A business contingency plan is a structured plan of action that allows a business to continue operating during an emergency. It can include plans for natural disasters, market changes, outsourcing, and customer considerations.
Sometimes known as a backup plan, a business contingency plan is a structured plan of action that allows a business to continue operating even in the event of some kind 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 interrupt those operations. In practice, a business contingency plan is usually a combination of several different sub-plans that provide detailed instructions on how to conduct the business in the face of many different emergency situations.
An example of a business contingency plan focuses on continuing operations in the face of some type of natural disaster, such as a flood or hurricane. Here, the objective is to overcome temporary power losses in manufacturing facilities or the loss of voice and data communications between the main facilities of the company structure. This has led some companies to develop what is known as a disaster recovery process, effectively establishing backup power and communication sources that can allow the company to continue operating until the usual sources of power and communication are restored.
In addition to providing a plan of action for use after a natural disaster, the contingency plan can also focus on dealing with sudden changes in the market that adversely affect the value of the company’s issued stock or its investments. In this scenario, the idea is to use emergency fund reserves to offset these temporary losses, allowing the business to stay on top of its debt obligations while it decides what to do with failing investments. Depending on the reason behind the change in the market, this could simply involve clearing the low period until the market recovers, or it could require a structured divestment of certain securities that are not expected to recover in a reasonable period of time, absorbing the loss. and reinvestment in securities that show more promise.
It is not uncommon for a business contingency plan to include provisions for outsourcing certain functions as part of emergency provisions. For example, a fire that renders a company’s main office unusable could lead to the company’s main phone numbers being redirected to an answering service that tracks incoming calls and forwards them 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 business to continue operating internally but also helps minimize any inconvenience customers may experience as a result of the emergency situation.
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