Business owners, project managers and a whole host of other people create robust plans that can help them achieve their goals, whether business or personal. With as much work that goes into creating the plans, you would think they would be impervious to outside influence, but, alas, Murphy’s law (anything that can go wrong will go wrong) is alive and well, which is why you need a plan B—also known as a contingency plan.
In this guide, we’ll take a closer look at contingency plans. I’ll explain what they are (and aren’t) and how they can help dig you out of deep holes. I’ll share a step-by-step guide that will help you create a contingency plan, list their pros and cons and clue you in on software that can help you create solid backup plans quickly.
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What Is a Contingency Plan?
A contingency plan, which can also be called a plan B or a backup plan, is a reactive plan that helps business owners, project managers and others overcome tricky situations that have derailed their main plan.
By planning for incidents that may be out of your control, such as volatile markets, a pandemic, cyberattacks and increasing costs due to tariffs, you can quickly course-correct and continue on your merry way without too much of a fuss, regardless of the type of business you run or the project management methodology or agile framework you use to complete work.
Contingency Plan Examples
To give you a better idea of problems that can derail your business and project management plans, I will share a few scenarios so that you can see how they may impact you.
Cyberattacks
Every business owner’s worst nightmare: a cyberattack, where bad actors seize control of your systems and demand a ransom. On top of having IT policies that include updating device firmware, employee training and software updates, you need a contingency plan in place so that the second your infrastructure is infiltrated, you can minimize damage to your network and customer information. A plan will also help you keep your business running.
Your cyberattack contingency plan should include data backup and communication plans, establish a chain of command and quarantine any infected devices. The plan should also include details on agencies to contact for help, such as the Internet Crime Complaint Center (IC3). The quicker you can react to threat actors, the better chance you have of coming out the other side with little damage.
Widespread Sickness
Sickness in the workplace can quickly take out multiple team members at the same time. A situation like this can have huge consequences on how smoothly a business operates and can throw project due dates off so much that scope creep sets in. As you can imagine, a robust contingency plan for widespread sickness and employee absence is vital.
The plan should include a policy stating that nobody should attend work when they are sick or until they are fully recovered. A list of trusted staff agencies should be provided so that temporary workers can fill the gaps, and open communication with clients and key stakeholders should be established so that project scopes, S.M.A.R.T. goals, objectives and key results (OKRs) and expectations can be adjusted for the given period. You may also want to reduce service hours or collaborate with other businesses to meet customer needs.
Supply Chain Disruptions
Supply chain problems can happen for many reasons, including transportation woes and natural disasters in the areas where you source goods. If you’re a retailer, a disruption in the supply chain will lead to empty shelves, lower profits and unhappy customers, while a meticulous critical path method construction plan will fall into disarray due to late or unavailable supplies. The solution is, of course, a supply chain contingency plan.
A supply chain contingency plan should include a list of alternative suppliers that can get the resources or products you need to your door. There should be a communication plan that includes how to inform customers, stakeholders and clients. You should also develop a plan to account for extra costs, as it is likely that the goods and resources you need will cost more than previously budgeted for.
How To Create a Contingency Plan
Now that you know what a contingency plan is and what they look like, it’s time to create your own. If you’ve never created a contingency plan before, don’t stress. Just follow the steps below and you’ll be able to create one in no time.
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Step 1: Define a Contingency Planning Policy Statement
Leaders should write a contingency planning policy. The policy should list your SMB’s or project team’s commitment to continuity, contingency plan objectives and the roles that team members will play when contingency plans are called into action. The roles and responsibilities can be listed on a RACI chart. The policy should also describe what format the contingency plans will follow and the information they must contain.
Step 2: Conduct a Business Impact Analysis (BIA)
The second thing SMB owners and/or project leaders should do is write a business impact analysis (BIA), which covers how potential problems and emergencies will impact your business or project. The BIA should prioritize the systems and processes that are crucial for business or project continuation.
Step 3: Identify and Implement Preventive Controls
This step of contingency planning involves the business owner, project manager or scrum master identifying and implementing preventive controls, or defining what needs to be done to reduce the impact on the business and how contingency plans will work. This can cover everything from cost-cutting methods to maintaining staffing levels to protecting systems, supply lines and deadlines.
Step 4: Define Contingency Strategies
Now is the time to write the strategies to protect your business or project from ruin. You can write contingency plans for specific scenarios such as failing supply lines, increased costs, sickness, natural disasters and cyberattacks, to name a few. The contingency strategies are what you and your employees will follow when problems arise. I recommend ClickUp or Notion to create notes. You can learn more about ClickUp below and about Notion in our Notion review.
Step 5: Train Employees and Test the Plans
Once the plans have been written, it is time to train your employees so that when the time comes to implement those plans, everyone knows exactly what to do. In a bad situation, the quicker your team can react, the better chance you have of mitigating damage to your business or project.
Step 6: Maintain the Contingency Plan
Do your due diligence and revisit your contingency plans often. It is up to you how often, but I would suggest at least quarterly. If major changes occur, you should revisit the plans as soon as you can. The last thing you want to do during a time of duress is open a plan that is outdated and does not take into account changes to your business or project.
Common Contingency Plan Mistakes
When creating your contingency plans, do your best to avoid these common mistakes:
- Avoid creating one-size-fits-all plans; tailor each one to specific scenarios.
- Do not leave out any stakeholders, clients or VIPs who need to be informed.
- Don’t underestimate the importance of training your staff.
- Do not overlook communication methods and standards; if you do, chaos will ensue.
- A contingency plan is an official business document, and should be professional, but do not use convoluted language. Make it as easy to read and follow as possible.
- Underestimating risks can be just as bad as not planning at all. Err on the side of caution and plan for the worst just in case.
What Are the Pros and Cons of Contingency Planning?
Contingency plans are a fantastic way of ensuring your team knows how to react when disaster strikes; however, along with the advantages of contingency plans come disadvantages. Before adopting contingency plans, take a look at the pros and cons I have shared below to make sure you understand what you’re getting yourself into.
Contingency planning pros:
- Can minimize downtime and loss
- Well-defined plans can boost employee and stakeholder morale
- Contingency plans help ensure business continuity during hard times
- Successful contingency plans can enhance your business or individual reputation
- Can enhance communication and decision-making
Contingency planning cons:
- Employee training can increase operating costs
- Expect to spend plenty of time developing contingency plans
- It can be hard to predict all the issues that can affect your business or project
- Contingency plans are reactive and not proactive
- Complacency can become an issue, as plans can lead to a false sense of security
How Do Contingency and Mitigation Plans Differ?
We’ve talked about contingency plans a lot, but many business leaders get them confused with mitigation plans, which are something else entirely. This is an easy mistake to make and is one that you want to avoid. The biggest difference between the two is that:
- Contingency plans are reactive, meaning they are used to respond to problems that have already occurred. While they allow you to develop plans to deal with a potential situation, they do not help prevent it. Contingency plans are the equivalent of buying a bicycle helmet after your bike has already crashed.
- Mitigation plans are proactive, meaning they are used to diminish risks before they happen. With a mitigation plan, money is spent upfront to put systems and measures in place to help nip problems in the bud. Mitigation plans are the equivalent of having a safety helmet you can wear before you get on your bike.
Project Management Software for Contingency Plans
There are many methods you can use to write contingency plans. You could grab a notebook to jot down your plan, use a whiteboard, produce a simple Word document or even use napkins (though I really don’t recommend them). However, the best way to create a contingency plan is to use project management software.
Many platforms offer collaborative documents and lists that can be used to notate potential risks and their probabilities. Instead of using work breakdown structures, you can also quickly assign team members to recovery tasks so that everyone knows who will handle problems should they occur.
Below, I have listed the three platforms that topped our best project management software roundup and appeared in our best free project management software list. If you want to make your life easier, give them a try.
- ClickUp. Robust collaborative documents, tables, kanban boards, Gantt charts and even a contingency plan template await those who choose to use ClickUp. You’ll find a feature-packed free plan that supports unlimited users and affordable paid plans. You can learn more in our full ClickUp review.
- Monday.com. Easily the most user-friendly project management platform around, Monday.com, with its intuitive tools, clean menus and customizable project and process templates, makes creating projects and plans a piece of cake. You can learn more in our full Monday.com review.
- Teamwork.com. Not only is Teamwork.com one of the best platforms for complex projects, thanks to its robust resource management and financial planning tools, but it is also a top choice for those needing to create and share documents, such as contingency plans. You can learn more in our full Teamwork.com review.
The Bottom Line
If you own a business or run projects frequently, you cannot afford to skip over the process of creating contingency plans. As much as we would like to believe everything in life will be smooth sailing, we all know it’s not that way. It’s far better to have a plan in place to deal with issues when they arise than to be running around like a headless chicken. Follow the steps in this guide, and you’ll be able to create contingency plans that will help dig you out of a hole should your business or project fall into one.
Featured Partners
1
monday.com
Yes
From $8 monthly per user
Zoom, LinkedIn, Adobe, Salesforce and more
2
ClickUp
Yes, for unlimited members
$7 per month
Slack, Microsoft Outlook, HubSpot, Salesforce, Timely, Google Drive and more
3
Hubspot
Yes
$15 per seat per month
Zoom, Slack, Google Workspace, QuickBooks and more
Frequently Asked Questions (FAQs)
How do you create a contingency plan?
The best way to create a contingency plan is to meet with your team, clients and key stakeholders to discuss potential problems and how they should be handled. It is always best to ensure that everyone is on the same page so that issues can be dealt with quickly.
What are the key components of a contingency plan?
Key components of a contingency plan include a contingency policy statement, a business impact analysis, a description of specific scenarios and how they will be handled, communication plans and a solid employee training plan.
Why do businesses need contingency plans?
Businesses need contingency plans to help them navigate problems that could have a significant impact on operations.
What is the difference between a contingency plan and a mitigation plan?
The biggest difference between contingency plans and mitigation plans is that contingency plans are reactive and kick in after an event has occurred, while mitigation plans are developed to stop issues from occurring in the first place.
How often should a contingency plan be updated?
At a minimum, contingency plans should be updated annually. However, things happen quickly in the business world, so I recommend updating contingency plans quarterly, or as soon as any major changes occur in your project or business.
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