How to Make a Contingency Plan

You’ve heard the phrase, “Always have a Plan B.”

Well, “Plan B” is just common vernacular for what’s known as a contingency plan. In other words, a contingency plan is put in place in case the primary plan that you’re executing doesn’t unfold as expected.

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, the chances of completing a project successfully will drop considerably, even if that project plan was made with planning software.

Well, “Plan B” is just common vernacular for what’s known as a contingency plan. In other words, a contingency plan is put in place in case the primary plan that you’re executing doesn’t unfold as expected.

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, the chances of completing a project successfully will drop considerably, even if that project plan was made with planning software.

The use of contingency plans is widespread and applies to any business venture. Governments, for example, use them to prepare for disaster recovery or economic disruption. If you’re not working on a contingency plan when you’re planning any enterprise, then you’re opening yourself up to unnecessary risk.

What Is a Contingency Plan for a Business?

In most cases, a contingency plan is devised to respond to a negative event that can tarnish a company’s reputation or even financial livelihood. However, contingency plans in business aren’t, by definition, always negative. There are positive contingency plans, such as what to do if the organization receives an unexpected sum of money or other resource.

The contingency plan is a proactive strategy, different from a crisis management plan, which is more of a reaction to something that happened. A 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. Unpredictability might be the enemy of business, but that doesn’t mean that it doesn’t exist. To execute a plan believing you can avoid unpredictability may be fatal to your organization’s future.

How to Create a Business Contingency Plan

A contingency plan is a plan, and like any plan, it 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.

• Identify and Prioritize Resources: Research your company and list its crucial resources, such as teams, tools, facilities, etc., then prioritize that list from most important to least important.
• What Are the Key Risks? Figure out where you’re vulnerable by meeting with teams, executives and every other department in the organization to get a full picture of what events could compromise your resources; hire an outside consultant, if necessary.
• Draft a Contingency Plan: If you can, write a contingency plan for each risk that you identified in the above steps, but start with what’s most critical to the life of your organization. As time permits you can create a plan for everything on your list. Whatever the plan, the thought behind each should be the steps necessary to resume normal operation of the company, thinking about communications, people’s responsibilities, timelines, etc.
• Share the Plan: When you’ve written the contingency plan and it’s been approved, the next step is to make sure everyone in the organization has a copy. A contingency plan, no matter how thorough, is not effective if it hasn’t been properly communicated.
• 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 Plans and Risk Management in Project Management

In project management, contingency planning is often part of risk management. Any project manager knows that a plan is only an outline. Sometimes the project will extend beyond those lines. The more a manager can prepare for chance in their plan, the more effective it will be.

But risk management isn’t the same as contingency planning. Risk management is about identifying, assessing, avoiding, mitigating, transferring, sharing and accepting risk; while a contingency plan is about developing steps to take when an actual issue occurs. However, they do share the aspect of what to do when the risk happens.

So, a contingency plan is what to do if an unplanned event occurs. It can be as simple as asking, “What if…?,” and then outlining the steps to your plan as you answer that question.

Project Risk for Contingency Planning

When managing a project there are many entry points for risk that need to be accounted for with a contingency plan. For example, there’s the physical, as in loss due to damage to information, equipment or facilities as a result of an accident or natural disaster.

Technical issues are another risk factor, in that systems can stop working or not work as needed to deliver the project on time and within budget. Of course, human resources are another risk, as teams get sick, leave projects or are terminated.

On a larger scale, there are factors even further beyond the control of a project manager, such as political and social change. For example, if you’re working on a government contract that can change with whoever is currently in control of the government. Policy can change, and communities can protest projects and effectively stop them.

Liability issues are also at play when managing a project. There is the threat of legal action or compensation plans.

Key Steps in Contingency Planning

Project managers are adept at creating contingency plans, as the structure and actions are like many of the processes already familiar to their profession. For instance, a contingency plan breaks down tasks to get more detail and, in so doing, more control.

The following are the key steps in contingency planning:

• Note where there are resources that can be used in an emergency. Also, note where in your contingency plan these resources might be applied.
• Identify dates that if missed will negatively impact your plan, for example getting approval from a group or committee that only meets every now and then.
• Know your contingency plan. Check for any weak links and strengthen them. Identify any slack that you can find in it.
• See if you can find points in your plan where alternative routes can be taken, and think through each one’s scenario to add flexibility to your plan.
• Use your experience to help you see patterns in your project’s ebb and flow of activity to sharpen your plan.

Challenges of Contingency Planning

Like any plan, there are always challenges that managers need to think about before and during the process of creating their contingency plans.

The Desire to Focus on “Plan A”

Human nature likes to focus on one solution. A contingency plan might not get the attention it needs because people are solely invested in the main action. They want “Plan A” to be successful and feel spending too much time on a “Plan B” could potentially sabotage that success.

It’s critical that managers stress the importance of a contingency plan. That will serve as a safeguard that helps facilitate success rather than hinder it. Therefore, it cannot be put on the backburner or given little thought, but rather, must be thoroughly followed through.

The Small Probability of Occurrence

Another issue is that because of its nature, a contingency plan has a small probability of occurring, and so many might not see the urgency in such an activity. That means that it can land on the bottom of their to-do list or never get done.

Again, the need for a contingency plan might seem like a luxury when planning for a project, but without one you’re putting your project and your business at risk. The time you put into creating a thorough contingency plan will pay off if you need it, while if you don’t, you’re lucky. But never place a bet on chance.

This article was originally published on ProjectManager.com.