Contingency Planning 101 - Are You Prepared for a Business Crisis?
No matter how well managed your business is, one crisis could bring operations to a grinding halt. If your business ends up in the middle of a crisis, having a well thought out contingency plan will get you on the path to successfully overcome it.
What is a contingency plan?
A contingency plan is a plan of action created by your business in response to possible future risks.
The purpose of the plan is to help your business remain proactive, ensuring you are prepared for any unlikely catastrophic events. While your business may not be able to avoid risk, you certainly can effectively plan for it, helping you be ready for action if disaster strikes.
How to Make A Contingency Plan
Preparing a thorough contingency plan is the first step to ensuring your business is prepared for a crisis.
Planning is an essential part of operations management, offering a blueprint for how to deal with difficult and trying events before they occur.
- Identify the areas essential to business operations
- Go through your company and list essential resources - teams, tools, facilities, etc.
- Identify key risks to your business
- What events could compromise your resources? (Disasters, crises, etc.)
- Plan for how to deal with risks
- Write a contingency plan for each risk identified
- Distribute the plan
- Give a copy to everyone at your business
- Periodically revisit the plan
- Revise and maintain the plan to keep the details up to date
What is a business crisis?
A business crisis is a sudden, unexpected, or unplanned situation that threatens the stability of a business.
These crises can cause major financial, relational, and social disturbances for a business.
Types of Crisis
- Financial crisis
- Happens when an organization is hit by the sudden loss of a large amount of money
- Examples: bankruptcy, revenue losses, inflation or sudden change in the market
- Impacts: negative reputation, shut down of the business, customers lose trust
- Quick plan: keeping some business funds aside, changing your business to fit new market requirements, upgrading or mobilizing requisite funds
- Get Accounting Help
- Natural crisis
- Examples: earthquakes, volcanic eruptions, tornadoes, hurricanes, floods, landslides, tsunamis, storms
- Impacts: physical damage to your business, temporary business closure
- Quick plan: having a plan in advance, providing training to employees
- Technological crisis
- Examples: software failures, industrial accidents, oil spills
- Impacts: customer service interruptions, physical damage to your business
- Quick plan: implement a fix as soon as possible, mitigate your losses
- Confrontational or malevolent crisis
- Examples: employee or former employee commits violence, boycotts, picketing, sit-ins, terrorism, cybercrime
- Impacts: mental health disturbance of employees, negative reputation of your business
- Quick plan: getting police involvement
What is crisis management?
Crisis management is the process of managing the response to a business crisis, events, and threats.
Effective crisis management can protect the reputation and public image of your business. By practicing crisis management, you can communicate that your business is handling a crisis appropriately.
Crisis communication is a Public Relations technique that helps communicate to customers and stockholders how your business is handling a crisis.
Here are some best practices for handling communication during a business crisis:
- Respond Quickly
- Use social media to your advantage, as it is an instant channel of communication
- If possible, make a statement within an hour of an event
- Be consistent
- Use all communication channels available to you
- Relay the same consistent messages across all platforms.
- Pre-draft messages in advance via templates, then insert key information once it is known
Posted: 04 May, 2020