Let’s face it; risks are unavoidable in business. It’s true! And if you follow any type of news or industry outlet, you are likely shaking your head because you can recall some companies being hit by some sort of disaster recently. Data being stolen, lettuce being tainted with Ecoli or an unforeseen death of a vital member of a business. These things happen. And they happen to businesses of all sizes. Yep, not even small businesses are safe from risks…they may just be a different type of risk.
So, what should you do? Wait and hope for the best? No! There is a far better way to handle the unknown risk that may (or may not) show up. Contingency planning.
Developing a contingency plan is not glamorous, and unless you love planning (like I do!), it’s also not likely on the top of your list of to-dos’. But it is necessary, and it can save your business from a major disaster, or even from going out of business altogether. Contingency planning can be broken down into four steps.
The first step is determining what potential risks your business may encounter. Admittedly this can be a tough one because you need to think about bad things that could happen – not an enjoyable thing to do. But it is necessary, and this step could prevent a chain of negative events that could literally destroy your business. Start with the following categories, and think through each one carefully to determine what could impact your business:
It’s a long list and not every category may apply to your business, but it is better to explore each category than to avoid it altogether. Keep in mind; not every risk is a negative risk. For example, a sudden increase in orders for a specific product. That’s great news…as long as your business is prepared to handle that sudden increase in orders. If you’re not, that sudden increase could lead to unfulfilled orders and angry customers. Probably not what you would like.
Take time to go through this step. Leverage other members of your team, ideally a cross-functional team, to really dig into the potential risks and write them down.
Now that you’ve documented the risks, it’s time to prioritize these risks. When prioritizing the risks that have been outlined, consider the likelihood of the risk happening and the impact that it could have on your business.
This step helps you determine which risk to plan for first, and which risks may not be worth planning for at all because of the impact and likelihood.
Now it’s time to plan. I know, this may seem like the most overwhelming step, but I encourage you to think differently. Consider this an easy step compared to dealing with a disaster without a plan – not fun, and even more overwhelming.
It’s best to approach this step with a team. A group of trusted employees that can help develop the plan. For example, if your business is distribution-based, include a member of the team that knows the ins and outs of the routes the drivers take. They will likely be able to provide insight on how to handle a major highway shutdown, for example.
With your team in place, go through each scenario and document what your organization will do if a disaster were to occur. For each disaster, outline the following:
It’s important to get these items “down on paper” so that everyone knows what to do if the potential risk actually occurs.
Once the plan is in place, save it and back-up the plan. Perhaps all key stakeholders have the plan on their phone, or the plan is backed up to the cloud, or the plan is on a flash drive in a safe, or all of those options. The idea here is that the sole version of the plan is not located within the office because one of the risks could be your office being shut down due to a natural disaster.
But this isn’t a “Save it and forget about it” document. Regularly review the document as a team to determine if plans need to be adjusted, as plan owners may need to be changed of an employee left the company or is no longer equipped to execute the plan. You may also need to add potential new disasters to the contingency plan. This regular review should also include any necessary pieces of training, as needed. The point is your plan can become outdated if it is not reviewed regularly.
Although we hope you do not need to implement the plan, but if you do, you will be well-equipped to do so. And because you have a plan in place, the team will be able to quickly take control of the situation which will minimize losses in productivity and sales, prevent panic from happening with employees, customers, and suppliers, and provide strong direction and leadership for the organization. And it might just be what saves your business.
If you do not yet have a contingency plan in place, we hope this article gives you the nudge to create it. Happy planning!