Contingency Planning

Planning now, about how to deal with a crisis in the future, is called Contingency Planning. A crisis is usually an unforeseen event which threatens the business in some way.

Examples of Crisis Production – machinery can break down. Finance – A cash flow crisis, the bank may withdraw the overdraft facility. HRM – A worker not turning up for work or a walkout by staff over an industrial relations issue. A product may have to be recalled because a fault is found. Public Relations – there may be a news story about a company sourcing materials from a third world country and exploiting its workers.

Why you might need a plan 1.When you identify a risk that you assess as impacting greatly 2.When you cannot reduce the risk to an acceptable level 3.When the risk is still so large that you need to take a structured approach to reduce its likely impact

Advantages and disadvantages of contingency planning It will allow an organisation to use the and customer service number to identify any possible events. It forces the management team to consider alternative courses of action in the event of disruption or deviation from original plan. It provides the management team of an alternative method of achieving key business objectives. It facilitates the business decision making process and enables management to negotiate the optimum deal in the interests of the business.

Advantages and disadvantages of Contingency Planning It will facilitate the organisation in the prevention of internal events, such as quality control issues or sourcing other suppliers of ingredients and packaging. However, Contingency Planning is a costly activity. It can involve huge numbers of highly qualified staff in assessing risk and planning what to do if things go wrong.

Development of a Contingency Plan Establish there is a need Plan all possible scenarios of the crisis Find solutions to each scenario Formulate each plan Test each plan out What actions warrant the plan being put into effect? Allocate responsibilities Sequence of actions necessary?

Disaster recovery plan Temporary buildings?? Special staffing?? Backup machinery?? Arrangements with other companies?? Extra finances?? Existing staff?? Fire Bomb Earthquake Arson Hurricane

Review Questions Explain how a contingency plan may be drawn up. Should every possible crisis and contingency plan be considered by an organisation? Why do contingency plans need to be reviewed and monitored regularly?