Why Contingency Planning? Importance and Benefits

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Crisis Management > Best Practices > Why Contingency Planning? Importance and Benefits

Why Contingency Planning? Importance and Benefits
Anneke Zwart, Student (University), Netherlands, Moderator
Simpkins (2009) argues that Contingency Planning (CP) is probably the most important topic of an organizationís overall strategic plan. The importance of preparing for any contingencies must not be underestimated. Contingency planning takes into account other outcomes than the expected and desired outcomes. And this is exactly what makes CP important.

Indeed, the world of today and its business environment is changing at fast pace. Every organizaton has to deal with continuous and fast changing internal and external environmental dynamics. Important changes today are technological changes, globalization, market transformations, democracy and more. Successful leaders should consider and prepare for those possible changes. Contingency planning enables leaders to mitigate the negative consequences of those transformations on their organizations.

Furthermore, CP makes leaders aware of and adapt to changes in consumersí preferences. Every product goes through a product life cycle in which consumersí preferences for certain products change over time. Contingency planning helps leaders to take into account those changing preferences and adapt to it. By continuously redesigning and reinventing products and services, products can become desired again for customers and stakeholders.

Do you have additional ideas why CP is important?
Source: Simpkins, R.A. (2009),"How Great Leaders Avoid Disaster: The Value of Contingency Planning", Business Strategy Series, Vol. 10 Iss. 2 pp. 104 - 108.
 

 
Importance of Contingency Planning
Roland Alech, Consultant, France, Member
HI! I agree fully. I add a few thoughts:
- CP might be also about dealing with CHANGING RESOURCES (you don't have what you expected to pursue your goals).
- CP is important because you might then PARTIALLY SUCCEED even if THE plan is no longer viable.
- CP also helps prepare and compare different trajectories and outcomes, giving the decision makers a BENCHMARK which reinforces their planning and their capacity to adapt quickly.
- I also emphasize AGILITY as a useful capacity. Agility in itself is not easy to acquire. It not the same thing as reactivity, but if your teams, organization, strategy and operational means are agile, you have an advantage when a contingency plan has to be implemented...
- I also like to remember and remind 2 things to people I work with: "Failing to plan is planning to fail..." but ... "No plan is valid once the first shot is fired...
 

 
Why Contingency Planning is Important
Kirk C. Heriot, Professor, United States, Member
As Master Kahn used to say in the "Kung Fu" TV Series: "Expect the unexpected."
CP helps you anticipate problems. While you might not always have a plan in place for every scenario, the PROCESS OF TRYING to do so will put you in a better position of responding to the unexpected than blindly counting on your plan being correct.
 

 
Benefits of Contingency Planning
SANAJI, Teacher, Indonesia, Member
I think CP is not a new idea. We know that nothing is permanent in this world except change itself. So of course to keep the organization moving toward consistent achievement of its objectives, it is necessary to set up a contingency plan in case the strategic plan. It might be that the plan turns out not to be in accordance with the original environment after all.
In a DYNAMIC environment, CP is necessary to:
1. Provide a quick and immediate RESPONSE to changes in the external environment. However, CP will only help, if the environment changes relatively predictable. It that is not the case, then what should be done is to change the plan, e.g., changing strategies, programs, tactics and targets.
2. MITIGATING RISK. CP is useful to prevent a greater risk to the organization. After all, when the plan has become obsolete and incompatible with the current environmental conditions, continuing to implement it is likely to result in poor results.
 

 
Preventive System
Tran le Phuong, Teacher, Mongolia, Member
Each organization has its own Mission-Vision that expresses the direction for achievement. However, in order to ensure everyone is on the right track, leaders need CP which my school calls a "PREVENTIVE SYSTEM". This preventive system foresees all negative influences that may occur such as: human resources, execution of project, dealing with customers... Absolutely, preventive system-contingency planning is needed.
 

 
Another Reason for Contingency Planning
Dr. Alan Williams, Professor, Thailand, Member
In a business organization the owner/CEO/BOD members have a MORAL AND LEGAL RESPONSIBILITY to protect the investment of the shareholders and to protect all stakeholders.
All business owners etc. know scenarios that could suddenly threaten the business' revenue, margin, market share, product life cycle, etc. And items / scenarios that could threaten the safety of employees, local community, etc.
In my experience the most professional organizations have planned and unplanned discussions about 'risk'. These discussions are professional but often time consuming. How can it be any other way? In 1 organization that I worked for as a consultant, once every year all directors and all department managers must provide a list of known/imaginary threats/risks to the CEO and this list is then put into a table of items for at least one full discussion in the next year. Plus adhoc items as needed.
 

 
Why Contingency Planning in Project Management
Gopalakrishnan, Project Manager, Indonesia, Member
CP is to cover unknowns, unforeseen uncertainties, and/or unanticipated conditions that are not possible to adequately evaluate or determine from the data on hand at the time the plan is prepared. CONTINGENCIES IN PROJECT MANAGEMENT relate to the uncertainties of the current known and defined project scope and are not a prediction of the future project scope or schedule changes.
A project team should anticipate the most common unforeseen uncertainties. Based on that it should prepare a risk analysis and solutions/mitigations prior to commencing the project.
 

 
Why Contingency Planning is Important?
K.Narayana Moorthy, HR Consultant, India, Member
In business "contingency planning" conjures images of NATURAL DISASTERS such as hurricanes, earthquakes, or floods or MAN-MADE CRISES like riots, fires, or terrorism. The concept of CP is rarely tied up with ROUTINE BUSINESS PERFORMANCE MANAGEMENT.
This is because many companies fail to recognize, how important it is to describe in advance, in detail, steps the organization will take in the event that it fails to meet or also in the event it exceeds the budget and performance plans.
A well-thought contingency plan enables a company to launch quick, effective responses to changing market and business conditions. Without the agility that results from this type of capability, an organization looses many valuable opportunities.
A best practice is to start the contingency planning at the time of the annual budgeting process.
 

 
Aims of Contingency Planning
kipkosgei chepkiyeng, Manager, Kenya, Member
CP is a kind of a road map when the planned does not materialize as expected. Its main aims are to minimize failure, deviations, and hasten turn around time among other. A CP proposes what may go wrong and comes up with possible solutions /alternatives.
 

 
CP is Important, but not Enough to Handle Any Type of Catastrophe
Bernhard Keim, Business Consultant, Germany, Premium Member
When doing CP, we should always keep in mind that the outcomes are always different of whatever you might have planned. Even the most sophisticated plan will not protect you from the unexpected!
That means organizations have to be able to handle ambiguities.
If a disaster occurs you will only know afterwards what happened exactly and what were the reasons. When it happens you just don't have this information. You are confronted with the effect of an unknown and not anticipated something.
You can plan for fire, an earthquake, a power shortage only if you take into account that these things might happen although you don't know when. More PROBLEMATIC ARE EVENTS YOU HAVE NOT EVEN THOUGHT ABOUT and there are many of them.
But what you always will need is a resilient communication structure, with well defined reporting guidelines and fallbacks. Without proper information everyone feels lost in any situation.
 

 
A Contingency Fund is also Important to Serve as a Cushion at Need
shachi kanta khuntia, Interim Manager, Member
In India, the age old tradition of giving gifts of gold, silver ornaments, brass, bronze utensils to brides at the time of marriage is actually meant for meeting the requirement at the time of dire need is not only a foresight of managing with a contingency fund. It helps to manage the basic need of the family either by selling or mortgaging those items.
The same is true for the fund kept aside out of reserve cash for an organization. It is a good idea to go ahead with creating a corpus of CONTINGENCY FUND for any sort of financial crisis.
 

 
Relevance of Contingency Planning
Ramakrishnan, Consultant, India, Member
The word contingency implies 'prepare for the unexpected' It would relate to several events, results, opportunities, programs in a business organization. Contingency plans can be made with a fair degree success in known business environments.
CP builds CONFIDENCE in an organization, an indicator that it can successfully negotiate any unexpected event that might otherwise pull the company down.
But for that it's important all employees are be aware of such a plan and know their roles to implement the plan without any waste of time.
 

 
Contingency Planning for Bad Days
Nasir Sajjad, Consultant, Pakistan, Member
CP provides a path to react smoothly to certain events, because the RESOURCES ARE READY to be positioned and there is no halt, no crisis, no worry, no strain, no stress, no contention.
If CP is done well prior to any problematic situation then it's a success for the entity and also for the management and/or the board.
 

 
Contingence Planning Gives Confidence to an Institution
Tito Rafael Hidalgo Barcia, Strategy Consultant, Ecuador, Member
Contingence planning as a plan B gives any company or non-profit organization CONFIDENCE on how to face possible misfortunes. Knowing you have plan B allows the institution to focus fully in plan A.
(Don't we all feel confident to know we carry a spare tire in the car incase we get a flat tire?)
CP helps the planner walk through a mental rehearsal of the strategic plan in order to identify possible misfortunes.
 

 
Contingency Planning - PACER
Mark Wm. Cawman, Student (Other), Member
To anticipate that flexibility is necessary, I have heard a contingency plan should be 5 levels deep, summarized by the PACER acronym:
P - Plan
A - Alternate plan
C - Contingency plan
E - Emergency plan
R - Ridiculous plan when all else plans fail.
 

 
Why Resiliency Management is Mandatory
jorge anibal hoyos hoyos, Manager, Colombia, Member
Contingency Management or Resiliency Management is not only about our products, services, finance independent from each other, but also MIXED AS A WHOLE UNIT to face it up when the nature powers acts against our world, our market, our company or when competitors suddenly cause damage to us.
By studying in depth through the scenarios and situations likely to occur, by making agreements with suppliers "in the case of..." or "what if ", by maintaining very good relationships with the banks, by "stand-by products", innovation, flexibility in our factories when demands slows down or surprisingly increases.
All what is needed to do when unlucky attacks must be prepared in advance as is possible through scenarios analysis.
 

 
Benefits of Contingency Planning
Guillermo Vasquez, Business Consultant, Colombia, Member
On a more strategic language, a contingency plan could be seen as coverage of risk as one of the participants already mentioned: the only thing certain is change, and having these dynamics covered in contingency plans is a strategic strength. Even if plan B is not the solution for the emerging situation, if you have DEVELOPED A TEAM AND ORGANIZATION READY to look for new alternatives, innovation possibilities to minimize the damage.
 

 
Benefits of Contingency Planning
Edy Khalife, Manager, Lebanon, Member
CP allows firms to avoid the shock of complete surprise, reduces indecision and uncertainty when unplanned thing happens, it forces managers to think in terms of possible outcomes.
Source: Mitome, Speer, Swift, 2001 Embracing Disaster with CP, Risk Management, Vol. 48, Iss. 5
 

 
Lessons from World War Z
Emmanuel Mwirichia, Manager, Kenya, Member
If you have watched the 2013 Brad Pitt movie World War Z, you will remember the scene where he is talking to the Mossad intelligence agency and learns about the zombie threat (through an intercepted email).
It seemed crazy, but so did the prospect of the Holocaust, the Munich massacre and the Yom Kippur War. Israel has committed to imagining the unimaginable and preparing for it. In summary they build a wall that helps to protect them (somewhat, no spoilers).
CP is what helped Israel remain a zombie-free oasis...
 

 
Contingency Planning Should be Added to Fayol's First Management Role
Ramakrishnan, Consultant, India, Member
Fayol's Five Management Roles model distinguishes 5 elements:
1. Prevoyance (forecast and planning) examining the future and draw up plan of action, the elements of strategy
2.To organize: Build up the structure, both material and human of the undertaking.
3. To command: manage the activity among the persons.
4 To coordinate: Binding together, unifying and harmonizing all activities and efforts
5. To control: Seeing that everything occurs in conformity with established rules and expressed command.
Perhaps it is appropriate to add 'PREPARE WITH A CONTINGENCY PLAN' to role number 1.
 

 
A Risk in Emergency Planning
Omar HEMISSI, Professor, Algeria, Member
The complexity of more and more markets and increasingly short product life cycles seem to place emergency planning as an alternative. But their recurrence bear the risk of making it into a sort of tactic to adapt to rapid and unexpected changes in the environment.
 

     
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