The Advantages of Contingency Planning

As a business owner, it's impossible to control everything. Contingency planning is about recognizing your limitations and preparing to deal with things you can't avoid: natural disasters, terrorism, hardware failures and other events that threaten to stop business dead in its tracks. Done properly, a contingency plan shouldn't scare you. It should increase your company's ability to cope when things don't go as smoothly as expected.

Having a contingency plan means that, when the unexpected happens, your business can maintain the best state of operations possible, depending on the severity of the disaster. Instead of going bankrupt when your building gets struck by a tornado, the disaster relief insurance you purchased can cover major costs, for example.

To give a real-life contingency plan example, the New York Board of Trade saved itself by building a second trading floor outside of the World Trade Center. This terrorism contingency plan kept the board healthy and in business, despite the attacks that took place on Sept. 11, 2001.

An effective contingency plan outlines who's responsible for what in the face of disaster. Provided that you test your plan and make your staff members aware of their duties, a contingency plan saves time if the worst does happen. Instead of having people waiting around for direction, you have a workforce full of people who know what to do and how to do it. Less time is wasted coordinating employees and giving orders, so you can focus on dealing with any issues that you didn't account for in your original plan.

When you plan for the worst in advance, you might find that some disasters are actually preventable. Sitting down and thinking about your company's risks is all that's needed to bring these issues to light. For example, maybe you take your company's databases for granted, but risk analysis reveals that they're getting old and you don't have a backup in place. Replacing your aging equipment and designing a backup system helps avert a crisis before it happens.

Among the many benefits of contingency planning, the main benefit is psychological: when you plan for what might happen, you're more mentally prepared to deal with the unexpected. With no plan in place, you have to think about what steps to take first, second and third to minimize damage from catastrophic events. With a contingency plan, those basics are already documented, leaving your mind clear to cope with higher-level concerns. When you know you've done everything you can do to handle a bad situation, you can approach problems with a calm, assertive attitude.