Contingency Plans ― Expecting the Unexpected

March 15, 2001
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When it comes to disasters, many companies have a “crossed fingers” approach ― the company crosses its fingers and hopes it will not be affected. This approach can have tragic effects. Statistics indicate that more than 60% of companies affected by a major catastrophe go out of business within two years if immediate action is not taken. There is an alternative: contingency planning.

With a contingency plan in place, immediate action can be taken when a catastrophe occurs. This means that lives and property can be saved, downtime can be lessened and damage can be minimized. To develop a contingency plan that works, several factors need to be considered:

  • Minimizing interruptions to business operations

  • Limiting the severity of the disruption

  • Resuming critical operations within a specified time after a disaster

  • Expediting the restoration of services

  • Assuring customers that their interests are protected

  • Maintaining a positive image of the organizations

  • Minimizing financial loss

  • Establishing awareness of the plan with employees and management.

The first step in creating a contingency plan is gaining executive support to get the necessary resources for creation of a plan. When the plan is presented to management, it is a good idea to share the objectives of the contingency plan and the reasons for its necessity. Also, it is important to share the consequential cost of not having a plan in effect.

Next, a planning committee needs to be established. This committee should oversee the development and implementation of the plan. For the plan to be successful, it’s critical to have the participation of all departments.

The role of the committee is to review issues that pertain to each representative’s department in relation to the total contingency plan. Each committee member should then perform a risk analysis. An effective plan contains a risk analysis that includes a range of possible disasters, whether natural, technical, or human threats. Subjects that should be considered include:

  • Financial impact exposures

  • Operational impacts (customer service, reduced quality, loss of competitive advantage)

  • Intangible impacts (public opinion, employee morale, employee confidence)

  • Critical business functions

  • Requirements for business continuation (relocation, modification of the current facility).

Another important step in contingency plan development is conducting research and gathering materials necessary for the response and recovery after a disaster. Necessary materials include a telephone list of key personnel, vendors and other organizations that will play a role in recovery. An accurate equipment inventory is also essential. A checklist should be developed that will allow for notification of the appropriate parties should a disaster occur.

After a plan has been created, it’s essential to share the plan with employees. The head of the planning committee must educate and train the whole organization on implementation of the plan.

The most effective way to share the plan is to exercise the plan. A scheduled practice run of the plan gives all parties the opportunity to see action steps that work, those that don’t and those that do need tweaking.

Once the plan has been revised, it is ready to be implemented. But, implementation isn’t the final step. The plan should be reviewed bi-annually and revised annually. The annual revision is required to accommodate updates in information and strategy, changes in notification lists, changes in service providers, changes in equipment and even changes in business priorities.

With a well thought-out, well-designed contingency plan in place, a disaster doesn’t have to equal destruction. A properly implemented plan will provide a company with the tools it needs to survive a disaster and get back to business as quickly as possible.

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