A contingency plan is also called risk management because it contains all the situations a company may face in the future. Plans are unpredictable, so they are made for unexpected events or require major changes and adjustments to achieve the ultimate goal. Not all changes are predictable, so a contingency plan plays an important role if you want your business to succeed. Malaysian business owners when joining an SAP learning hub Malaysia could learn in more detail about other styles of planning and how to do it. 

List out possible risks

Before giving out any solutions for any type of risk, you must point them out first, having the problem identified will solve 50 per cent of the problem. First, make a list of all the risks that could affect your business. Keep in mind that contingency plans come on many levels and can be planned at the business, department, or program level. Ensure that your contingency plan is appropriate for the scope and magnitude of the risks you are responsible for managing.

Contingency planning is a large undertaking, so conducting brainstorming meetings with relevant stakeholders to sort out and discuss potential risks. If you’re not sure who to include in your brainstorming session, create a stakeholder analysis map to identify who to include.

Grade the risks

There is no need to create a contingency plan for every identified risk. After outlining the risks and potential threats, collaborate with stakeholders to predict the potential impact of each risk.

Score each risk using two metrics: The severity of the impact and the likelihood that the risk will happen. During the risk evaluating phase, each risk will be assigned a severity level and probability to make up a scale of High, Medium, and Low.

Mark out severe risks

After assigning severity and probability to each risk, it is your and your stakeholders’ job to decide which risks are most important. For instance, you should have contingency plans for high-probability, and high-severity risks, but probably not for low-probability, and low-severity risks. You and your stakeholders should draw the line based on the shared agreements between the team and delegate on who will be responsible for dealing with the issue when it occurs. 

Analyse the impacts on business

Having a clear understanding of the severity and likelihood of each risk, you can precisely plan out the actions required to minimise the threat’s impact on your organisation.

Ask yourself and the stakeholders, what about risks with low severity but high probability? What about risks with high severity but relatively low probability? Based on the risk appetite there would come several ways in resolving the case. If it is an acceptable level of risk, likelihood to happen, or minor issue. By understanding exactly what drives your business, you can develop a contingency plan for any risk, regardless of likelihood or severity.

Eventually, a contingency plan or a risk management plan is something you should always update even if the process is undertaken. Keep the plan flexible and adapt it based on the contexts when the risks occur, and make sure to let everyone know who to contact and report when the risk happens.