Contingency planning
Contingency planning is a process in which organizations identify possible risks and situations that they
may come across in the future and then develop appropriate plans and strategies to respond to those
threats or adverse events. Their objective is to bring the company out of this situation and restore
normal operations as soon as possible and with minimal losses.
Organizations create contingency plans so that they can implement them as soon as any disaster or
change in business situation occurs. These plans ensure that businesses continue to operate despite the
challenges they come across. Such plans enable companies to face various emergencies, such as natural
calamities, economic downturns, untimely demise of the CEO or a board member, epidemics and
pandemics, fires, power outages, and so on. It is a proactive strategy that stresses on preparation more
than response.
The first step of contingency planning is to recognize and prioritize the resources that are essential for
continued business operations. Once these resources and their significance have been identified, the
risks faced by each of them should be determined. Each risk should be ranked in terms of its probability
of occurrence and the extent of damage it could cause to the organization’s operation and serving. An
action plan is then developed accordingly, which lays down the responsibilities assigned to each
employee in the event of the situation occurring. It also includes the plan of action for different stages,
i.e. immediately after a serious event occurs, the way business will continue its operations in the
aftermath of the event and how it will resume operations in full capacity.
Crisis management
Crisis management refers to the way companies deal with an emergency or disaster after it has
occurred. It is the process carried out by companies after the crisis has occurred, and so, it is a reactive
strategy that stresses on response to the event instead of preparation for it.
Companies come into the crisis management mode following the occurrence of an unexpected issue. It
is not possible for them to anticipate all disasters that they may be inflicted with. Sometimes, despite
contingency planning, some events do not occur the way they had been predicted. Similarly, it is not
possible to foresee certain situations. Hence, the contingency plans would not be effective and may
have to be modified to deal with the existing situation. In such circumstances, companies need to
analyze the situation and respond in a swift way so as to minimize the damage caused. They need to
establish a team that is responsible for evaluating the impact of the disaster or crisis on the business and
developing a plan for dealing with the problem and recovering from it. The team should communicate
the plan of action with the employees and update all the stakeholders regarding their response and
recovery procedure.
Companies need to show a timely response every time they face a crisis because the quick and efficient
reaction is the key to crisis management. However, a haphazard or inadequately organized response is
often found to be ineffective. The entities should thoroughly analyze the situation and then prepare
themselves for a proper response to the issue