contingency plan example in business plan

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.

Mind Map for Risk Identification

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.

Risk Probability and Impact Matrix

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.

Business Contingency Plan Example

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.

Join over thousands of organizations that use Creately to brainstorm, plan, analyze, and execute their projects successfully.

contingency plan example in business plan

More Related Articles

start a B2B business

Leave a comment Cancel reply

Please enter an answer in digits: 5 × 5 =

Download our all-new eBook for tips on 50 powerful Business Diagrams for Strategic Planning.

Filter by Keywords

Project Management

What is a contingency plan & how to develop one.

Vivian Tejeda

ClickUp Contributor

July 13, 2023

In business, the only constant is inconsistency. 

Whether it’s natural disasters, cybersecurity breaches, or supply chain disruptions, unexpected events can strike at any time. And this isn’t simply alarmist talk—obviously, business risks can pop up anywhere, but you can avoid so much with a general backup plan.  

It’s why developing a contingency plan is essential for every organization. However, it takes knowing what to include, how to create proactive measures, and how to have this plan ready at any time so you maintain normal operations.

And that’s where this guide comes in. 💪

Let’s walk through the process of contingency planning to help your team navigate unforeseen challenges with confidence. Here’s how to start safeguarding your business against the unpredictable.

What is a Contingency Plan?

Benefits of having a contingency plan, how to create a business contingency plan: a step-by-step guide, elements of a contingency plan, contingency plan examples, get your team prepared with a contingency plan.

Avatar of person using AI

A contingency plan is a proactive strategy designed to help businesses prepare for potential risks and disruptions. It outlines the necessary steps to lower potential damage, ensure your business operations continue, and that an organization can recover from its biggest risks or unexpected adverse situations.

Business contingency plans understand the key risks that could derail an entire project or business continuity. Typically, contingency planning relies on business impact analysis to determine the biggest risks and potential setbacks . This allows companies to proactively create a backup option from an original plan.

From weather-related disasters to data breaches, contingency planning makes all the difference when the unexpected occurs. There are plenty of reasons to create contingency plans—for obvious and not-so-obvious reasons.

Here are some of the benefits of contingency planning you might not realize:

1. It keeps damage and losses in check

Having a solid contingency plan means you’re ready to tackle whatever curveballs life throws at your business. And the best part? It minimizes the impact these surprises can have on your business. For example, it could be financial, operational, or reputational risk management to keep damage and losses to a minimum.

With detailed contingency plans in place, you set yourself up to stay strong, no matter what.

2. It allows companies to keep business as usual—even when it’s not

A lot of businesses operate on the model that everything runs perfectly—minus a few hiccups here and there. But how do organizations plan around unpredictable disasters from weather or other emergencies that could break your supply chain?

You could panic—or have some relief knowing the contingency plans you created have a detailed backup plan to maintain business continuity—so everything remains running smoothly. Contingency planning allows you to adapt to whatever comes your way and keep serving your customers with minimal interruption.

Now that’s what you call stability.

3. It helps businesses bounce back in no time

Let’s be real—the faster you recover from an unexpected event, the better. Your contingency planning process helps you identify what you need to do to get back on track ASAP.

The result? You save time and resources and avoid any extra headaches that might come from a prolonged disruption—including losing that customer base you’ve worked so hard to grow. 

4. It makes it easier to win over customers and keep them

Here’s the thing—your customers and key stakeholders want to know you’ve got their backs. When you’ve got a business contingency plan at the ready, you show customers you’re serious about maintaining top-notch service and reliability. 

It’s a rock-solid way to build trust, foster customer loyalty, and show that your business operates no matter the situation—so you can focus solely on what matters most.

Ready to build your own contingency plans? Follow these seven steps to ensure your business is prepared for the unexpected. 

1. Assemble a contingency planning team

Gather a diverse group of employees and stakeholders who understand your business and provide valuable insights into potential risks and solutions. 

This team should include representatives from different departments and levels of responsibility, ensuring a well-rounded perspective. Remember, a diverse team spots potential blind spots better and brings creative problem-solving ideas to the table.

2. Leave no stone unturned

Identify possible disruptions—natural disasters, cybersecurity breaches, personnel issues, or other hazards—and assess their potential impact on your business. Take a deep dive into your operations and consider both internal and external threats. 

Consult with your team and external experts if needed, and create a comprehensive list of risks that could affect your business continuity.

3. Tackle the biggest fish first

Rank the identified risks according to their potential consequences and the likelihood of them actually happening. Focus on high-impact, high-probability events for your contingency plan.

This prioritization process will help you allocate resources effectively and ensure you’re tackling the most critical threats first. Remember, it’s essential to strike a balance between addressing immediate threats and preparing for longer-term risks.

4. Plan for action—not a reaction

For each risk, create a detailed plan outlining the steps your business will take to mitigate the threat and minimize its impact. These response strategies should be clear, actionable, and tailored to the specific risk at hand . 

clickup contingency plan template

Better yet, don’t start from scratch. ClickUp provides a done-for-you contingency template that you can fill in and share with your whole team. As you continue to flesh out your contingency plan, consider both short-term and long-term solutions, and make sure your plan is flexible enough to adapt to changing circumstances. The more specific your action plans , the better prepared your team will be.

5. Establish communication and keep the lines open

Determine how the information will be shared and establish guidelines for coordinating response efforts among team members and stakeholders. This might involve setting up dedicated communication channels, designating points of contact, or implementing a centralized reporting system. 

It might even be worth adding it to your onboarding process for employees. The goal is to ensure that everyone involved in executing the contingency plan is on the same page.

6. Train employees and raise awareness

Educate your employees about the risks you’ve identified and make sure they’re familiar with the contingency plan. Conduct regular training sessions and drills to keep everyone prepared. 

Make sure your team understands their role in the plan and is equipped with the skills and knowledge necessary to execute their responsibilities. Who is doing what? What are the expectations?

An informed and well-trained team is your strongest asset in navigating unexpected challenges.

7. Regularly review and update the contingency plan: Stay ahead of the curve

Stay proactive by periodically reviewing your contingency plan and making necessary updates based on changes in your business environment, new risks, or lessons learned from past incidents . 

Schedule routine check-ins to reassess potential risks, evaluate the effectiveness of your response strategies, and make any necessary adjustments. A contingency plan is a living document—keep it fresh and relevant to stay prepared for whatever comes your way.

Creating comprehensive contingency plans takes several crucial elements—think of them as the building blocks for a solid foundation of preparedness. Let’s explore each of these components in detail:

Risk assessment and identification: Know your threats

First things first, you need to dive deep into your business processes and identify potential threats that could disrupt your operations. 

Consider everything from natural occurring disasters and cyberattacks to personnel changes and to issues with supply chains. Once you’ve compiled a list of risks, assess their potential impact on your business to determine the severity of each threat.

Risk management is all about knowing the likelihood of anything and everything that could pause your operations. Here are some common reasons for developing contingency plans :

  • Natural disaster recovery (e.g., floods, earthquakes, hurricanes, tornadoes)
  • Pandemics or widespread health crises
  • Supply chain disruptions or shortages
  • Cybersecurity breaches or data theft
  • Technological failures or system outages
  • Regulatory changes or legal issues
  • Economic downturns or market fluctuations
  • Competitor actions or industry shifts
  • Workplace accidents or safety incidents
  • Acts of terrorism or civil unrest
  • Damage to facilities or equipment (e.g., fires, vandalism)
  • Intellectual property disputes or theft
  • Loss of major clients or contracts
  • Reputation-damaging events (e.g., product recalls, public relations crises)
  • Environmental hazards or accidents (e.g., chemical spills, pollution incidents)

Risk Assessment Whiteboard Template by ClickUp

Try the ClickUp Risk Assessment Whiteboard Template to collaboratively plan around all of the potential issues that could harm your operations. A visual whiteboard allows everyone to participate and clearly see the risks and strategies to address them in one space. Now, your contingency plan will look better than ever.

Prioritization of risks: Focus on what matters most

Not all risks are created equal. To make the most of your contingency planning efforts, prioritize risks based on their likelihood as well as what their consequences could be. 

Focus on addressing high-impact, high-probability events first, then work your way down the list to make sure you’re tackling the most critical threats head-on to have a solid Plan B.

ClickUp Prioritization Matrix Template

The ClickUp Prioritization Matrix Template aids in prioritizing tasks and projects based on their impact on users and the effort required to implement them. It’s a useful tool for assessing operational workflows and improvements, with prioritization made easy using the 3×3 matrix.

Response strategies and action plans: Be proactive—not reactive

For each identified risk, develop a clear and actionable plan outlining the steps your business will take to minimize the threat and its impact. 

Remember, it’s essential to be proactive rather than reactive—having well-defined response strategies in place will help you act swiftly and decisively when faced with unexpected challenges.

Using the Cybersecurity Action Plan Template by ClickUp to create an organized and detailed cybersecurity implementation plan

For IT teams, contingency plans must include how you’ll address any cybersecurity threats. The ClickUp Cybersecurity Action Plan Template helps IT departments add crucial details to a contingency plan.

Communication and coordination: Keep everyone in the loop

Here’s an important note to keep in mind: A contingency plan is only effective if everyone involved knows about it and understands their role. 

Outline how information will be shared during an emergency, and establish protocols for coordinating efforts among team members and stakeholders. For example, HR software with clear communication and seamless coordination features can be vital for a successful response to any crisis.

ClickUp Communication Plan Template

If you need help setting up your internal or external communication process during a crisis, the ClickUp Communication Plan Template is a must. This template provides simple steps to build an effective communication plan with easily customizable sections throughout the Doc so your contingency plan is as thorough as possible.

Training and awareness: Empower your team

Educate your employees about potential risks and the contingency plan itself. 

Run regular training sessions and drills to make sure everyone is familiar with their responsibilities and prepared to act when the time comes. An informed and well-trained team is your strongest asset when navigating unexpected challenges.

ClickUp Process and Procedures Template

Get a head-start with the ClickUp Company Process and Procedures Template to easily document and organize your contingency planning guide for the organization. This template will give you the bones of a solid plan to get employee buy-in and knowledge of what to specifically do if circumstances change.

Plan maintenance and updates: Keep it fresh and relevant

Lastly, don’t let your contingency plan collect dust. Regularly review and revise it as needed to make sure it remains up-to-date and aligned with your current business environment. 

Schedule periodic check-ins to assess potential risks, evaluate the effectiveness of your response strategies, and make any necessary adjustments. A contingency plan is a living document—keep it fresh and relevant to stay prepared for whatever comes your way. 🚀

clickup business continuity plan template

Don’t make planning any more difficult than it has to—use the ClickUp Business Continuity Plan Template and rest assured you’ve included everything. Add reassessment plans to go back and edit contingency plans based on new threats or risk you could encounter and review each year.

Toyota’s Swift Response to the 2011 Tsunami

In 2011 a devastating earthquake and tsunami hit Japan, causing widespread destruction and significantly impacting businesses across the country. Toyota, a global leader in the automotive industry, was no exception. Supply chains suffered massive disruptions due to damaged infrastructure and affected suppliers.

However, Toyota’s business contingency plan played a crucial role in minimizing the impact of the disaster on the company. They already discovered the possible risks associated with natural disasters and put measures in place to address them with a solid backup plan.

The company’s business continuity planning played a huge role in quickly bouncing back. Here are some of the best examples of their plan: 

Shifting production to alternative locations

Toyota’s “plan B” included an emergency response process to shift production to other facilities. When the tsunami struck, Toyota quickly relocated some manufacturing operations to unaffected plants, both within Japan and overseas.

These types of proactive measures helped maintain production levels and ensured that the company could continue to meet customer demands during the crisis.

Tapping into alternative suppliers

The event also affected many suppliers that Toyota relied on for parts and materials. To minimize the impact on supply chains, the company leveraged its extensive network of global suppliers, turning to alternative sources to procure the necessary components. 

This diversification strategy allowed Toyota to maintain its production schedules and minimize late deliveries of customer vehicles. 

Implementing recovery efforts

In the aftermath of the crisis, Toyota swiftly mobilized its resources to support recovery efforts. They worked closely with affected suppliers to help them restore their operations, provided financial assistance, and shared their expertise in disaster recovery. 

By getting ahead of “what ifs”, Toyota demonstrated the power of effective contingency planning in the event of a major disaster.

Remember, a good offense is the best defense. That’s why contingency planning pushes you to be proactive in managing risks . By identifying potential threats and addressing them before they escalate—and keeping your plan updated—you’ll always be ready to respond effectively. It’s like having a secret weapon in your back pocket.

Whether you use one of ClickUp’s templates or create something from scratch, a contingency plan is about so much more than just preparing for the unexpected. It’s about minimizing damage, ensuring business continuity, bouncing back quickly, building trust, and being proactive.

Use ClickUp as your central space for communication, planning, and organizing essential documents. Additionally, you can rely on Whiteboards to collaboratively organize your response plans.

When you put it all together with ClickUp, you’ve got a recipe for a resilient, agile, and successful organization that takes on anything life throws its way. Give ClickUp a try today for free !

Questions? Comments? Visit our Help Center for support.

Receive the latest WriteClick Newsletter updates.

Thanks for subscribing to our blog!

Please enter a valid email

  • Free training & 24-hour support
  • Serious about security & privacy
  • 99.99% uptime the last 12 months

business contingency plan

An overview of business contingency plans

Reading time: about 3 min

Natural disasters, data hacking, theft—your organization has likely prepared for major catastrophes.

Less significant events can also be majorly disruptive—say your biggest customer suddenly switching to a competitor or your entire sales staff getting food poisoning at their annual retreat.

Many circumstances have the potential to disrupt, or worse, shut down your business. A business contingency plan can save the day. Follow the steps below to develop a business contingency plan that will help you stay prepared for the worst.

What is a contingency plan?

A contingency plan is a roadmap created by management to help an organization respond to an event that may or may not happen in the future—whether it’s a large-scale event like a natural disaster or a small-scale roadblock like employee theft.

The purpose of a business contingency plan is to maintain business continuity during and after a disruptive event. A contingency plan can also help organizations recover from disasters, manage risk, avoid negative publicity, and handle employee injuries.

By developing a contingency plan, your business can react faster to unexpected events. The faster your organization is able to get back up and running, the less impact you'll see on profits and revenue.

How to write a contingency plan

There are many factors to consider when building a contingency plan. These four steps are a good place to start preparing for the unexpected.

1. Identify the risks

Before you can prepare for a disaster, you need to understand what types of disasters you’re preparing for. Think about all the possible risks to your organization, including natural disasters, sudden changes to revenue or personnel, or security threats.

2. Prioritize the risks

Make sure you spend your time and resources preparing for events that have a high chance of occurring as you write and develop your contingency plan. For example, you may have listed earthquakes as a possible risk. However, if your area doesn't experience many earthquakes, you wouldn’t want to spend all your time preparing for this event. If your area is prone to flooding, you should spend more of your resources preparing for floods.

To determine which risks are more likely to occur, use a risk impact scale . This will help you to estimate the likelihood that an event will occur and determine where to focus your efforts.

risk impact scale

3. Develop contingency plans

Once you’ve created a prioritized list, it’s time to put together a plan to mitigate those risks. As you write a contingency plan, it should include visuals or a step-by-step guide that outlines what to do once the event has happened and how to keep your business running. Include a list of everyone, both inside and outside of the organization, who needs to be contacted should the event occur, along with up-to-date contact information.

You can also create a list of ways to minimize the risk of these events now and start acting on it. 

4. Maintain the plan

Maintenance of your contingency plan is arguably the most important part of the process because it’s where the work happens to ensure you’re always ready.

Review your plan frequently. Personnel, operational, and technological changes can make the plan inefficient, which means you may need to make some changes.  

You’ll want to communicate the plan to everyone who could potentially be affected and clearly define what everyone's roles and responsibilities will be during a time of crisis. 

Buniness contingency plan example

To help you prepare for the unexpected, get started with these business contingency plan examples below. 

business contingency plan example

Ready to get started? Business contingency plans help you prepare your organization to handle anything unexpected. Give your employees a realistic plan for how they should handle any problem that arises. 

risk management process

Learn the 5 steps to an effective risk management process.

Lucidchart, a cloud-based intelligent diagramming application, is a core component of Lucid Software's Visual Collaboration Suite. This intuitive, cloud-based solution empowers teams to collaborate in real-time to build flowcharts, mockups, UML diagrams, customer journey maps, and more. Lucidchart propels teams forward to build the future faster. Lucid is proud to serve top businesses around the world, including customers such as Google, GE, and NBC Universal, and 99% of the Fortune 500. Lucid partners with industry leaders, including Google, Atlassian, and Microsoft. Since its founding, Lucid has received numerous awards for its products, business, and workplace culture. For more information, visit lucidchart.com.

Related articles

contingency plan example in business plan

62% of organizations report experiencing a critical risk event within the past three years. Make sure that your business is adequately prepared with enterprise risk management (ERM). Learn the key benefits and attributes of ERM.

contingency plan example in business plan

Identify and prepare for potential risks in your workplace. This article explains what the risk assessment process is and how you can start your own in five simple steps (including free templates!).

Bring your bright ideas to life.

or continue with

Illustration with collage of pictograms of face profile, leaf, cloud

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

This guide summarizes what sustainability-forward organizations look for in their ESG software platform to help achieve their goals.

Register for the ebook on ESG reporting frameworks

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.³ 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.

Help your business respond quickly to changing conditions with IBM Maximo, an integrated cloud-based solution that harnesses the power of artificial intelligence (AI), Internet of Things (IoT) and advanced analytics to maximize performance and minimize costs and downtime.

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.

Explore the business continuity measures IBM takes to help prevent or reduce the impact of potential threats.

Unlock the full potential of your enterprise assets with IBM Maximo Application Suite by unifying maintenance, inspection and reliability systems into one platform. It’s an integrated cloud-based solution that harnesses the power of AI, IoT and advanced analytics to maximize asset performance, extend asset lifecycles, minimize operational costs and reduce downtime.

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.

3  “ IBM business continuity management position paper ”, IBM Global Technology Services thought leadership white paper, September 2019.

  • Search Search Please fill out this field.
  • Building Your Business
  • Becoming an Owner
  • Business Plans

What Is a Business Contingency Plan?

Small Business Contingency Plans Explained

vitapix / Getty Images

A business contingency plan is a course of action that will be taken if an unexpected event occurs that could disrupt the business. It's a backup plan that ensures the business can continue to operate despite an adverse event.

A business contingency plan is a “plan B” or blueprint for how to keep your business running in the event of a natural disaster, major technical issue, or other unforeseen disruption. A contingency plan identifies potential risks to your business and outlines steps your management team and employees can take if confronted with one of those risks. It helps protect the health and safety of your workers after an event has occurred, while also minimizing business interruptions that can result in financial losses. A well-thought-out plan can mean the difference between staying in business and shutting down.

  • Alternate term : Continuity plan

Do You Need a Business Contingency Plan?

Every business should have a contingency plan so it can resume its operations as soon as possible after a disruptive event occurs. 

A plan will save you time and money since you've already decided what resources you need and actions to take to keep your business going. It can also alleviate some of the stress you're likely to feel when disaster strikes. 

Rather than fretting about what you should do, you can simply follow the steps you've laid out ahead of time.

How to Create a Business Contingency Plan

The first step in creating a contingency plan is to determine what risks are most likely to impact your business and the functions they will impact. Think about how your business normally operates and the types of events that could disrupt its major activities. Your risks depend on the nature of your business and your geographical location. For instance, hurricanes and earthquakes are risks in some areas but not others. Here are examples of events that could cause disruptions:

  • Physical damage by fire, windstorm, or other peril to a building that your business occupies
  • Damage to machinery or breakdown of equipment
  • An extended utility outage (electricity, water, gas, or telecommunications)
  • Resignation or extended absence of key employees
  • Damage to your computer system or a data breach
  • Interruption of your supply chain
  • Blocked access to your business location

Some of these events could also have legal implications. For example, all 50 states, along with D.C. and U.S. territories, have laws requiring businesses to notify individuals whose personally identifiable information has been stolen or released in a data breach.

Run an Impact Analysis

The next step is to conduct a business impact analysis so you can predict the potential outcomes of a disruption of one of your business functions or processes. An analysis can help you estimate the operational and financial impacts of a disruption. It can also help you gather the information you will need to develop recovery strategies. Here are examples of the potential operational and financial impact from the disruption of business functions and processes:

  • Lost or delayed sales or income
  • Increased expenses, such as overtime, outsourcing, and expediting costs
  • Regulatory fines
  • Contractual penalties or loss of contractual bonuses
  • Customer dissatisfaction or defection
  • Delay of new business plans  

When estimating the impact of events, be sure to consider timing and duration. 

A hurricane, structure fire, or data breach may have a greater effect on your income or costs if it occurs during your busy season than when business is normally slow. Likewise, a disruption that lasts for a day will have less impact than one that extends for a week or a month.

You can use the results of your impact analysis to rank your risks in order of priority. Risks with the greatest potential impact should be listed first.

One of the easiest ways to write a contingency plan is to use a template, which is provided by several state and local websites including, for example, the one for Cambridge, Massachusetts .

Plan for Continuity

Once you've analyzed your risks and estimated their impacts, you can begin writing your contingency plan. You'll need a plan for each of the risks you've identified. For example, suppose your manufacturing business is highly dependent on a grinding machine. If the machine became inoperable due to physical damage or a malfunction, your business might have to shut down temporarily. You draft a contingency plan outlining steps you will follow if your machine becomes unusable. Your plan, in turn, might include contact information for two companies that rent machines similar to yours.

When writing your contingency plan, be sure to identify specific people who will need to take action. For instance, suppose your firm employs a highly-skilled salesperson named Susan, who generates 50% of your firm's sales. If Susan left your firm or was unable to work for an extended period, your sales would plummet. You know a retired salesperson (Jim) who could step in for Susan temporarily. However, before you include Jim in your plan, you should explain the roles and responsibilities you'd expect him to fulfill and obtain his consent.

Once you've completed your contingency plan, be sure to share it with your managers and staff who will be responsible for implementing it. Ask them for their feedback, as they may think of a potential risk or impact you didn't consider.

Contingency Plan Example

Here's an example of how a company might use a contingency plan.

Tom owns Tasty Treats, a manufacturer of frozen prepared meals. The firm generates 60% of its revenue from sales of frozen pizza, all of which is made at a central location. Tom worries that his business could be severely impacted if a catastrophe occurs at the pizza manufacturing facility and he's forced to shut it down. Tom thinks his biggest risks are fire, windstorm, equipment breakdown, and an extended power outage, and that all have a high probability of occurring. He drafts a detailed contingency plan. Here are the highlights.

Ready.gov. " Business Impact Analysis ." Accessed Jan. 28, 2021. 

National Conference of State Legislatures. " Security Breach Notification Laws ." Accessed Jan. 28, 2021. 

Free Contingency Plan Templates

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

  • Share on Facebook
  • Share on LinkedIn

Link copied

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

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

Simple Contingency Plan 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

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

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

Informational Technology Service Contingency Plan Presentation

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

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

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

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

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

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.

Drive Results With Effective Contingency Planning in Smartsheet

From simple task management and project planning to complex resource and portfolio management, Smartsheet helps you improve collaboration and increase work velocity -- empowering you to get more done. 

The Smartsheet platform makes it easy to plan, capture, manage, and report on work from anywhere, helping your team be more effective and get more done. Report on key metrics and get real-time visibility into work as it happens with roll-up reports, dashboards, and automated workflows built to keep your team connected and informed.

When teams have clarity into the work getting done, there’s no telling how much more they can accomplish in the same amount of time. Try Smartsheet for free, today.

Discover a better way to streamline workflows and eliminate silos for good.

  • Get started
  • Project management
  • CRM and Sales
  • Work management
  • Product development life cycle
  • Comparisons
  • Construction management
  • monday.com updates

A practical guide to creating a contingency plan

' src=

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?

monday.com makes budget contingency planning visual

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

contingency planning is easier with monday.com boards

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.

Risk impact probability table from PMI

( 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)

Quantitative risk register example in monday UI

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 

use automation to keep stakeholders up to date on your contingency plan

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.

manage your contingency planning with monday.com dashboards

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.

  • Project risk management

' src=

Don’t miss more quality content!

Send this article to someone who’d like it.

.css-s5s6ko{margin-right:42px;color:#F5F4F3;}@media (max-width: 1120px){.css-s5s6ko{margin-right:12px;}} Join us: Learn how to build a trusted AI strategy to support your company's intelligent transformation, featuring Forrester .css-1ixh9fn{display:inline-block;}@media (max-width: 480px){.css-1ixh9fn{display:block;margin-top:12px;}} .css-1uaoevr-heading-6{font-size:14px;line-height:24px;font-weight:500;-webkit-text-decoration:underline;text-decoration:underline;color:#F5F4F3;}.css-1uaoevr-heading-6:hover{color:#F5F4F3;} .css-ora5nu-heading-6{display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-align-items:center;-webkit-box-align:center;-ms-flex-align:center;align-items:center;-webkit-box-pack:start;-ms-flex-pack:start;-webkit-justify-content:flex-start;justify-content:flex-start;color:#0D0E10;-webkit-transition:all 0.3s;transition:all 0.3s;position:relative;font-size:16px;line-height:28px;padding:0;font-size:14px;line-height:24px;font-weight:500;-webkit-text-decoration:underline;text-decoration:underline;color:#F5F4F3;}.css-ora5nu-heading-6:hover{border-bottom:0;color:#CD4848;}.css-ora5nu-heading-6:hover path{fill:#CD4848;}.css-ora5nu-heading-6:hover div{border-color:#CD4848;}.css-ora5nu-heading-6:hover div:before{border-left-color:#CD4848;}.css-ora5nu-heading-6:active{border-bottom:0;background-color:#EBE8E8;color:#0D0E10;}.css-ora5nu-heading-6:active path{fill:#0D0E10;}.css-ora5nu-heading-6:active div{border-color:#0D0E10;}.css-ora5nu-heading-6:active div:before{border-left-color:#0D0E10;}.css-ora5nu-heading-6:hover{color:#F5F4F3;} Register now .css-1k6cidy{width:11px;height:11px;margin-left:8px;}.css-1k6cidy path{fill:currentColor;}

  • Strategic planning |
  • Contingency plan

Contingency plan template

Developing a contingency plan is the best way to ensure your business is safe from risk if something out of the norm occurs. Luckily, creating a contingency plan template can help you establish a backup plan quickly and easily.

Sign up to create your own template.

INTEGRATED FEATURES

Recommended apps.

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.

Recommended apps 

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.

How do you write a contingency plan?

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.

Related templates

Marketing strategy template card image

Marketing strategy

A marketing strategy template is a useful tool that helps your marketing team achieve their goals. Learn how to create your marketing strategy with Asana.

PEST analysis template banner image

PEST analysis

A PEST analysis template helps compile info on the external environment affecting your business. Learn how to prevent risk with a PEST analysis template.

Action plan template banner image

Action plan template

Taking action has never been easier. Learn how to create a reusable action plan template in Asana to take the guesswork out of strategic planning.

Objectives and key results (OKR) template card image

Objectives and key results (OKR) template

Learn how to create an OKR template in Asana so you can standardize the goal-setting process for everyone.

Cost benefit analysis template card image

Cost benefit analysis template

Digital cost benefit analysis templates are a useful framework to see if a new project or idea is viable. Learn how to create your own in a few simple steps, with Asana.

Nonprofit business plan template banner image

Nonprofit business plan template

Success doesn’t just happen—it’s planned. Stay focused on your most crucial work with a custom nonprofit business plan template.

Requirements traceability matrix template banner image

Requirements traceability matrix

A requirements traceability matrix template is a tool to help organize project requirements in a concise manner. Learn how to create one for your team.

Punch list template banner image

Creating a digital punch list template can help streamline the final bits of a project for your team. Here’s how to create one.

GTM strategy template banner image

Go-to-market strategy template

Simplify your GTM strategy with a go-to-market strategy template that aligns teams and keeps work on track. Learn how in Asana.

Project closure template card image

Project closure template

Endings are important. Create a project closure template to help your team tie up loose ends and finish their projects with confidence.

Project reporting template card image

Project reporting

Stay on top of your project’s performance. Keep everyone on the same page about what’s been completed and where your project is headed.

[Templates] Product Roadmap (Card image)

Product roadmap

What if you could create, share, and update your product roadmap in one place? Everyone could see you’re tackling the right priorities. Start planning your product roadmap with this template.

Program roadmap template banner image

Program roadmap

Create a program roadmap template and know the exact structure of each program, how they operate, and their future plans—company-wide.

Operational plan template banner image

Operational plan template

Learn how Asana’s operations team uses standardized processes to streamline strategic planning—no matter how many stakeholders are involved.

Strategic planning template article banner image

Strategic planning template

When you’re launching a new product, team, or even a new business, strategic planning templates keep you laser-focused and on task.

Annual planning template banner image

Annual planning template

Set clear goals and streamline your planning process—so every level of your company is aligned on what’s important.

Competitive analysis template banner image

Competitive analysis template

The more you know about your competitors, the better your strategy will be. Competitive analysis templates use a data-driven approach to see exactly how your business, products, and features compare to your competition.

Crisis management plan template banner image

Crisis management plan

Does your team know what to do during a crisis? Using a crisis management plan template can help keep all your employees on the same page.

Business plan template banner image

Business plan

A business plan is the first step to start your business and secure financing. Use our business plan template so you don’t have to start from scratch.

SIPOC template banner image

SIPOC template

Use your SIPOC template to ensure that the processes outlined in your SIPOC diagrams are consistent and up to your standards.

Create templates with Asana

Learn how to create a customizable template in Asana. Get started today.

  • Contact sales

Start free trial

What Is Contingency Planning? Creating a Contingency Plan

ProjectManager

Table of Contents

What is contingency planning, what is a contingency plan, contingency plan example, how to create a contingency plan, business contingency plans, project contingency plans.

Contingency plans are used by smart managers who are aware that there are always risks that can sideline any project or business. Without having a contingency plan in place, your organization won’t be well prepared for risk management .

The term contingency planning refers to the process of preparing a plan to respond to any risks or unexpected events that might affect an organization. Contingency planning starts with a thorough risk assessment to identify any risks and then develop a contingency plan to resolve them or at least mitigate their negative impact.

Contingency planning takes many shapes as it’s used for helping businesses and projects across industries. Even governments use contingency plans to prepare for disaster recovery or economic disruption, such as those caused by natural disasters.

A contingency plan is an action plan that’s meant to help organizations mitigate the negative effects of risks. In simple terms, a contingency plan is an action plan that organizations should execute when things don’t go as expected.

contingency plan example in business plan

Get your free

Action Plan Template

Use this free Action Plan Template for Excel to manage your projects better.

Now that we’ve briefly defined what contingency planning is, let’s take a look at a contingency plan example involving a manufacturing project.

Let’s imagine a business that’s planning to manufacture a batch of products for an important client. Both parties have signed a contract that requires the manufacturer to deliver the products at a certain date or there may be negative consequences as stated on the purchase agreement. To avoid this, the business leaders of this manufacturing company start building a contingency plan.

To keep this project contingency plan example simple, let’s focus on three key risks this company should prepare for.

  • Supply chain shortages: The supply chain is one of the most important business processes for this manufacturing company. Therefore, one of the most impactful risks is a raw material shortage which may occur if their main supplier is unable to deliver the materials they need on time. To prepare a contingency action for this risk, the business owners decide to reach out to other suppliers and place standing purchase orders which give them the opportunity to ask for a certain quantity of materials at some point in the future. If the risk of a supply chain shortage occurs, they’ll have multiple sources of raw materials available in case their main supplier can’t keep up with their demand levels.
  • Machinery breakdown: Another risk that might halt production is the malfunction of machinery. To prepare for this, business leaders hire extra maintenance personnel and order spare parts for their production line machinery as part of their contingency plan. If the risk of machinery breakdown becomes a reality, the organization will have the labor and resources that are needed to mitigate it.
  • The team is not meeting the schedule: If the manufacturing team members are failing to meet their goals on time for whatever reason, the manufacturing business will need to allocate more resources such as extra labor and equipment to complete the work faster. However, this contingency action will generate additional costs and reduce the profitability of the project.

ProjectManager has everything you need to build contingency plans to ensure your organization can respond effectively to risks. Use multiple planning tools such as Gantt charts, kanban boards and project calendars to assign work to your team and collaborate in real time. Plus, dashboards and reports let you track progress, costs and timelines. Get started today for free.

ProjectManager's Gantt chart

Like a project plan , a contingency plan requires a great deal of research and brainstorming. And like any good plan, there are steps to take to make sure you’re doing it right.

1. Identify Key Business Processes and Resources

To create an effective contingency plan you should first identify what are the key processes and resources that allow your organization to reach its business goals. This will help you understand what risks could be the most impactful to your organization. Research your company and list its crucial processes such as supply chain management or production planning as well as key resources, such as teams, tools, facilities, etc., then prioritize that list from most important to least important.

2. Identify the Risks

Now, identify all the risks that might affect your organization based on the processes and resources you’ve previously identified. Figure out where you’re vulnerable by brainstorming with employees, executives and stakeholders to get a full picture of what events could compromise your key business processes and resources; hire an outside consultant, if necessary. Once you’ve identified all the risks, you should use a risk log to track them later.

3. Analyze Risks Using a Risk Matrix

Once you’ve identified all the risks that might affect your processes and resources, you’ll need to establish the likelihood and level of impact for each of those risks by using a risk assessment matrix . This allows you to determine which risks should be prioritized.

4. Think About Risk Mitigation Strategies

Now, write a risk mitigation strategy for each risk that you identified in the above steps. Start with the risks that have a higher probability and higher impact, as those are the most critical to your business. As time permits you can create a plan for everything on your list.

5. Draft a Contingency Plan

Contingency plans should be simple and easy to understand for the different members of your audience, such as employees, executives and any other internal stakeholder. The main goal of a contingency plan is to ensure your team members know how to proceed if project risks occur so they can resume normal business operations.

6. Share the Plan

When you’ve written the contingency plan and it’s been approved, the next step is to ensure everyone in the organization has a copy. A contingency plan, no matter how thorough, isn’t effective if it hasn’t been properly communicated .

7. Revisit the Plan

A contingency plan isn’t chiseled in stone. It must be revisited, revised and maintained to reflect changes to the organization. As new employees, technologies and resources enter the picture, the contingency plan must be updated to handle them.

Contingency Plan Template

We’ve created an action plan template for Excel to help you as you go through the contingency planning process. With this template, you can list down tasks, resources, costs, due dates among other important details of your contingency plan.

contingency plan example in business plan

A business contingency plan is an action plan that is used to respond to future events that might or might not affect a company in the future. In most cases, a contingency plan is devised to respond to a negative event that can tarnish a company’s reputation or even its business continuity. However, there are positive contingency plans, such as what to do if the organization receives an unexpected sum of money or other project resources .

The contingency plan is a proactive strategy, different from a risk response plan , which is more of a reaction to a risk event. A business contingency plan is set up to account for those disruptive events, so you’re prepared if and when they arrive.

While any organization is going to plan for its product or service to work successfully in the marketplace, that marketplace is anything but stable. That’s why every company needs a business contingency plan to be ready for both positive and negative risk management.

In project management, contingency planning is often part of risk management. Any project manager knows that a project plan is only an outline. Sometimes, unexpected changes and risks cause projects to extend beyond those lines. The more a manager can prepare for those risks, the more effective his project will be.

But risk management isn’t the same as contingency planning. Risk management is a project management knowledge area that consists of a set of tools and techniques that are used by project managers to create a risk management plan.

A risk management plan is a comprehensive document that covers everything about identifying, assessing, avoiding and mitigating risks.

On the other hand, a contingency plan is about developing risk management strategies to take when an actual issue occurs, similar to a risk response plan. Creating a contingency plan in project management can be as simple as asking, “What if…?” and then outlining the steps to your plan as you answer that question.

Using ProjectManager to Create a Contingency Plan

ProjectManager has the project planning and risk management tools you need to make a reliable contingency plan that can quickly be executed in a dire situation.

Use Task Lists to Outline the Elements

Use our task list feature to outline all the elements of a contingency plan. Since a contingency plan likely wouldn’t have any hard deadlines at first, this is a good way to list all the necessary tasks and resources. You can add comments and files to each task, so everyone will know what to do when the time comes.

Task list in ProjectManager

Reference Dashboards to Monitor the Contingency Plan

Our dashboard gives you a bird’s eye view of all of the critical project metrics. It displays live data so you’re getting a real-time look at how your project is progressing. This live information can help you spot issues and resolve them to make sure that your contingency plan is a success. Which, given that it’s your plan B, is tantamount.

ProjectManager’s dashboard view, which shows six key metrics on a project

If you’re planning a project, include a contingency plan, and if you’re working on a contingency plan then have the right tools to get it done right. ProjectManager is online project management software that helps you create a shareable contingency plan, and then, if you need to, execute it, track its progress and make certain to resolve whatever problems it’s addressing. You can do this all in real time! What are you waiting for? Check out ProjectManager with this free 30-day trial today!

Click here to browse ProjectManager's free templates

Deliver your projects on time and under budget

Start planning your projects.

  • Search Search Please fill out this field.

What Is a Contingency?

  • How It Works

Types of Contingency Plans

Special considerations, banks and contingencies, the bottom line.

  • Corporate Finance

What Are Contingencies and Contingency Plans? Definition and Examples

contingency plan example in business plan

Charlene Rhinehart is a CPA , CFE, chair of an Illinois CPA Society committee, and has a degree in accounting and finance from DePaul University.

contingency plan example in business plan

A contingency is a potential occurrence of a negative event in the future, such as an economic recession, natural disaster, fraudulent activity, terrorist attack, or a pandemic.

Although contingencies can be prepared for, the nature and scope of such negative events are typically unknowable in advance. Companies and investors plan for various contingencies through analysis and implementing protective measures.

In finance, managers often attempt to identify and plan using predictive models for possible contingencies that they believe may occur. Financial managers tend to err on the conservative side to mitigate risk, assuming slightly worse-than-expected outcomes.

A contingency plan might include arranging a company's affairs so that it can weather negative outcomes with the least distress possible.

Key Takeaways

  • A contingency is a potentially negative event that may occur in the future, such as an economic recession, natural disaster, or fraudulent activity.
  • Companies and investors plan for various contingencies through analysis and implementing protective measures.
  • A thorough contingency plan minimizes loss and damage caused by an unforeseen negative event.
  • Contingency plans can include the purchase of options or insurance for investment portfolios.
  • Banks must set aside a percentage of capital for negative contingencies, such as a recession, to protect the bank against losses.

How a Contingency Works

To plan for contingencies, financial managers may often also recommend setting aside significant reserves of cash so that the company has strong liquidity, even if it meets with a period of poor sales or unexpected expenses.

Managers may seek to proactively open credit lines while a company is in a strong financial position to ensure access to borrowing in less favorable times. For example, pending litigation would be considered a contingent liability . Contingency plans typically include insurance policies that cover losses that may arise during and after a negative event.

However, insurance policies may not cover all of the costs or every scenario. For example, business interruption insurance doesn't usually cover pandemics, which many businesses suffered through as a result of the coronavirus pandemic.

The Federal government had to step in and pass the  Coronavirus Aid, Relief, and Economic Security (CARES) Act , which provided financial relief to businesses, families, and local governments to stem the economic hardship caused by the pandemic. In particular, the Paycheck Protection Program (PPP) offered $349 billion in aid to small businesses to help them maintain their payroll and expenses.

Insurance companies might also limit coverage or put exclusions in place for an act of God, which is an exogenous event, meaning outside of human control, such as a flood or an earthquake. Also, insurance can't replace the customers that were lost to competitors due to an event, particularly if it was an internal systems issue such as a data breach.

As a result, businesses need to have contingency plans established to help minimize the lost revenue and increased costs that are involved when business operations have been disrupted. Typically, business consultants are hired to ensure contingency plans consider a large number of possible scenarios and provide advice on how to best execute the plan.

Contingency plans are utilized by corporations, governments, investors, and central banks, such as the Fed. Contingencies can involve real estate transactions, commodities, investments, currency exchange rates, and geopolitical risks.

Protecting Assets

Contingencies might also include contingent assets , which are benefits (rather than losses) that accrue to a company or individual given the resolution of some uncertain event in the future. A favorable ruling in a lawsuit or an inheritance would be an example of contingent assets.

Contingency plans might involve purchasing insurance policies that pay cash or a benefit if a particular contingency occurs. For example, property insurance might be purchased to protect against fire or wind damage.

Investment Positions

Investors protect themselves from contingencies that could lead to financial losses related to investing. Investors might employ various hedging strategies such as stop-loss orders, which exit a position at a specific price level.

Hedging can also involve using options strategies, which is akin to buying insurance whereby the strategies earn money as an investment position loses money from a negative event.

The money earned from the options strategy completely or partially offsets the losses from the investment. However, these strategies come at a cost, usually in the form of a premium, which is an upfront cash payment.

Investors also employ asset diversification , which is the process of investing in various types of investments. Asset diversification helps to minimize risk if one asset class, such as stocks, declines in value.

Contingent Immunization

Contingent immunization is a type of contingency plan used in fixed-income investing. It involves the fund manager switching to a defensive position if the portfolio drops below a predetermined value.

Business Continuity and Recovery

As part of a contingency plan for disasters, such as a pandemic, companies need to plan ahead to ensure that the business can operate during and after an event. This type of contingency plan is often called a business continuity plan (BCP) or a business recovery plan.

Typically, a business continuity team is formed to plan for any possible contingencies and manage the continuity and recovery plan during a disruption . Businesses need to identify their critical business functions and perform an analysis of how an event might impact the company's operations and processes.

The contingency plan would include implementing the recovery of critical business functions such as systems, production, and employee access to technology such as computers.

For example, a contingency plan for a pandemic would include developing a remote work strategy to help prevent the spread of disease and provide employees with secure access to their work.

As a result, companies would need to invest in technology, which could include providing laptops and video-conferencing access to employees, creating cloud-based data storage, and facilitating access to company-wide communications such as email and internal data.

Cybersecurity

With any type of disaster, cybercriminals often try to take advantage of a crisis to hack into a company’s systems and steal data or disrupt business operations. Contingency plans are used to outline the procedures for cybersecurity teams to protect an organization from threats and malicious attacks.

A contingency plan should also prepare for the loss of intellectual property through theft or destruction. As a result, backups of critical files and computer programs, as well as key company patents, should be maintained in a secure off-site location.

Contingency plans need to prepare for the possibility of operational mishaps, theft, and fraud. A company should have an emergency public relations response relating to possible events that have the ability to severely damage the company’s reputation and its ability to conduct business.

How a company is reorganized after a negative event should be included in a contingency plan. It should have procedures outlining what needs to be done to return the company to normal operations and limit any further damage from the event.

For example, financial services firm Cantor Fitzgerald was able to resume operation in just days after being crippled by the 9/11 terrorist attacks due to having a comprehensive contingency plan in place.

Benefits of a Contingency Plan

A thorough contingency plan minimizes loss and damage caused by an unforeseen negative event. For example, a brokerage company may have a backup power generator to ensure that trades can be executed in the event of a power failure, preventing possible financial loss.

A contingency plan can also reduce the risk of a public relations disaster. A company that effectively communicates how negative events are to be navigated and responded to is less likely to suffer reputation damage.

A contingency plan often allows a company affected by a negative event to keep operating. For example, a company may have a provision in place for possible industrial action, such as a strike, so obligations to customers are not compromised.

Companies that have a contingency plan in place may obtain better insurance rates and credit availability because they are seen to have reduced business risks.

As a result of the financial crisis of 2008 and the Great Recession , regulations were implemented requiring bank stress tests to be performed to test how a bank might handle various negative contingencies. The stress tests project how much a bank would lose—if a negative economic event occurred—to determine if the bank has enough capital or funds set aside to survive the event.

Banks are required to have a specific percentage of capital reserves on hand, depending on the total risk-weighted assets  (RWAs). These assets, which are typically loans, have various risk weightings applied to them.

For example, a bank's mortgage portfolio might receive a 50% weighting, meaning the bank—in a negative scenario—should have enough capital that's valued at 50% of the outstanding mortgage loans.

The capital, called Tier-1 capital , can include equity shares or shareholders' equity and retained earnings, which are accumulated savings of prior years' profits. Although there are various components that go into the tier-capital ratio requirement, the ratio has to be at least 6% of the total risk-weighted assets.

Let's say as an example, Bank XYZ has $3 million in retained earnings and $4 million in shareholders' equity, meaning the total tier-1 capital is $7 million. Bank XYZ has risk-weighted assets of $70 million. As a result, the bank's tier-1 capital ratio is 10% ($7 million/$70 million). Since the capital requirement is 6%, the bank is considered well-capitalized when compared to the minimum requirement.

Of course, we won't know if the banking sector's contingency plan will be adequate until another recession occurs, which is a limitation of these plans since it's difficult to plan for every contingency.

Why Is an Environmental Contingency Plan Important?

Businesses that are at risk for environmental accidents–particularly spills of hazardous materials–should always have a plan in place detailing their response actions. Being prepared can help minimize the total damage done to the environment, minimize accident-related costs, and limit liability.

What Is Contingency Theory?

Contingency theory is an approach to management that suggests the best way to run an organization is dependent, or contingent, on that particular situation. In other words, a specific management style can work well in one company and fail completely in another one.

What Are the Steps in Creating a Contingency Plan?

To create a contingency plan, first, identify the key risks to your business and order them in regard to the likelihood of occurring and severity. Next, conduct a business impact analysis (BIA). From there, start shaping your plan, which should include preventive controls, an incidence response plan, a disaster recovery plan, and a business continuity plan. Make sure to provide training to employees, frequent testing, and updating of your plan.

A contingency is a potentially negative future event or circumstance, such as a global pandemic, natural disaster, or terrorist attack. By designing plans that take contingencies into account, companies, governments, and individuals are able to limit the damage done by such events.

U.S. Congress. " H.R.748 - CARES Act ."

Cornell Law School. " Minimum Capital Requirements ."

contingency plan example in business plan

  • Terms of Service
  • Editorial Policy
  • Privacy Policy
  • Your Privacy Choices

IMAGES

  1. An Overview of Business Contingency Plans

    contingency plan example in business plan

  2. 40 Detailed Contingency Plan Examples (& Free Templates) ᐅ

    contingency plan example in business plan

  3. FREE Contingency Plan Template

    contingency plan example in business plan

  4. 40 Detailed Contingency Plan Examples (& Free Templates) ᐅ

    contingency plan example in business plan

  5. 40 Detailed Contingency Plan Examples (& Free Templates) ᐅ

    contingency plan example in business plan

  6. An Overview of Business Contingency Plans

    contingency plan example in business plan

VIDEO

  1. BUSINESS PLAN EXAMPLE

  2. Business plan example

  3. Contingency Plan & Disaster Case Study (Group 8)

  4. Contingency Planning

  5. Business Planning

  6. Beat Your Rivals with These Competitor Analysis Framework Techniques

COMMENTS

  1. Contingency plan examples: A step-by-step guide to help your business

    What is a contingency plan? Business contingency plans, also known as "business continuity plans" or "emergency response plans" are action plans to help organizations resume normal business operations after an unintended interruption. ... Contingency plan examples. Here are some model scenarios that demonstrate how different kinds of ...

  2. Use a Contingency Plan to Protect Your Business [2024] • Asana

    A contingency plan is similar to a project risk management plan or a crisis management plan because it also helps you identify and resolve risks. However, a business contingency plan should cover risks that span multiple projects or even risks that could affect multiple departments. To create a contingency plan, identify and prepare for large ...

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

    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 ...

  4. What Is Contingency Planning? [+ Examples]

    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.

  5. What is a Business Contingency Plan

    Business Contingency Plan (Click on the template to edit it online) 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.

  6. 40 Detailed Contingency Plan Examples (& Free Templates)

    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.

  7. What is a Contingency Plan & How to Develop One?

    A contingency plan is a proactive strategy designed to help businesses prepare for potential risks and disruptions. It outlines the necessary steps to lower potential damage, ensure your business operations continue, and that an organization can recover from its biggest risks or unexpected adverse situations.

  8. Contingency Planning Essentials

    A business contingency plan is a written document that outlines an organization's contingency planning efforts. It typically includes a comprehensive assessment of possible risks to the business and corresponding measures the organization has planned to mitigate these risks, such as legal and budget contingency.

  9. What Is a Business Contingency Plan and How to Create One

    A business contingency plan is used to identify any potential business risks and clearly identifies what steps need to be taken by staff if one of those risks ever becomes a reality. A business continuity plan sounds similar in name and like a business contingency plan, aims to mitigate risks to the company. Business continuity plans outline a ...

  10. An Overview of Business Contingency Plans

    A contingency plan can also help organizations recover from disasters, manage risk, avoid negative publicity, and handle employee injuries. By developing a contingency plan, your business can react faster to unexpected events. The faster your organization is able to get back up and running, the less impact you'll see on profits and revenue.

  11. How To Create a Business Contingency Plan for the Unexpected

    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.

  12. What is a Contingency Plan?

    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 ...

  13. What Is a Business Contingency Plan?

    A business contingency plan is a "plan B" or blueprint for how to keep your business running in the event of a natural disaster, major technical issue, or other unforeseen disruption. A contingency plan identifies potential risks to your business and outlines steps your management team and employees can take if confronted with one of those ...

  14. Free Contingency Plan Templates

    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.

  15. How To Create A Good Contingency Plan

    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. ... 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 ...

  16. Free Contingency Plan Template [2023] • Asana

    A contingency plan template is a replicable outline of a contingency plan that you can use in case of an unexpected emergency, such as a response plan to natural disasters. Creating a contingency plan template can help prevent your business from experiencing major risk. This way, if you're faced with an emergency, your team has a strategy in ...

  17. Contingency Plan

    A contingency plan is a backup plan or a fallback option that is put in place to help businesses prepare for and manage unexpected events or disruptions. The objective of it is to minimize harm and facilitate a quick recovery. It outlines the steps that will be taken and the resources that will be mobilized in an emergency.

  18. Contingency Plan Example (With Benefits and Planning Tips)

    A contingency plan example is a model scenario demonstrating how a business can prepare for different risks and respond to them. These examples can serve as a template for preparing your own plan. By reviewing examples of the contingency plans used by other companies in your industry, you can learn what to include in yours and be better ...

  19. What Is Contingency Planning? Creating a Contingency Plan

    A business contingency plan is an action plan that is used to respond to future events that might or might not affect a company in the future. In most cases, a contingency plan is devised to respond to a negative event that can tarnish a company's reputation or even its business continuity. However, there are positive contingency plans, such ...

  20. What Are Contingencies and Contingency Plans? Definition and Examples

    Contingency is a potential negative event which may occur in the future such as a natural disaster, fraudulent activity or a terrorist attack. In finance, managers often attempt to identify and ...

  21. How To Write A Contingency Plan For Your Small Business

    To create a business contingency plan for your small business, follow these steps: Identify all the risks with your small business. These include risks related to hardware failure, suppliers going out of business, and core staff leaving the company. Prioritize the risks based on their impact on your small business,

  22. Contingency Plan

    Importance of Contingency Plans. Contingency planning is the process of creating a plan for an unforeseen event. It is also known as the crisis management process. Contingency planning helps in ...

  23. Free Contingency Plan Template for Word

    Template Highlights. Identify events that could put your business operations at risk and determine prevention and mitigation measures. Access this contingency plan template in Google Docs or Word. Focus your company's resources on preventing and mitigating the risks that are most likely to occur. Plan out measures of prevention based on your ...