Business Contingency Plan

Posted by Flora Bouton in Aug, 2015

What is a Business contingency plan?

A contingency plan is developed within the broader risk management plan and details a pre-researched course of action for management and staff to follow in an emergency or when an organization experiences an unexpected event that has the potential to affect the financial position, business image or market share of an enterprise. A contingency plan is also known as Plan B or the disaster recovery plan or the worst-case scenario plan or simply as a backup plan.

What is the purpose of a Business contingency plan?

A contingency plan is developed to ensure the continuity of business operations, to help an organization recover from disaster, manage organizational risks and to ensure that damage or injury to personnel and property is effectively contained. The main goal of a contingency plan is to restore normal operations at a minimal cost and with the least amount of disruption to normal business activities after an unexpected event has occurred.

What is a Business contingency plan like?

A contingency plan is like a ‘game plan’ that a sporting team may have when they find themselves unexpectedly behind on the scoreboard. The team realizes that the original plan that they took into the game has not worked and they need to adopt a different plan that the coach has previously devised for them when faced with this situation.

What is the main goal of a Business contingency plan?

A contingency plan sets out to effect three main outcomes when an unexpected event takes place:

1. The continuance of the day to day operations of the business with the minimum amount of interruption or interference from the unexpected event.
2. The actionable steps taken in the contingency/backup plan will maintain functional long enough for a suitable restoration of the main plan to take place.
3. The contingency plan activated in the emergency will ensure that customers are still able to purchase goods and services from the business in an systematic and timely way.

What are the components of a Business contingency plan?

The components of a contingency plan are:

• Incident response plan – This component of the contingency plan primarily focuses on the immediate response that is required when the incident first occurs. The plan outlines a complete series of processes that guides others in anticipating, detecting, and mitigating the impact of the contingency on the business assets.
• Disaster recovery plan – This component of the contingency plan primarily focuses on the preparation for and then restoration of normal operations as soon as possible after the contingency has occurred.
• Business continuity plan – This component of the contingency plan primarily focuses on ensuring that the critical business functions can go on when the contingency occurs. This may involve facilitating business operations at a substitute location, until the business can restore operations at the original location.

What are steps in developing a Business contingency plan?

The steps involved in developing a contingency plan include:

1. Development of a contingency planning policy statement – which is used to define the contingency objectives and establish the framework and responsibilities for contingency planning.
2. Prepare a business impact analysis – which is used to determine the contingency requirements and priorities.
3. Find preventive controls – that may deter, detect, and/or reduce impacts to the organization of contingencies.
4. Develop the recovery strategies – designed to restore operations as quickly and effectively as possible following a contingency disruption.
5. Develop a contingency plan – that detailed the roles, responsibilities, teams, and procedures associated with restoring the operations to normal following a disruption brought about by a contingency.
6. Plan the testing and training – to identify and address plan deficiencies and to evaluate the capability of the recovery team to implement the contingency plan rapidly and effectively.
7. Plan the maintenance – by reviewing and updating it regularly as part of the enterprise’s change management process. New information like contact lists will need to be updated regularly while a review of the accuracy and completeness of the contingency plan should be done annually.

What are the key risks to consider in a Business contingency plan?

Key risks that need to be considered when developing a contingency plan include a significant disaster that prevents the business from trading normally or it may be a situation that gradually gets worst making it increasingly difficult to conduct normal operations or it may be a range of smaller events but by happening at the one time, it makes normal operations near impossible.

Typical risks that need to be considered when developing a contingency plan include:

• Failure of key equipment failure that is critical for your business operations. e.g. IT equipment, vehicles or machinery.
• External to the business issues like strikes in key areas of supply or delivery.
• Litigation threats caused by business activities
• Physical damage to property in the form of extreme weather events or fire.
• Product failures that instigate the need to have them recalled.
• Negative public relations particularly on social media sites where negative feedback on the business can ‘go viral’ in a very short time.
• Significant changes to the business operating environment where a major competitor develops plans to move into your market.
• Staffing problems brought about by the the death or serious illness of key employees.
• Supply issues that may impact on your key suppliers causing your business to suffer as well.

Where can I find more information on a Business contingency plan?

http://smallbusiness.chron.com/business-contingency-plan-1081.html
http://www.mindtools.com/pages/article/newLDR_51.htm
http://www.itopf.com/knowledge-resources/documents-guides/contingency-response-planning/contingency-planning/