Importance of Contingency Planning and Why its Important in Business and Organizations?

So you have planned a new project or a business idea. You have planned everything, done with your SWOT analysis, and calculated the success of the project. You are sure that the project will go smoothly, which is a good thing to have confidence in one’s project. But what if an unforeseen external factor suddenly appears that can impact the project? Or what if a mistake is made in the process that messes up the project? Do you have a solution or backup plan in case anything goes wrong? This is why contingency planning is done – to get out of any situation or a mess that can affect the project. Because of this reason, the importance of contingency planning cannot be ignored by any business and organization. But what is contingency planning?

What is Contingency Planning?

Contingency planning is a strategy that is designed specifically for future unforeseen events. It is a proactive approach to ensure the operations go smoothly as possible and in case of a threat, the situation can be controlled or recovery strategies could be applied. In simple words, contingency planning is a backup plan or plan B to the primary plan.

Just like in every situation, plan B or backup plan are not launched unless it is necessary. Also, it is made sure that plan B recovers the situation and helps in continuing the smooth operations that were aimed at in plan A. After recovering from the situation the operation should follow a normal course. This is the importance of contingency planning.

Similar to planning a primary plan for a project, contingency planning includes many steps and involves many people. Here are the main essentials that are required in contingency planning.

  • Risk Assessment: While planning for a project, all the possible risks are predicted and assessed beforehand.
  • Situations: after risk assessment, different situations are assessed that can occur and damage the project. These situations are listed based on the importance and possible damage that they can cause.
  • External Factors: These are the situations that can occur due to environmental change That can affect the business i.e. change in market policy, changes in law, a sudden emergency like a pandemic, political situation, economic recession, etc.
  • Solutions: A solution is formulated for every possible situation. The aim is to continue the operations and recover the damage as much as one can.
  • People who need to know about this: It is important to identify who should know about the situation and who can handle an emergency. Mostly, it is the senior leadership, management, and employees that are updated about the progress and handle the upcoming emergency.
  • Make a Timeline: It is important to make a timeline and estimate the time it takes for damage control. Making a timeline helps speed up the process and lets both parties know about the progress.

These are all important factors that are required for making an effective contingency plan.

Moving on, the article will discuss the importance of contingency planning in business and an organization.

Importance of Contingency Planning in Business and Organizations

Contingency planning has become essential for carrying out business operations without delay. Having contingency plans ensure or increase the business’s success and its survival. Nowadays, every business – small or big – has introduced contingency planning in its system. The importance of contingency planning is discussed below.

1. Preparation

Contingency planning is essential for a business and organization because it helps the organization prepare for unforeseen situations. Even if there is no sudden change in the plan or the effect of an external factor, it is a good thing for a business to prepare for any situation. Lastly, if a contingency plan is already made, there is no need to start from scratch and continue the operation using plan B or a backup plan.

2. Increases Adaptability

Other than preparing the organization for unexpected situations, contingency planning helps the organization to attain adaptability and flexibility in daily operations. This is a necessary skill in the changing market trends and needs. Instead of stopping a project because of a small hurdle, organizations learn to use other methods to continue the operations. In other words, contingency planning is equivalent to changing business courses to gain more profit or divert a big loss.

3. Save Time

When an unexpected situation occurs during the normal operations of a business, it affects the timeline. When the plans are changed to start from scratch, it means increasing the timeline more. This can affect the business and result in loss. Therefore, the importance of contingency planning is focused on businesses to save time and money.

4. Brings Good Reputation to the Business

When a business fails, it not only affects the business owner but all the investors who have funded the business. so, a hiatus in a business project is a financial loss and reputation loss. Therefore, it is necessary to prepare for the crises beforehand. It is better than reaching bankruptcy. The stakes of investors, shareholders, customers, employees, and management in a business make it a big loss for everyone. But having a contingency plan, the business managers or owners can convince different parties like employees, customers, shareholders from withdrawing their stakes and continue investing in the business. On the contrary, a business with no contingency plan loses trust automatically, affecting the reputation of the company.

5. Provides Opportunities

The importance of contingency planning is not limited to preventing unexpected situations and minimizing the loss. It also allows the business to explore other areas and take advantage of the opportunities that arrive during the process. During the process of making a contingency plan, the opportunity to analyze the market and business trends arises. If you are an expert, you can identify these opportunities and use them to your benefit. It helps to identify good opportunities, timely and hence, benefiting the business.

6. Prevent Damage

Contingency planning is essential for every business these days as it helps the business to continue running and prevent major losses. It is impossible for a business to always get profit but even during a loss, a business can do minimize the loss. This is why a backup plan is always made to prevent major damage from coming in the way and ruining the whole organization.

Tips to Make a Contingency Plan

Making a contingency plan is not difficult and not very different than making a normal plan for a business project. One needs to be prepared for every possible situation and use the witts to get out of any possible hurdle. Following are some tips that can be sued to make an effective contingency plan.:

  • Assess the situation deeply.
  • Study market and its trend to know what kind of threats can be presented during the operations and what can be done to avoid them.
  • Study case studies of businesses and their operations. It helps to gain different perspectives.
  • Set goals to minimize damage and ways to return to normal operations.
  • At least cover the basics of the business if gaining profit is not possible in a situation.
  • Hire experts and get them to train your staff in the process.
  • Keep up to date with market trends on daily basis and review the plans accordingly.
  • Engage the staff and all employees during the whole process and make sure everyone is on the same page. Because mismanagement can cause more damage to the already unpredictable situation.
  • Make a detailed contingency plan to avoid any confusion.


The above discussion proves that the importance of contingency planning should not be taken lightly. It can prevent the business from major losses and damages. Moreover, if the contingency plan is made with great care and if the situations are in favor of the business market, the business can achieve a profit out of every situation with the help of a contingency plan.

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