When everything is going well and according to plan, businesses tend to get too comfortable with their success, forgetting to prepare for the unexpected. And when a catastrophe punches out the door, these businesses usually suffer the most.

This is where a well-crafted contingency plan comes to play. It will prepare you for any bad times your company may face: from natural disasters to protests or important machinery not working properly.

In this article, you will learn what a contingency plan is, all the reasons you should have one ready, and how you can make one of your own (along with a few templates that you can use for your business).

A business contingency plan is a document that sets a step-by-step process of how the organization and staff should act in case an emergency or unexpected events occur.

Contingency planning is important in risk management, business continuity, and disaster recovery. They help on making sure that the company is ready for anything.

A contingency plan usually focuses on negative situations that might halt business operations, damage your brand's reputation, or diminish your financial health. But sometimes, it can be used for sudden positive changes, like a surprise influx of money due to sales exceeding expectations.

A contingency plan is a more proactive strategy, where you will immediately act as soon as a situation happens. In contrast, crisis management (another key piece of business continuity) is more reactive, acting after unforeseen events occur.

A contingency plan gets you prepared against potential risks, helping to react quickly against negative events. It is a backup plan that lists all the actions to be taken, and everyone will focus on what they should do instead of panicking.

It also allows you to minimize damage by doing a risk analysis and risk assessment of potential threats. You will minimize the loss of production and resume normal operations way faster than not having a contingency plan ready.

You need to do thorough research and business impact analysis before diving into your contingency plan development.

Once you have the necessary data to plan out an emergency response against possible threats to your organization, there is a set of guidelines you can follow to make a contingency plan.

Pinpoint Every Possible Key Risk

Identify major events that could negatively impact your business and key resources, such as IT systems, machinery, employees, etc.

You should involve other team and department leaders, industry experts, and any other consultant you deem necessary to ask. You need to get a deep understanding of things that will get you in trouble.

Take notes or use a mind map to categorize and organize all the data you have gathered. Share this information with everyone in your organization who might find it useful.

Evaluate The Potential Impact and Probability of Those Risks

Once the risks are identified, you must define how they might impact your business and how likely they may appear.

Many companies will use a qualitative risk assessment table (known as a probability impact matrix) to evaluate the possibility of certain threats rising. You can also lay them out in a risk impact probability chart.

Then, try to prioritize them based on the risk they posed to your business, so you can better set out your plan activation once a certain risk happens.

Make Contingency Plans For These Events

After pinpointing all the possible key risks that will threaten your business and normal operations, you must outline the actions to take once these risks occur. Prepare your "Plan B."

Clarify what all the employees must do, highlight when certain actions need to take place, lay out the restoring and communication processes to follow, and set all you need to do in advance to prevent or mitigate losses when these sorts of events happen.

Draft your plans based on priority. You can write them down on the document or lay them out in a visual format (like a table or a mind map) to better visualize them.

Calculate Costs With Your Contingency Budget

During the risk analysis, you should estimate the potential costs of these adverse events. To have a better overview of these costs, you should add to your document the following concepts:

• Full Potential Loss due to the Event

• Expected Loss from the Event

• Cost of Response

• Cost of Mitigation

It will allow you to make an informed decision about budgeting contingency reserves within your project and yearly budgets.

Making an accurate estimate for an emergency budget is crucial to risk response and prevention. If these prevention costs are too high for an event that is likely to happen, then you should consider the cost of mitigation efforts.

Share and Maintain Your Contingency Plan

Once the plan is completed and approved, ensure every employee has access to it. Share it online via email, providing a direct download link, or print it to distribute it in person to all the staff members.

You need to be sure to keep each plan updated as your organization goes through changes, such as implementing new technologies. Also, rehearse implementation with stakeholders regularly to ensure each team member knows their role and responsibilities.

You already know why your organization needs a contingency plan ready whenever a disaster occurs and how to create one. You are ready to make one of your own.

The best way to start writing down a contingency plan is to use a pre-established template to base yours. Or downloading one to modify it and edit it in a way that better suits your needs. So, we have provided a few templates that you will be able to download for free. All that you need is to have installed Microsoft Word or PowerPoint on your computer.

If you need a CD key for these programs, you can purchase Microsoft Office 2021 Professional Plus Key Retail Global at a low cost from the RoyalCDKeys store. You will get the latest version of the Office package, which includes programs such as Word, Excel, PowerPoint, Access, Outlook, and more.

Business Contingency Plan Template

With this template, you can keep tabs on your organization's contingency plans, and it guides you through your business operation recovery priorities, relocation strategy, recovery procedures, and backup details. This template will help you to determine accurate planning to ensure the success of such a plan.

You can download it as a Word document or a PowerPoint slide from Smartsheet.

Formal Contingency Plan Template

This template is built more formally, where you can set out all the main topics about a contingency plan in a simple document written down in extensive paragraphs.

Download it as a Word document from HHS.gov.

Extensive Contingency Plan Template

This contingency plan template lays out every concept using extensive text, tables, and graphs. It doesn't leave anything out and has plenty of pre-established information to guide you through this long document.

Download it as a Word file from IFRC.org.

Your organization must have a contingency plan ready. You don't know when anything bad may happen and trouble your operations. It helps you prepare for minor problems, major events, and everything in between.

You should use any of the templates we provided and start making your own contingency plan. With everything you have learned throughout this article, you’ll be prepared for everything.