Sometimes known as a backup plan, a business contingency plan is a structured plan of action that allows a business to continue functioning, even in the event of some sort of emergency situation. The idea behind this type of business plan is to allow the business to continue its essential operations even when some unforeseen event threatens to disrupt those operations. In actual practice, a business contingency plan is usually a combination of several different sub-plans that provide detailed instructions regarding how to conduct the company in the face of several different emergency situations.
One example of a business contingency plan focuses on continuing operations in the face of some sort of natural disaster, such as a flood or hurricane. Here, the goal is to overcome temporary losses of power to manufacturing facilities or loss of voice and data communications between key facilities in the company structure. This has led to some companies developing what is known as a disaster recovery process, effectively establishing backup sources of power and communication that can allow the business to continue operating until the usual sources of power and communication are restored.
Along with providing a plan of action for use after a natural disaster, the contingency plan may also focus on dealing with sudden shifts in the marketplace that adversely affect the value of the company’s issued shares, or its investments. In this scenario, the idea is to utilize emergency reserves of funds to offset those temporary losses, allowing the business to remain current on its debt obligations while deciding what to do with the failing investments. Depending on the reason behind the shift in the marketplace, this may involve simply riding out the low period until the market recovers, or it may require a structured divestment of certain securities that are not anticipated to recover in a reasonable period of time, absorbing the loss, and reinvesting in securities that show more promise.
It is not unusual for a business contingency plan to include provisions for outsourcing certain functions as part of the emergency provisions. For example, a fire that renders the main office of a company unusable may lead to redirecting the main telephone numbers for the business to an answering service that screens incoming calls and then routes the calls to selected employees who are now working from home. Many companies consider their customers when designing a business contingency plan, a strategy that not only allows the company to keep functioning internally, but also aids in minimizing any inconvenience that clients may experience as a result of the emergency situation.