Why Your Business Needs a Contingency Plan – and How You Can Make One
Running a business takes vision, courage, dedication and more than a little luck. As the pandemic has shown us, there is always a chance that market downturns or external crises could hit your business, no matter how robust your business plan. According to one report, 12,930 companies in India shut down operations in 2020-21 due to the COVID-19 pandemic[1]. This just goes to show how unpredictable the world is, and how quickly things can go wrong. But while you cannot predict the future, you certainly can prepare for such eventualities with the help of a contingency plan. Such planning is the key to the longevity of your business, so it’s important that you get it right.
May 2023
6 mins read
Share:
What is a contingency plan?
A contingency plan, or a business continuity plan, helps a business prepare for unusual events which could negatively impact its operations. It is a blueprint for the company’s response to crisis, with the aim of restoring normalcy as quickly as possible. The plan helps protect company resources, identifies key staff, assigns specific roles for the recovery phase and minimises inconvenience to customers. Irrespective of the size or industry, every organisation should have a contingency plan.
Five reasons an organisation needs a contingency plan
1. Preparing for the unexpected
The number one reason to have a well-thought out contingency plan is to protect the enterprise from sudden catastrophic events. For instance, there could be a fire in the data room, putting your data at risk, or an important company leader might suffer injury or death during a crucial phase. Without contingency plans like having data backups in the cloud, or lining up succession strategies for key figures, such events could hobble the company.
2. Mitigating business losses
When a business faces disruption, such as a fire, natural disaster, power outage or cyber-attack, a contingency plan can help expedite a return to normalcy. This can help prevent a significant hit to sales and revenue.
3. Faster response to contingencies
The modern world of business is ripe with competition. How fast you respond to a situation often determines the success of your business. With a contingency plan in place, your business can overcome unexpected problems without losing ground in its operations. Instead of reacting to such events, you can prepare proactively and put in place protocols to accelerate the crisis response. In the case of industry-wide events or even global crises like the pandemic, that faster response could also provide a competitive edge.
4. Managing public relations
In this digital age, customers are free to share their opinions with just a few taps or clicks. Even a few negative reviews can have a disastrous effect on the reputation of a business, especially in the case of SMEs. A contingency plan will ensure that you have a process in place to prevent a customer backlash, and to cope with it better if it happens. Robust planning can forestall panic and help the organisation better manage its public relations.
5. Better business agility
The pandemic has shown us the importance of being agile, and contingency plans can help companies improve their agility. For instance, if new government regulations threaten to affect your operations, your company will be better able to deal with the situation if there is a blueprint to help it adapt to regulatory changes.
How to create a contingency plan
- Prioritise your most important resources
Start with identifying and prioritising the resources your organisation needs to function normally. The job of the contingency plan will be to first protect these resources and ensure they remain functional during emergencies, or at least recover fastest. These could include your IT systems, key employees or any particular physical assets or facilities. - Identify the major risks
Once your key resources are prioritised, identify the risks they face. Conduct meetings with your executives, key personnel, IT staff, department heads and other employees to gain a detailed understanding of which events might impact your critical resources. You could also engage consultants to help you identify such risks. - Draft a contingency plan
Make a contingency plan for every resource and risk, starting with the highest-priority ones. When evaluating threats, begin with the most significant ones, or those to which a particular resource is most prone. Once a plan is formulated for high-priority resources and threats, you can work on other low-priority resources and risks. Focus on employee activities, communication, timelines and employee responsibilities to help your organisation return to normalcy. - Distribute the plan to every member
After completing the plan and receiving approval, you must ensure that all stakeholders and employees can easily access it. There is a slew of mobile apps dedicated to corporate crisis management, which will ensure that all employees and stakeholders have access to the plan. - Keep updating the plan
It’s also important to update the contingency plan every time a significant event occurs in your organisation, such as installing new technologies, hiring new employees or shifting to a new office. Rehearse the implementation with the employees and stakeholders regularly so that every individual is aware of their role during an emergency.
Invest towards a contingency fund
The first objective of a contingency plan is to prevent significant disruption due to an unexpected event – but if it does happen, you’ll also need resources to power the recovery. For businesses, it’s essential to keep emergency funds handy, so that such events do not decimate their finances. Building a sizable corpus through regular investments in avenues like mutual funds is an excellent way for a business to amass the financial resources to tide over a crisis.
Robust contingency planning is the key to the survival of your business – so commit fully to it and ensure that your hard work won’t be wiped out by the vagaries of the market.
Disclaimer: Mutual fund investments are subject to market risks, read all scheme related documents carefully.
Source Links
Share:
PGIM India Asset Management Private Limited
(CIN - U74900MH2008FTC187029)
Toll Free Number: 1800 266 7446
Email: care@pgimindia.co.in
This is an Investor Education and Awareness Initiative by PGIM India Mutual Fund.
All the Mutual Fund investors have to go through a one-time KYC (Know Your Customers) process. Investor should deal only with the Registered Mutual Funds (RMF). For more info on KYC, RMF and procedure to lodge/redress any complaints, visit https://www.pgimindiamf.com/ieid.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. Read more
All the Mutual Fund investors have to go through a one-time KYC (Know Your Customers) process. Investor should deal only with the Registered Mutual Funds (RMF). For more info on KYC, RMF and procedure to lodge/redress any complaints, visit https://www.pgimindiamf.com/ieid.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. Read more
The information contained herein is provided by PGIM India Asset Management Private Limited (the AMC)
on the basis of publicly available information, internally developed data and other third-party
sources believed to be reliable. However, the AMC cannot guarantee the accuracy of such information,
assure its completeness, or warrant such information will not be changed. The information contained
herein is current as of the date of issuance* (or such earlier date as referenced herein) and is
subject to change without notice. The AMC has no obligation to update any or all of such
information; nor does the AMC make any express or implied warranties or representations
as to its completeness or accuracy. There can be no assurance that any forecast made
herein will be actually realized. These materials do not take into account individual
investor's objectives, needs or circumstances or the suitability of any securities,
financial instruments or investment strategies described herein for particular investor. Hence,
each investor is advised to consult his or her own professional investment / tax advisor / consultant for advice in this regard.
The information contained herein is provided on the basis of and subject to the explanations, caveats and warnings set out elsewhere herein.
The views of the Fund Manager should not be construed as an advice and investors must make their own investment decisions regarding investment/ disinvestment in securities market and/or suitability of
the fund based on their specific investment objectives and financial positions and using such independent advisors as they believe necessary.
