Contingency planning is planning to mitigate the impacts of risk events, variances and failures, by making secondary plans, work- around, fall-back positions or ‘Plan Bs’ in case things go wrong or the original plan fails.
A simple example might be planning for the possibility that a new e-procurement system fails to go live on time planned. The contingency plan (Plan B) may involve measures such as maintaining the old system in parallel running, reverting to manual procurement processing, and/or contracting out e-procurement operations to a pre-selected, pre-briefed service provider. Such a plan might also include how Plan A will go back on track: what is the next opportunity to switch systems, and how can we ensure that the process delays or glitches have been solved? It will also include plans for stakeholder communication about the delay, the back-up plan, work-around arrangements, and so on.
The role of contingency planning
Contingency planning is important because of three of the fundamental principles of risk:
• Many risks cannot be completely eliminated. They may be caused by factors outside the organisation’s control (such as natural disasters, the outbreak of disease, terrorist attack or third pay action). Or the elimination of risk may require such tight programming and restriction of organisational activity as to be dysfunctional: eliminating discretion, flexibility, innovation and opportunity. Contingency planning is based on the recognition that ‘bad things happen.
• Risks may be low-probability but high impact. A risk may be too unlikely to justify continual or costly measures to prevent its occurrence — but sufficiently high impact to justify planning for mitigation measures (minimising costs and consequences) if it does occur. Contingency planning is based on ‘thinking positive’ — but planning for the worst’.
• Risk mitigation is more effective when proactive than when reactive. Risk mitigation requires systematic planning, resourced employment and lead time for implementation all of which may be in short supply once a risk event has occurred, or is in the midst of occurring. Contingency planning is based on having plans and resources ready and waiting to be put into action when triggered.
Stages of Formulating Contingency Plans
1. Identify critical risks
2. Identify and evaluate solutions
3. Identify and document selected contingency response
4. Document what/who will trigger activation plan
5. Establish and train response leadership
6. Communicate the plan do that everyone can respond at need