Business contingency plans allow a business to continue operating even in an emergency.
Sometimes known as a backup plan, a business contingency plan is a structured plan of action that allows a business to continue operating even in the event of some type of emergency situation. The idea behind this type of business plan is to allow the business to continue with its essential operations even when something unforeseen threatens to disrupt those operations. In practice, a business contingency plan is often a combination of a number of different sub-plans that provide detailed instructions on how to conduct business in a number of different emergency situations.
Most companies need a contingency plan for serious computer failures.
An example of a business contingency plan focuses on continuing operations in the face of some type of natural disaster, such as a flood or hurricane. Here, the goal is to overcome temporary power losses at manufacturing facilities or the loss of voice and data communications between key facilities in the business structure. This has led some businesses to develop what is known as a disaster recovery process, effectively establishing backup power and communication sources that can allow the business to continue operating until regular power and communication sources are restored.
Business contingency plans are designed to keep a business running even when hit by an unexpected disaster.
In addition to providing an action plan to use after a natural disaster, the contingency plan can also focus on dealing with sudden changes in the market that negatively affect the value of the company’s issued shares or its investments. In this scenario, the idea is to use emergency fund reserves to offset these temporary losses, allowing the company to stay current on its debt obligations while it decides what to do with distressed investments. Depending on the reason behind the change in the market, this may involve simply spending the bear period until the market recovers, or it may require a structured divestment of certain securities that are not expected to recover within a reasonable period of time, absorbing the loss and reinvesting in securities that show more promise.
It is not uncommon for a business contingency plan to include provisions for the outsourcing of certain functions as part of the emergency provisions. For example, a fire that disables a company’s headquarters could lead to the redirection of key company phone numbers to an answering service that monitors incoming calls and routes them to select employees who now work from home. Many companies take their customers into account when developing a business contingency plan, a strategy that not only allows the company to continue operating internally, but also helps minimize any inconvenience that customers may experience as a result of the situation. of emergency.