Contingency plan

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In business, a plan for coping with the effects of an eventuality that is possible but the actual occurrence or timing or degree of which is difficult or impossible to forecast.

The contingent eventuality may be expected to have either positive or negative impact on a business. (If a study shows a contingent event would be neutral for the business, no contingency plan would be needed in relation to it - though occasional checking that this remains true may be wise.) Inevitably, most business discussion focuses on the negative, though.

Such a plan is to facilitate the taking of steps needed to enable an organisation to respond to the contingency's eventuation both appropriately and in an organised and timely fashion.

The plan will often require the organisation to have taken some steps in advance of the eventuation, such as a careful study of the matter, staff training, issuance of procedures and guidance, ensuring access to appropriate information, contingent agreements with suppliers and service providers, etc.. For example: a corporate treasury may have available a standby dealing room in another location in case of being unable to access its normal facilities; or a firm may have taken steps to make acquisition of another business on retirement of an owner both possible and relatively straight forward for it even when the owner seemed in the best of health.

For an example, see the ACT's briefing "Contingency planning for a downturn in the economy: a treasurer’s checklist" This considers a non firm-specific crisis, how a business's treasury might respond and, importantly, what needs to be done beforehand (now?) when crisis is only a theoretical possibility and there seems to be no urgency to plan or spend money or staff time about it.

See also