Contingency plans, which are better known as emergency response plans, are very useful in anticipating the occurrence of things that result in the cessation of operational activities. In managing the organization, various risks may actually occur starting from technical disturbances (eg data loss) to natural events (eg floods). Therefore, every organization needs to develop an effective contingency plan in order to be prepared to deal with various adverse events.
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Part 1 of 3: Anticipating Various Risks
Step 1. Prepare before developing a contingency plan
The main purpose of preparing a contingency plan is to maintain the continuity of the organization's operational activities in the event of a disaster.
- First, define a formal policy stating that the organization must develop a contingency plan.
- Make a plan that is simple and practical. Use words that are easy to understand and provide guidelines that are easy for the reader to apply because this plan must be carried out by all personnel in the organization.
- Determine the specific reasons for which you must make a contingency plan. Think of indicators that serve as benchmarks for determining the successful implementation of a contingency plan so that the organization can carry out activities as usual. Determine the operational activities that play an important role in the continuity of your business.
Step 2. Create a contingency plan by answering three important questions
Creating a plan that answers all three of these questions is a way to ensure that you don't miss a single aspect to consider.
- What events might occur?
- What actions will we take to address it?
- What do we need to do to prepare ourselves?
Step 3. Find out what risks your organization is likely to face
Determining the risks that may occur is one of the important aspects in preparing a contingency plan. However, the process will be different according to the situation and condition of each organization. You should also consider the circumstances of your own organization when determining risks. Contingency plans are needed to anticipate business risks in the form of:
- Natural disasters, for example: floods, hurricanes, and droughts. Other risks: financial crises, work accidents, personnel problems (eg death of an organizational leader or employee strike), data loss, management chaos, and product problems (eg: defective products).
- Focus on the preparation of plans on aspects of management, communication, finance, coordination, logistics, and technical problem solving.
- Technical problems are usually faced by the team that handles the communication infrastructure. You must consider the risk of losing data or customers.
Step 4. Consider risks according to priority
Determine the risk rating based on the magnitude of the chance of the risk occurring. In general, contingency plans cannot anticipate all risks because the chances of occurrence are not the same. Try to find out the risks that have the greatest chance of happening and that will greatly affect operational activities.
- Focus on the events with the most fatal consequences. List all events that affect operations and rank them from 1 to 10. Think about the impact of each of these events, for example: engine fires have a lower rating than factory fires.
- After that, determine the rating based on the frequency of occurrence of the risk. For example: give a rating of 1 for a risk that occurs once a month and a rating of 10 for a risk that occurs once every 100 years. Multiply the two numbers to get a total score that indicates the magnitude of the risk and its impact on the organization.
- Develop a contingency plan starting with the event with the highest score. Prepare solutions to anticipate these events. In addition, you can improve work processes for low-scoring events. Fundamental aspects that ensure the continuity of the organization's activities must be a top priority, for example: managing cash flow, developing market share, and improving employee performance.
Part 2 of 3: Defining Multiple Scenarios
Step 1. Determine the scenario for the event with the highest risk
In order to develop an effective contingency plan, define realistic scenarios for each risk. Create a specific framework to anticipate what the impact would be if the highest risk did occur.
- You can determine the impact after compiling the scenario thoroughly. Think about the biggest impact of each scenario in detail.
- From a scenario, prepare several versions of the plan with graded impact intensity, for example: mild impact, moderate impact, and severe impact.
Step 2. Make a schedule for the implementation of the plan according to the scenario
Determine which personnel are responsible for what actions and when. Also prepare an updated list or contact list and determine who should provide notifications.
- Prepare a schedule so that all responsible personnel know what they have to do on the first day or during the first week. Develop a specific schedule for each scenario.
- Make a schedule according to the scenario to anticipate the emergence of obstacles in various aspects of the organization, for example in terms of work facilities (infrastructure constraints), organization (there is no warning system for emergencies or a skilled response team), and institutions (for example: lack of funding sources or partners external business). Determine the personnel who should be responsible for certain aspects.
Step 3. Think about the most important factors to get your business up and running again
Discuss this in detail by conducting a review of the capacities and vulnerabilities within the organization. Does the organization have adequate capabilities to address or address each risk?
- For example: a disaster that may occur is a flood because the river water overflows and inundates housing on the banks of the river. Poor infrastructure may trigger vulnerability and the availability of skilled personnel is an organizational capacity.
- Do an honest resource assessment. Determine what needs to be changed or reduced due to limited resources? Perform analysis to determine the impact on business activities so that you are able to determine the actions that must be taken so that the organization continues to operate and is able to achieve its goals.
Step 4. Determine how to reduce the risk
After making a contingency plan, don't sit back and hope nothing bad happens. Take various steps to reduce risk and take prevention.
- Find out if there are colleagues willing to help. Are there local resources that can be utilized in the event of a disaster? Are there neighbors willing to help?
- An effective contingency plan is able to reveal various aspects that need to be improved so that a plan that was originally very useful, now may not be needed anymore.
- For example: you realize the need for insurance protection or carry out a disaster management simulation. Install a data backup system to prevent data loss. Make a plan for each scenario.
Part 3 of 3: Implementing a Contingency Plan
Step 1. Communicate the contingency plan to all employees
You need to inform the contingency plan to all levels of the organization's management as early as possible before an emergency occurs.
- Explain the roles and responsibilities of each personnel so that they are not confused when this plan must be executed to prevent panic.
- Provide useful training so that each personnel is able to fulfill responsibilities according to plan. Perform the necessary simulations and make adjustments after observations have been made.
Step 2. Test your plan
Perform testing in 4 stages to be more efficient and effective. If there are inter-departmental problems or conflicts, adjust the plan and retest.
- Hold meetings with senior staff. Let him set the date and time for the meeting to do a full review of the contingency plan and appreciate the people who have done the job to the end.
- Hold interdepartmental meetings to review each other's departmental plans. In this stage, you need to allocate resources and identify emerging conflicts.
- Find the cause of crucial system failures. Plan evaluation can be done within the department by simulating system and/or vendor failures. Scenario simulations can be performed without shutting down equipment or delaying processes that must continue to run.
- Do a test run. However, you need to test the contingency plan by temporarily stopping operations.
Step 3. Keep the contingency plan in a safe and easily accessible place
In the event of a disaster, do not let the plan catch fire or be swept away by the flood. To make it easy to access when needed, don't keep your plan file storage a secret.
- Keep the plan file and copies in several places so that they can be used as soon as possible when needed.
- Keep a copy of the plan in different places from the original. Please tell how to access it to some authorized people.
Step 4. Establish a regular schedule for conducting reviews
Changes occur all the time so that the assumptions that underlie the preparation of the plan are no longer valid. The risk may be greater than when the plan was drawn up.
- Involve several people when drafting and adjusting plans. For example: ask new employees to provide input or make improvements from a different perspective.
- Compare all assumptions used when drafting the plan with current data or have a third party check. The backup system on your computer may store less data than you think.
Tips
- Don't overlook the importance of a contingency plan so you don't create one!
- Develop contingency plans in various scenarios.
- Begin planning by forming a committee and appointing a chair. Choose people who have the skills, tools, and knowledge so that each department is able to develop its own plans.
- Reread the plan that has been drawn up to find things that were missed.
