Planning has always been a critical component of a business. However, there is a misconception regarding contingency planning. Although to successfully run and manage a business you will need both a business plan and a contingency plan, contingency planning is frequently “forgotten” or even worse, ignored.
One of the challenges I face as business contingency consultant is that many business owners don’t know what contingency planning is, let alone its importance. If I am lucky, I find a business owner that thinks contingency planning is catastrophe or disaster planning, and sometimes end of the world kind of scenario planning. That’s why it makes sense to begin by explaining what a contingency is? And, what is contingency planning?
A contingency is an event or circumstance that is possible but cannot be predicted with certainty. I’m going to dig a little deeper here, and add that a contingency is an event or circumstance that usually represents a negative impact or effect. And that makes total sense, because if it wasn’t, it will have negative repercussions and no one would care about it. However, we care about contingencies and plan for them because these events or circumstances have the potential to negatively impact you, your life, your routines, your business, your community, etc.
Now, contingency planning is defined as the strategies planned and developed to deal with those events. These plans are made in advance, by identifying risks and solutions or responses. The solutions or responses that will appropriately address the events and minimize the negative impact.
The topic of contingency planning is well known among large corporations. In fact, large corporations not only know what contingencies are, but also understand the importance of planning for contingencies. Why? Because they know it is not a matter of if, but when.
Contingency planning is a way to ensure business continuity. Maybe you have heard about business continuity or continuity of operations. If you have worked for the government or watched the Designated Survivor show, you have heard about continuity of government. These terms refer to the implementation of the contingency plans made to ensure continuity of either business operations or government operations.
The truth is, contingency planning is nothing new. It all started with regulated businesses like banks that needed to ensure information was not lost after disruptions. Then, the Y2K scared every corporation and government, and everyone started planning for the worst-case scenario, but nothing happened. Then after the attacks of September 11, 2001, when business disruptions wiped out businesses not only near ground zero, but in surrounding neighborhoods, contingency planning became the best-known secret of large corporations.
Unfortunately, I am still amazed by the number of business owners that believe that planning for contingencies is a waste of time. There is a vast number of business owners out there that still believe that they don’t need to plan for what ifs, but I want to help business owners change that mindset. I’ve found that many business owners don’t realize the many benefits of contingency planning; from minimizing revenue loss to the improvement of day to day operations. So, I’m on a mission to give contingency planning a “makeover”, so business owners give it a chance and reap the benefits.
To change business owners’ mindsets, I need to debunk the “myth”. Most business owners think that contingency planning is about catastrophes, disasters, or end of the world kind of scenarios. They falsely think it’s planning for events they will have no control over, and that is so far from the truth! Contingency planning is about planning for events that could impede your business from regular operations. Let me give you some examples:
Technology failure – you cannot process payments or access your reservations system.
Supplier issues – your raw materials are not delivered on time; your operations cannot start.
Environmental issues – a gas leakage in your community keeps customers away.
Transportation issues – a major accident or road closure derails all your sales.
As you can see, these events could and will happen at some point. We are not talking about a terrorist attack, or an airplane falling from the sky on top of your business. We are talking about events that will impede normal, day to day operations. Then, why not plan to react adequately?
Through the years, I have studied businesses of all sizes, successful and failed businesses. I’ve found that a common denominator between the successful businesses is the ability to react to the environment, achieved by strategically planning. On the other hand, failed businesses also have a common denominator; they assume everything will be fine, and go as intended and NEVER develop a plan addressing how to react to adversity.
Now, if you are thinking that no one can prevent these or other events from happening, you are right. No one can prevent all events from happening, but wouldn’t be nice to have peace of mind regarding what we can prevent? I assure you that you can prepare to minimize your business’ exposure to risks and limit your financial risks. I hope this post resonates with you so you can begin to understand the importance of planning for contingencies as a long-term success strategy for your business. It is not complicated; you just need to take action. You can start by listening to the Business as Usual podcast and learn to draft a basic contingency plan.