeholders, including employees, customers and suppliers, are aware of the situation and know what steps are being taken to address the issue. A comprehensive communication plan should outline how the information will be shared, who will be responsible for providing updates and what channels will be used to communicate with different stakeholders.

Step 4: Train employees and build awareness

For a contingency plan to be effective, employees need to be aware of the potential risks facing the business and understand their roles and responsibilities in the event of a disruption. This may involve training employees in new processes or procedures, providing guidance on emergency response protocols or conducting regular drills to ensure that all team members are prepared to act quickly and effectively in the event of a crisis.

Step 5: Review and update the plan regularly

As the business environment continues to evolve, it is essential that contingency plans are regularly reviewed and updated to reflect changes in the company's operations, industry dynamics or the broader economic landscape. This may involve conducting periodic risk assessments, updating response strategies or refining communication protocols to ensure that the plan remains relevant and effective.

Related: 5 Reasons Why You Should Create an Emergency Response Program for Your Business

Implementing a contingency plan

With a comprehensive contingency plan in place, businesses can take steps to minimize the impact of disruptions and maintain operational continuity . Key steps in the implementation process include:

Developing an action plan

An action plan should outline the specific steps that will be taken to address each identified risk, including timelines, resources and responsibilities. This plan should be clear, concise and easily accessible to all team members, ensuring that everyone understands their role in the event of a disruption .

Allocating resources

Contingency planning may require the allocation of resources, such as budget, personnel or equipment, to implement response strategies effectively. Businesses should prioritize resources based on the likelihood and potential impact of each identified risk, ensuring that the most critical vulnerabilities are addressed first.

Testing and refining the plan

Once the plan has been developed, it is essential to test its effectiveness through simulation exercises, drills or other means. This will help identify any weaknesses or gaps in the plan and enable the business to refine its strategies accordingly. Regular testing also helps ensure that employees are familiar with the plan and prepared to act in the event of a disruption.

Monitoring the environment and adapting

Contingency planning is an ongoing process that requires businesses to monitor changes in their operating environment and adapt their strategies accordingly. This may involve updating the plan to address new risks, adjusting response strategies in light of changing circumstances, or reallocating resources as needed. By staying attuned to the evolving business landscape, organizations can remain agile and resilient in the face of uncertainty .

Contingency planning is a critical component of business growth, enabling organizations to navigate the unexpected and maintain operational continuity in the face of disruptions. By identifying potential risks, developing targeted response strategies and implementing a comprehensive plan, businesses can build resilience and drive continued success. As the business environment continues to evolve, contingency planning will remain a vital tool for business owners, entrepreneurs and franchise owners seeking to capitalize on new opportunities and protect their organizations from unforeseen challenges .

Related: How to Create a Disaster Plan for Your Business

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Business contingency plan example

This business contingency plan example template can help you:

• Understand your organization's contingency plan more clearly.
• Communicate the plan to everyone who could potentially be affected.
• Prepare your organization to handle anything unexpected.

Open this template to view a detailed example of a business contingency plan that you can customize to your use case.

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Contingency plan template

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Planning for future business initiatives should include crafting a backup plan in the event something doesn’t go as planned. With a contingency plan template, your team can quickly establish and launch a backup strategy in the event that a roadblock occurs.

What is a contingency plan template?

What is a contingency plan.

A contingency plan is a strategy you create for your team or business in the event that something disrupts regular business operations. Think of a contingency plan as the “Plan B” for regular business operations—it’s the plan that you create to keep things running even if something prevents your business from operating normally.

What’s the difference between a business contingency plan and a business continuity plan?

While they sound similar, contingency plans and continuity plans are two separate strategies put in place to help keep a business running. Teams create a contingency in advance of a disruption to prepare for potential future issues. Contingency plans often require an incident to meet certain criteria before the plan is enacted. A contingency plan is only enacted if a scenario meets a certain criteria. When teams develop the contingency plan, they also develop the criteria a situation needs to meet before that plan is executed. 

A continuity plan is a solution that’s put in place during an incident to help keep the business running. While a contingency plan requires that a situation meets certain requirements before it is enacted, a continuity plan does not. This means that your team can start implementing a continuity plan as soon as something starts to go awry.

Why use a contingency plan template?

Using a contingency plan template provides you with a few different benefits.

Ensure every plan has the relevant information: When you use a contingency plan template to develop your strategy, you’ll have key elements, such as a scenario criteria, and the strategy needed to keep the business running. This ensures that every plan will have all of the information the team needs to enact the plan.

Standardize formatting : When all contingency plans are organized in a similar manner, team members will know exactly where to find the information they need when they need to enact a contingency plan. In times of crisis, people sometimes don’t think clearly. Having information organized in a similar manner helps take the cognitive work away from finding the information you need.

Simplify plan creation : When you create a contingency plan template in a digital work management platform like Asana, you can create full contingency plans quickly and easily. Simply duplicate the template and then add in the relevant information to that specific plan.

Integrated features

Project Brief . A project brief is a way to communicate important details and dates to your broader project team. Make sure your team can easily access your project brief by putting it in a central source of truth like Asana.

Approvals . Sometimes you don’t just need to complete a task—you need to know if a deliverable is approved or not. Approvals are a special type of task in Asana with options to “Approve,” “Request changes,” or “Reject” the task. That way, task owners get clear instructions on what actions they should take and whether their work has been approved or not. 

Custom fields . Custom fields are the best way to tag, sort, and filter work. Create unique custom fields for any information you need to track—from priority and status to email or phone number. Use custom fields to sort and schedule your to-dos so you know what to work on first. Plus, share custom fields across tasks and projects to ensure consistency across your organization. 

Messaging . Need to share information that isn’t actionable? Try Messages in Asana. Messages enable you to communicate within Asana about non-actionable work. You can send messages to any combination of individuals, teams, and projects, so everyone is on the same page. Link to tasks, projects, and Goals in Asana to make it easy for your message recipients to gain context and drill down into the details.

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Vimeo . Text may get the point across, but written words lack tone, emotion, and expression. With video messaging in Asana, powered by Vimeo, you can give your team all the context they need, without having to schedule another meeting. Record short video messages of yourself, your screen—or both—then embed the videos in tasks, projects, messages, and comments to provide additional clarity and context. A transcript of the recording is automatically created by Asana, making it readable and searchable. Give feedback, ask questions, and assign tasks—all without leaving Asana.

Google Workplace . Attach files directly to tasks in Asana with the Google Workplace file chooser, which is built into the Asana task pane. Easily attach any My Drive file with just a few clicks.

Slack . Turn ideas, work requests, and action items from Slack into trackable tasks and comments in Asana. Go from quick questions and action items to tasks with assignees and due dates. Easily capture work so requests and to-dos don’t get lost in Slack. 

Microsoft Teams . With the Microsoft Teams + Asana integration, you can search for and share the information you need without leaving Teams. Easily connect your Teams conversations to actionable items in Asana. Plus, create, assign, and view tasks during a Teams Meeting without needing to switch to your browser.

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The best way to write a contingency plan is to start with a contingency plan template. A contingency plan template outlines all of the major components of a contingency plan. With the template, all you need to do is fill in key information relevant to the specific contingency plan for your current situation.

What are the benefits of contingency planning?

Contingency planning minimizes the amount of risk your business may experience if a disruption occurs. Use a contingency plan template to create multiple plans for different situations, so your business will always be prepared.

What are the 9 steps of contingency planning?

There are nine key steps to contingency planning . The first step is to make a list of major potential risks. From there, weigh those risks based on both severity and likelihood of the risk happening. Here you can identify important risks that could affect operations, and analyze what impact they may have on your business. Then, you can use a contingency plan template to develop your full plan for the biggest risk, gain approval from superiors, distribute plans to relevant teams, and create new plans if needed.

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Example of a Business Contingency Plan

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Every business depends upon certain "givens," which range from retaining key personnel, to emergency planning, to credit arrangements. But what happens when a relatively young CEO is killed in an accident or when an earthquake destroys a company's headquarters? Or, when a line of credit is unexpectedly cancelled? There are practically an infinite number of things that can go wrong and negatively impact a business.

There are even unexpectedly good things that can be disruptive – a classic instance is the small business that gets a huge contract far beyond the company's current ability to fulfill it. Contingency plans lay out what should happen when one or more of these unexpected events occurs. Every business – large or small – needs its own unique contingency plan.

The following examples deals with how SEC requirements for contingency plans can affect a business.

What's the Problem?

Every contingency plan answers a question about a problem. In this instance, the SEC requires each Registered Investment Advisory firm to have on file plans that assure that the business can go forward and deal equitably with its client investors in the event that the head of the firm becomes unavailable through death, serious illness or accident. The question is simply: How will the firm handle client needs when the head of the firm becomes unavailable?

Information and Data Availability

The first thing the SEC requires is that there is will always be some means of clients being able to access their information in the firm's accounts, importantly the record of each client's current equity holdings, but also essential documentation related to tax advice and retirement planning. The contingency plan deals with this need in two ways:

• It states that all client information is stored on the firm's primary computer and that the computer is backed up continuously on a separate local drive and on the cloud. Specific retrieval information is provided.
• It states that records of all client holdings are also maintained at the brokerage where the firm executes all trades, and that each client has unrestricted access to brokerage records. 

This two-step data availability plan guarantees that if, the firm's building is destroyed, the information remains fully available offsite, both to the firm and, independently, to its clients. Since the firm's correspondent brokerage has the same SEC-mandated information availability obligation as the advisory firm, client records kept at the brokerage are also available at an offsite location maintained by the brokerage. Thus, client records are stored and continuously maintained at at least four separate physical locations and on the cloud.

Alternative Communication Means Between Advisors and Clients

The SEC also requires that each firm has in place an alternative means of communicating with clients. Having alternative means available allows the firm to continue to handle client accounts in a timely way in the event of a catastrophe. In addition to the firm's email address and telephone number, the firm maintains a mailbox in another city and periodically reminds each of its clients of that alternative address. The head of the firm also has a dedicated cell phone account separate from the firm's business telephone account or his personal cell number and makes sure that every client knows that independent number.

Alternate Communications Between Advisor and Employees

In this small firm, only the principal has authority to trade on behalf of its clients; therefore an alternative means of communication between the principal advisor and a single clerical employee isn't required to ensure that the business can continue without interruption. If the firm had multiple registered advisors handling client accounts, alternative communication means similar to those required for the principal advisor would be required and in place.

Regulatory Reporting Requirements

Because the business records are stored in more than one physical location and are also stored on the cloud, where they are available regardless of the advisor's location. As long as the advisor is in reasonably good health and of sound mind, no physical disaster or emergency is likely to impede the firm’s few and occasional regulatory reporting obligations.

If the advisor is seriously ill, dead or of unsound mind, the advisor’s wife – a well-established marketing professional – has instructions in place to notify clients, all of whom are personally known to her. She is also instructed in how to terminate the business as a registered institution, with notification to the SEC. At that point, the business will cease and the clients will assume responsibility for their own accounts with a minimum of disruption.

Access to Funds in the Event of Firm Termination

Clients have continuous and unimpeded access to funds and records at all times through the firm's correspondent broker.

The Takeaway for all Types  of Contingency Plans

This particular contingency plan for a small registered investment advisory service provides good information about contingency plans generally:

• Every contingency plan originates as the answer to a specific question, here: "What safeguards exist for the orderly continuation or termination of this service in the event of the principal advisor's inability to carry the business forward?"
• Every contingency plan provides specific solutions to one or more particular issues.
• The plan addresses how the company responds internally to the event and also how it responds to the event externally.
• More comprehensive contingency plans likely consist of several different specific plans like the one in the example, each of them addressing a specific crisis or an unexpected event. 

This particular plan addresses two issues common to many contingency plans: data loss and leadership incapacity. Other issues contingency plans often address are:

• natural disasters (also implicit in the example)
• public safety threats, employee and customer injuries and workplace accidents generally
• mismanagement, deliberate or unintended
• responsive planning to specific product liability issues.
• QuickBooks: What Is a Contingency Plan and Why Does Your Business Need One?
• Study:com: What Is Contingency Planning in Business? - Definition, Example & Importance
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• Federal Emergency Management Agency: Business Continuity and Disaster Preparedness Plan
• Financial Industry Regulatory Authority: Small Business Continuity Planning Template

I am a retired Registered Investment Advisor with 12 years experience as head of an investment management firm. I also have a Ph.D. in English and have written more than 4,000 articles for regional and national publications.

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How to Form a Business Contingency Plan in 7 Steps

TABLE OF CONTENTS

A business contingency plan can help you prepare for emergencies such as the COVID-19 pandemic. Here are 7 steps you can take to avoid operational disruptions:

• Assemble a contingency planning team
• Identify and analyze potential risks
• Prioritize risks
• Develop preventive measures and responses
• Distribute your plan
• Test your plan
• Maintain your plan

What Is a Business Contingency Plan?

A business contingency plan is a documented course of action your company prepares to take in case of a chance event — a contingency — that threatens to disrupt your operations. It also is sometimes referred to as a business continuity plan or a disaster plan.

A business contingency plan document typically covers:

• A list of potential risk scenarios
• An evaluation of the likelihood of each scenario
• An analysis of the potential impact of each scenario should it happen
• What preventive steps should be taken to avoid or mitigate each scenario
• What response should be taken in the event each scenario takes place

This type of planning can be applied to preparing for any type of business disruption, including:

• Financial emergencies, such as cash-flow crunches
• Staffing emergencies, such as medical emergencies or sudden loss of key personnel
• Supply-chain disruptions, such as manufacturing shortages
• Equipment disasters, such as machine failures
• Technical disruptions, such as network outages or payment-processing failures
• Security disasters, such as data breaches
• Natural and man-made disasters (hurricanes, pandemics, terror attacks, etc.)
• Legal disputes, such as lawsuits from injured or terminated employees
• A customer-relations crisis, such as negative publicity

These are just a few business continuity contingency plan sample scenarios. Depending on your business, you may face special risks specific to your industry, product or service.

So, Why Do You Need a Business Contingency Plan?

Having a contingency plan in business protects you against emergencies that could potentially disrupt your operations, hurt your cash flow or even drive you out of business. While it’s tempting to assume such contingencies are exceptional situations, some types of emergencies are all too common.

For Example

A survey by online payment platform provider WePay found 41% of businesses had experienced cash-flow challenges within the past year. Of these, 59% reported that the financial impact was either consequential or highly consequential. This type of scenario could easily drive a small company out of business.

Cybersecurity breaches represent another common emergency. In 2019, 28% of businesses reported suffering a data breach over 12 months, according to a survey by the National Cyber Security Alliance. Of these, 69% were knocked offline for a time, 37% suffered a financial loss, 25% filed for bankruptcy protection and 10% went out of business.

The spread of the novel coronavirus provides another example. At the beginning of the pandemic, the number of small businesses that felt comfortable about their cash-flow situation fell from 59% in March to 48% in May, according to research by MetLife and the U.S. Chamber of Commerce . Nearly 1 in 5 businesses were temporarily closed in May.

As these numbers illustrate, business emergencies happen frequently, and they can happen suddenly, sometimes with devastating effects. This makes it prudent for businesses to invest in developing contingency plans.

How Do You Go About Developing a Business Contingency Plan?

The heart of a business contingency plan is a set of standard operating procedures that detail how your company will respond in the event of specific risk scenarios. To develop this type of plan effectively, you first need to assemble a planning team to identify, analyze and prioritize risks.

To put your plan into practical use, you will need to distribute it to key personnel and test and maintain it. Following these steps will enable you to develop a contingency plan that you can implement if an emergency does arise:

1. Assemble a Contingency Planning Team

A preliminary step toward doing effective contingency preparation is to assemble a planning team. One person should be designated as the contingency planning leader. This individual will be responsible for:

• Managing overall contingency planning
• Coordinating communication between team members
• Getting input from key personnel
• Supervising risk identification, analysis and evaluation
• Overseeing development of preventive measures and responses
• Distributing contingency plan documents to key personnel
• Supervising contingency plan training and testing
• Keeping plans updated

To perform these duties effectively, the team leader should possess prerequisite skills, such as project-management experience. During the planning process, they will need to keep in touch with upper management as well as key personnel from departments involved in contingency planning. Depending on which risks are identified, departments that may be relied upon to provide input may include:

• Information technology
• Marketing and sales
• Customer service

The contingency planning leader should identify which personnel will be relied upon for expert input and who will be responsible for coordinating responses in the event of an emergency. For contingency planning to be effective, it’s critical for the planning leader to communicate with these key personnel.

2. Identify and Analyze Potential Risks

Your planning team’s first task should be to identify potential risks to your operations. Examples of potential risks include:

• Your in-store operations aren’t generating as much revenue as they did before the coronavirus pandemic
• Your cash flow falls short of your monthly expenses
• An employee in a key position is out with an illness or injury for an extended period
• Your company’s owner passes away unexpectedly
• Your suppliers inform you that they are running short on stock this month
• Your website server goes down
• Your company network gets hacked or infected with a computer virus
• A hurricane disrupts your business
• An employee gets injured on the job and files a claim
• A customer service issue generates a large number of public complaints on your social media profile

These are just a few business contingency plan example scenarios. For a comprehensive contingency plan, review all your operations and identify any potential scenarios that could disrupt them.

After identifying potential risks, you should analyze each scenario. Your analysis should evaluate:

• How likely each scenario is
• What impact each scenario would have on your business

You can use a business contingency plan template to identify and analyze risks. A simple way to create a template is to use a spreadsheet to list risk scenarios as rows, with columns dedicated to describing each scenario’s likelihood and impact, plus additional columns for preventive measures and responses.

When evaluating the likelihood of each scenario, you may find it convenient to use a simple scoring system. For example, you could use:

• 1 for extremely low risk
• 2 for moderately low risk
• 3 for moderately high risk
• 4 for extremely high risk

This allows you to quantify the likelihood of a given risk. Similarly, you can use a scoring system to measure the impact of a given scenario.

3. Prioritize Risks

After you’ve analyzed potential risks, the next step is to prioritize them. This is a necessary step because the process of developing contingency plans for risks consumes time and labor, and most businesses don’t have the need or the resources to cover every possible risk in equal detail. Strategically, it makes sense to address your greatest risks first.

If you use a scoring system to evaluate risks as suggested above, you can prioritize risks based on score. Scenarios that are more likely or which have a bigger potential impact should be prioritized above less probable or lower-impact scenarios.

You also can use criteria based on logical considerations to prioritize potential risks. For example, if your revenue model relies heavily on e-commerce, a contingency plan for online business continuity should be a high priority.

4. Develop Preventive Measures and Responses

After you’ve ranked your risks by order of priority, you can begin developing standard operating procedures to address each one. Your procedures should address 2 major areas:

• What preventive measures can be taken to prevent this scenario from arising?
• What response should be taken if this scenario does happen?

To illustrate, a financial contingency plan, for example, might call for the preventive measure of setting aside a percentage of revenue each month to create an emergency fund in the event of a cash-flow crisis. It also might include provisions to tap into a business line of credit in the event a financial emergency does arise.

Your contingency planning leader should develop preventive and responsive procedures in consultation with relevant company personnel and outsourcing partners. In some cases, you may wish to tap into the expertise of an outside consultant. For instance, you might hire a cybersecurity expert to review your network security risks and recommend preventive measures.

Preventive measures and procedures should be documented and stored in a place where they can be accessed by relevant personnel. This will help ensure that your contingency plan can be used in the event of an actual emergency. It will also make it easier to keep your plan updated.

5. Distribute Your Plan

After your planning leader has developed a rough draft of a contingency plan, it should be shared with relevant personnel who will be responsible for implementing the plan in the event of an emergency. This will allow you to get feedback on how to improve your plan. Your company’s planning leader then can incorporate this feedback to create a final draft of the plan.

Once a final draft has been agreed on, your plan should be distributed to key personnel for reference and use. An efficient way to distribute your plan is to create an area of your company’s intranet where management personnel and relevant workers can access it digitally.

As a contingency against the event of a physical disaster or a problem with your company’s network, be sure to create physical and cloud backups of your plan, with at least one physical copy stored at a different location than your on-site premises. These safeguards will ensure that you will be able to access your plan remotely even if your network goes down or there is a physical disaster at your site.

6. Test Your Plan

It’s crucial to ascertain that your contingency plan will actually work when you need it. The best way to do this is to run a test simulation of your plan.

For example, if you have a plan for what to do in a cash-flow crisis , you might have your accountant plug in some numbers for what will happen if your revenue level drops to a given point. The accountant then can run a simulation of whether your contingency measures would be adequate to offset the drop in revenue. As part of this simulation, you might want to  check your credit score  to verify that you could qualify for a loan or line of credit if needed.

Similarly, if you have a plan for what to do in the event of a company network outage, you might plan a simulated outage at a time when business is normally slow. This will give your team an opportunity to verify that your contingency plan will work when needed.

Testing also can serve as a training opportunity for personnel who will be responsible for putting your plan into effect in a real situation. It’s vital for key players to know what to do if a situation calls for activating your contingency plan. Running a test simulation will give them practical experience with putting your plan into effect.

7. Maintain Your Plan

Business contingency plans need periodic updating because of changes that may happen after their creation. For instance, if you have a plan for a cash-flow emergency and your monthly revenue or operational expenses change significantly, your plan needs to be adjusted to reflect your new numbers.

To make sure that your contingency plan stays up-to-date, schedule a periodic review of your plan document. Depending on the specifics of your plan, you may opt to review it on an annual, quarterly or even monthly basis.

You also can update your plan after you actually use it and observe how it works in practice. Take notes on how the plan implementation went, and if there were hiccups, make appropriate adjustments.

Protect Your Company With a Business Contingency Plan

Planning for emergencies is an essential part of a complete business plan and can protect your company in the event of a crisis. Effective planning starts with assembling a team to identify and analyze potential risks. You can then prioritize your highest risks to develop effective preventive measures and responses.

In order for your plan to be effective, it’s important to distribute your plan to key personnel and test and maintain it to make sure that it works and stays up-to-date. Put these steps into effect to protect your business from unexpected disruptions. When it comes to contingency planning, it’s better to be safe than sorry.

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