Contingency Planning in 2020
Today’s business nature is driven by high-speed technology, large amounts of data, and rapidly changing business demands. Especially in our current environment with the COVID-19 pandemic forcing businesses to implement remote work routines, evaluate how it will stay in operation, and adjust to customers changing needs. The volatile, uncertain, complex, and ambiguous (VUCA) business environment many firms operate in today dictates the necessity for bold leadership, agility in operations, and positive organizational culture that enables employees to make vital decisions while feeling safe.
If we listen to CNBC, Bloomberg, or other business/finance sources right now, we often hear “look for businesses with a strong balance sheet, companies we cannot live without, and the low-interest-rate environment.” However, we do not often hear about the most prepared organizations to shift into a remote workforce operation, planned for hard economic times, or have contingency plans in place for various circumstances. Contingency planning is worst-case scenario planning for businesses and how they will resume normal operations after major catastrophic events. The standard events companies plan for include: natural disasters, environmental, facility damage, geopolitical risks, and other external factors or circumstances. It is also vital for contingency plans to consider all organizational resources, financial, human, and physical assets.
A step-by-step guide to contingency planning is listed below.
1. Create a contingency plan mission statement where you establish a clear orientation for your firm, its priorities, and how it wishes to plan for these major events.
2. Identify the contingency plans your firm will formulate.
3. Analyze the potential risks to your firm.
4. Design your contingency plans. Create a task force that collaborates, solicits feedback, and accounts for all resources.
5. Develop formal strategies, employee training, and communication channels. Contingency plans should not be a secret to your workforce. All employees should be trained and understand how to react during such significant events.
6. Implement your training program, round table practice sessions, and other preparation tools.
7. Evaluate the effectiveness of your contingency plans consistently; at least once a year, and always after executing a contingency plan due to a real-time event.
It is also critical for business leaders to ensure their organization is strategically aligned - including contingency plans and financial structure, employee programs, and their mission. Each business’s needs are different but smaller, and private firms should have about one-year worth of cash or other liquid vehicles to fulfill their obligations. You can use the quick ratio and the current ratio. Moreover, organizational leadership must ensure its employees are protected, safe, and able to carry out its mission.