Three steps for planning for the ‘what happens ‘if’ scenario’
Contingency plans are used for risk management when an exceptional risk that, though unlikely, would have catastrophic consequences. An example of a business contingency plan would be a policy that all the directors or senior management of a company do not travel on the one plane. In 2010 Sundance Resources, a West Australian mining company lost their entire board of directors when they were all on a chartered plane that crashed in the Congo. The company was nearly ruined by such a loss.
The three steps to the contingency planning process:
- Analyse Risks – This involves listing all of the possible events that could disrupt operations such as natural disasters, worksite accidents, death of the CEO, data loss, product recall, theft, etc.
- Determine the probability and impact of risks – This involves listing all possible events that could disrupt operations and ranking them based on your estimate of the likelihood of the occurrence.
- Develop a process for each item – Starting with your highest ranked events, document the plan for disaster recovery (the safety of people and assets), continuity (keeping the business operational), and security (protection of resources), while the event is addressed.
Cantor Fitzgerald, a financial services company, is a prominent example of the successful implementation of a business contingency plan. In the space of two hours, the firm lost 658 of its 960 New York employees in the September 11 attacks, as well as much of its office space and trading facilities. Despite these significant losses, the firm was able to resume business within a week. It remains a successful company today.