The Importance of a Contingency Plan
- A contingency plan is important to protect a company from the negative impact of an unforeseen event. These events can include a natural disaster, the death of the owner of the company or the collapse of the economy. The purpose of a contingency plan is to consider all of the events that could happen and how the company would handle each one. This ensures that no matter what happens, the company and its employees know what to do to get the business back on track.
- For a contingency plan to be the most effective, it must include extensive details. Instead of looking at what is likely to happen, a contingency plan addresses anything that can happen. For example, power failures and computer viruses are likely events. However, an earthquake, tornado or other natural disaster may be be much less likely. An effective contingency plan takes these disasters into consideration. The details of what each employee should do in each scenario is outlined in a contingency plan.
- A business that does not have a contingency plan is unprepared if something goes wrong. Without a contingency plan, the business employees are left to panic and try to come up with a solution to the problem as quickly as possible. However, a business that takes the time to create a contingency plan before something bad happens reduces wasted time and increases the speed of recovery. The less time a company spends on recovery, the more quickly the business rebounds after a disaster.
- In addition to having a contingency plan on file, key employees within the business should be familiar with it. If the contingency plan ever needs to be used, the more people who know what it contains, the more quickly it can be implemented. Some areas of the contingency plan should be practiced ahead of time to ensure that employees know what to do. Owners and managers should always know where the contingency plan is located and when any changes are made.
