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What is a Contingency Plan in Business?

A business contingency plan is a plan that identifies potential risks to your business and also notes the necessary strategies or course of action the business and its stakeholders would have to assume to combat them. These risks could be a global pandemic, natural disaster, loss of a key employee, breakdown in the supply chain, a new competitor, and more.

This plan is more or less a Plan B or disaster recovery plan that offers your business something to fall back on in case things fail to go as planned. Note that without a properly developed business contingency plan, you put your whole enterprise at risk of damage and loss of productivity.

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Have it in mind that this plan may be the difference between continuing business operations and completely shutting down. Howbeit, a good number of businesses in this age fail to develop business contingency plans since they instead prefer to invest all their time and energy into Plan A.

Note that by investing time, resources, and interest into your plan, you can overcome certain business-related obstacles and keep the business stable amid a crisis. Not only does a business contingency plan minimize the impact of unforeseen events, but it also creates a plan for running your business after the disaster comes to an end.

Have it in mind that a business contingency plan doesn’t always have to be for a negative event. You might develop a contingency plan for when your business experiences an increase or when your nonprofit receives a massive anonymous donation.

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Contingency plans differ from crisis management, which is more or less a response to an event that’s just happened. Contingency plans are a critical part of your general business continuity strategy because they guarantee your business is ready for anything.

Most successful businesses and government organizations put together multiple sets of contingency plans so that potential threats are adequately observed and their responses are fully practiced before an issue hits. A contingency plan helps to ensure you are ready for any issues.

How to Write a Business Contingency Plan

The best approach to putting together a proper business contingency plan is brainstorming sessions and strong research. If you are looking to develop a viable business contingency plan for your business, below are some steps to take.

  1. Create a list of risks

To be able to create plans to manage risks, you have to first identify those risks. Owing to that, you must start by creating a list of any risks that might affect your business. Don’t forget there are numerous levels of contingency planning—you could be planning at the business, department, or program level.

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Always ensure that your contingency plans suit the level and size of the risks you are tasked with addressing. This plan is a large-scale effort, therefore ensure to hold a brainstorming session with necessary stakeholders to note and evaluate potential risks.

  1. Evaluate risks based on severity and likelihood

It is not a must to develop a contingency plan for every possible risk you lay out. After you must have analyzed your risks and possible threats to your business, it is recommended you work with your stakeholders to note the potential impact of each risk.

Take your time to evaluate each risk based on two metrics: the severity of the impact if the risk were to occur and the likelihood of the risk happening. Within this risk assessment level, assign each risk severity and likelihood. Consider using high, medium, and low metrics!

  1. Prioritize the risks based on their impact

After you must have designated the severity and likelihood of each risk, it’s up to you and your stakeholders to decide the exact risks that are most important to address. For instance, you should create a plan for a risk that has a high likelihood and high severity, but you may not really need a contingency plan for a risk that’s a low likelihood and low severity.

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You should consider using some of the risk impact probability software or tools available in this modern age to evaluate and prioritize risks based on the severity of their impact and the probability of them occurring.

  1. Develop contingency plans for the biggest risks

At this point, develop a contingency plan for each risk you must have noted as being very paramount. As part of that contingency plan, ensure you describe the risk and brainstorm what your team will have to do if the risk occurs. Note that each plan should include all of the steps you intend to take to return to business as usual. Most often, your business contingency plan is expected to include information about:

  • The triggers that will set this plan into motion
  • The immediate response
  • The person or persons involved and informed
  • Key responsibilities, including a RACI chart if necessary
  • The timeline of your response (i.e. immediate things to do vs. longer-term things to do)
  1. Test your plan

It is also recommended you test a business continuity plan to check and guarantee its effectiveness. Take your time to carry out well-detailed exercises or simulations to measure response time and execution of recovery strategies.

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Note that testing your plan can show the weaknesses or vulnerabilities and show where staff needs to be trained or informed to increase preparedness. Systems change as information technology advances, so ensure your plan can change when necessary and has all it takes to proffer the required solutions.

  1. Share and modify the plan

After you must have completed your business contingency plan, ensure that every employee and stakeholder has easy access to it.

For this vital step, you might want to leverage an issue and crisis management app, known to provide contingency plans and related documents directly to each employee on his or her mobile device. Also, host a meeting to present it to everyone and address any questions or concerns they may have.

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Be sure to keep each plan updated as your business goes through changes, such as hiring and firings and the adoption of new technologies. Set up a time every quarter or year to review and modify your business contingency plan as necessary.


A business contingency plan is vital for most businesses and can save a company time, money, and resources. When looking to develop a business contingency plan for your company, outline the major incidents that could impede your business operations, prioritize them based on their impact and probability, then develop a well-detailed action plan describing what you intend to do in case they occur. Always remember to review and update them frequently.