Having a contingency plan in place provides critical benefits for small businesses. That’s why it’s so important to invest the time upfront into developing a detailed plan for handling unexpected events and scenarios. In this article, we’ll cover explain what a contingency plan is, the key benefits of contingency planning and the steps to create one for your company.
What is a Contingency Plan?
A contingency plan is a documented strategy that outlines how your small business will respond and adapt to potential threats, disasters or disruptive scenarios in order to continue essential operations. It may also be called a business continuity plan.
The plan identifies risks that could impair business activities and provides policies and procedures to implement if those events occur. This allows your company to navigate challenges and safeguard bottom lines to the best extent possible.
Benefits of Having a Small Business Contingency Plan
Proper contingency planning provides small businesses with the following advantages:
- Prepares leadership to make smart decisions quickly when disruptions hit
- Minimizes revenue losses and damage by addressing risks proactively
- Bolsters confidence of customers, employees, and stakeholders
- Reduces chance of permanent closure after adverse events
- Helps safeguard vital assets like data, intellectual property, and inventory
- Allows flexibility and agility in response instead of knee-jerk reactions
- Satisfies insurance policy requirements in some cases
- Provides back-up options if parts of operations are impaired
- Demonstrates regulatory compliance in some industries
How to Develop a Small Business Contingency Plan
Now that we’ve covered the critical benefits, here are the steps to create your own plan:
Identify Potential Risks
Brainstorm scenarios like natural disasters, pandemics, cyber-attacks, supply chain disruptions, market shifts, key staff leaving, etc. Analyze the likelihood and potential impact of each. Focus planning on high probability and high impact risks first.
Outline Priorities and Requirements
Determine the most important business functions and systems that must be protected in a disruption event. Specify requirements like Internet access, computers, staff, licenses, physical space, inventory etc.
Make Response and Communication Plans
Outline response plans addressing each identified risk. Specify actions like notifying staff, safeguarding assets, shifting operations online/to a new location, dealing with media etc. Also develop a communications plan for alerting customers, vendors, authorities and stakeholders.
Assign Roles and Responsibilities
Designate contingency teams and individual roles to enact response plans when triggered. Identify backups for each role in case primary people are unavailable. Ensure all participants understand their responsibilities.
Document Vital Information
Note information vital for continuing operations like emergency contacts, licenses, bank accounts, passwords, computer backups, partner agreements, insurance policies and more. Keep this organized and accessible.
Build Readiness Capabilities
Determine capabilities needed to bolster readiness like emergency funding, insurance policies, staff cross-training, cybersecurity systems, alternative suppliers, telecommuting options, backup premises etc. Invest in solutions that build resilience.
Update the Plan Periodically
Regularly review and update the plan to keep it current as risks shift quite regularly. AI wasn’t on anybody’s radar a decade ago and now its considered a risk to many industries and jobs. Keeping the plan top of mind will build preparedness. A prudent approach will serve your business well.
Taking the time upfront to develop a contingency plan empowers small business leaders to swiftly and smartly navigate the unexpected. Following the steps above will safeguard your company and provide continuity when disruptions strike. Stay proactive with planning for stability.