contingency plan for key equipment failure

Enterprises are often defined by how they deal with events that are out of their control. For example, how you react to a disruptive technology or cope with a sudden change in the markets can be the difference between success and failure.

Contingency planning is the art of preparing for the unexpected. But where do you start and how do you separate the threats that could do real harm to your business from the ones that aren’t as critical?

Here are some important definitions, best practices and strong examples to help you build contingency plans for whatever your business faces.

What is a contingency plan?

Business contingency plans, also known as “business continuity plans” or “emergency response plans” are action plans to help organizations resume normal business operations after an unintended interruption. Organizations build contingency plans to help them face a variety of threats, including natural disasters, unplanned downtime, data loss, network breaches and sudden shifts in customer demand.

A good place to start is with a series of “what if” questions that propose various worst-case scenarios you’ll need to have a plan for. For example:

• What if a critical asset breaks down, causing delays in production?
• What if your top three engineers all quit at the same time?
• What if the country where your microprocessors are built was suddenly invaded?

Good contingency plans prioritize the risks an organization faces, delegate responsibility to members of the response teams and increase the likelihood that the company will make a full recovery after a negative event.

Five steps to build a strong contingency plan

1. make a list of risks and prioritize them according to likelihood and severity..

In the first stage of the contingency planning process, stakeholders brainstorm a list of potential risks the company faces and conduct risk analysis on each one. Team members discuss possible risks, analyze the risk impact of each one and propose courses of action to increase their overall preparedness. You don’t need to create a risk management plan for every threat your company faces, just the ones your decision-makers assess as both highly likely and with a potential impact on normal business processes.

2. Create a business impact analysis (BIA) report

Business impact analysis (BIA) is a crucial step in understanding how the different business functions of an enterprise will respond to unexpected events. One way to do this is to look at how much company revenue is being generated by the business unit at risk. If the BIA indicates that it’s a high percentage, the company will most likely want to prioritize creating a contingency plan for this business risk.

3. Make a plan

For each potential threat your company faces that has both a high likelihood of occurring and a high potential impact on business operations, you can follow these three simple steps to create a plan:

• Identify triggers that will set a plan into action: For example, if a hurricane is approaching, when does the storm trigger your course of action? When it’s 50 miles away? 100 miles? Your teams will need clear guidance so they will know when to start executing the actions they’ve been assigned.
• Design an appropriate response: The threat your organization prepared for has arrived and teams are springing into action. Everyone involved will need clear, accessible instructions, protocols that are easy to follow and a way to communicate with other stakeholders.
• Delegate responsibility clearly and fairly: Like any other initiative, contingency planning requires effective project management to succeed. One proven way to address this is to create a RACI chart . RACI stands for responsible, accountable, consulted and informed, and it is widely used in crisis management to help teams and individuals delegate responsibility and react to crises in real time.

4. Get buy-in from the entire organization—and be realistic about cost

Sometimes it can be hard to justify the importance of putting resources into preparing for something that might never happen. But if the events of these past few years have taught us anything, it’s that having strong contingency plans is invaluable.

Think of the supply chain problems and critical shortages wreaked by the pandemic or the chaos to global supply chains brought about by Russia’s invasion of Ukraine. When it comes to convincing business leaders of the value of having a strong Plan B in place, it’s important to look at the big picture—not just the cost of the plan but the potential costs incurred if no plan is put in place.

5. Test and reassess your plans regularly

Markets and industries are constantly shifting, so the reality that a contingency plan faces when it is triggered might be very different than the one it was created for. Plans should be tested at least once annually, and new risk assessments performed.

Contingency plan examples

Here are some model scenarios that demonstrate how different kinds of businesses would prepare to face risks. The three-step process outlined here can be used to create contingency plans templates for whatever threats your organization faces.

A network provider facing a massive outage

What if your core business was so critical to your customers that downtime of even just a few hours could result in millions of dollars in lost revenue? Many internet and cellular networks face this challenge every year. Here’s an example of a contingency plan that would help them prepare to face this problem:

• Assess the severity and likelihood of the risk: A recent study by Open Gear showed that only 9% of global organizations avoid network outages in an average quarter. Coupled with what is known about these attacks—that they can cause millions of dollars in damage and take an immeasurable toll on business reputation—this risk would have to be considered both highly likely and highly severe in terms of the potential damage it could do to the company.
• Identify the trigger that will set your plan in action: In this example, what signs should decision-makers have watched for to know when a likely outage was beginning? These might include security breaches, looming natural disasters or any other event that has preceded outages in the past.
• Create the right response: The organization’s leaders will want to determine a reasonable recovery time objective (RTO) and recovery point objective (RPO) for each service and data category their company faces. RTO is usually measured with a simple time metric, such as days, hours or minutes. RPO is a bit more complicated as it involves determining the minimum/maximum age of files that can be recovered quickly from backup systems in order to restore the network to normal operations.  

A food distribution company coping with an unexpected shortage

If your core business has complex supply chains that run through different regions and countries, monitoring geopolitical conditions in those places will be critical to maintaining the health of your business operations. In this example, we’ll look at a food distributor preparing to face a shortage of a much-needed ingredient due to volatility in a region that’s critical to its supply chain:

• Assess the severity and likelihood of the risk: The company’s leaders have been following the news in the region where they source the ingredient and are concerned about the possibility of political unrest. Since they need this ingredient to make one of their best-selling products, both the likelihood and potential severity of this risk are rated as high.
• Identify the trigger that will set your plan in action: War breaks out in the region, shutting down all ports of entry/exit and severely restricting transport within the country via air, roads and railroads. Transportation of their ingredient will be challenging until stability returns to the region.
• Create the right response: The company’s business leaders create a two-pronged contingency plan to help them face this problem. First, they proactively search for alternate suppliers of this ingredient in regions that aren’t so prone to volatility. These suppliers may cost more and take time to switch to, but when the overall cost of a general production disruption that would come about in the event of war is factored in, the cost is worth it. Second, they look for an alternative to this ingredient that they can use in their product.

A social network experiencing a customer data breach

The managers of a large social network know of a cybersecurity risk in their app that they are working to fix. In the event that they’re hacked before they fix it, they are likely to lose confidential customer data:

• Assess the severity and likelihood of risk: They rate the likelihood of this event as high , since, as a social network, they are a frequent target of attacks. They also rate the potential severity of damage to the company as high since any loss of confidential customer data will expose them to lawsuits.
• Identify the trigger that will set your plan in action: Engineers make the social network’s leadership aware that an attack has been detected and that their customer’s confidential information has been compromised.
• Create the right response: The network contracts with a special response team to come to their aid in the event of an attack and help them secure their information systems and restore app functionality. They also change their IT infrastructure to make customer data more secure. Lastly, they work with a reputable PR firm to prepare a plan for outreach and messaging to reassure customers in the event that their personal information is compromised.

The value of contingency planning 

When business operations are disrupted by a negative event, good contingency planning gives an organization’s response structure and discipline. During a crisis, decision-makers and employees often feel overwhelmed by the pile-up of events beyond their control, and having a thorough backup plan helps reestablish confidence and return operations to normal.  

Here are a few benefits organizations can expect from strong contingency plans:

• Improved recovery times: Businesses with good plans in place recover faster from a disruptive event than companies that haven’t prepared.  
• Reduced costs—financial and reputational: Good contingency plans minimize both financial and reputational damage to a company. For example, while a data breach at a social network that compromises customer information could result in lawsuits, it could also cause long-term damage if customers decide to leave the network because they no longer trust the company to keep their personal information safe.
• Greater confidence and morale: Many organizations use contingency plans to show employees, shareholders and customers that they’ve thought through every possible eventuality that might befall their company, giving them confidence that the company has their interests in mind.

Contingency plan solutions

IBM Maximo Application Suite is an integrated cloud-based solution that helps businesses respond quickly to changing conditions. By combining the power of artificial intelligence (AI) , Internet of Things (IoT) and advanced analytics, it enables organizations to maximize the performance of their most valuable assets, lengthen their lifespans and minimize costs and downtime.

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Sanctioned interpretations IATF 16949 - 6.1.2.3 Contingency plans

The organization shall:

a) – b) (…)

c) prepare contingency plans for continuity of supply in the event of any of the following: key equipment failures (also see Section 8.5.6.1.1); interruption from externally provided products, processes, and services; recurring natural disasters; fire; utility interruptions; cyber-attacks on information technology systems ; labor shortages; or infrastructure disruptions;

The rationale for the change :

Organizations need to address the possibility of a cyber-attack that could disable the organization's manufacturing and logistics operations, including ransom-ware. Organizations need to ensure they are prepared in case of a cyber-attack.

a) – d) (…)

e) periodically test the contingency plans for effectiveness (e.g. simulations, as appropriate); cybersecurity testing may include a simulation of a cyber-attack, regular monitoring for specific threats, identification of dependencies, and prioritization of vulnerabilities. The testing is appropriate to the risk of associated customer disruption; Note: cybersecurity testing may be managed internally by the organization or subcontracted as appropriate

The rationale for the change:

Cybersecurity is a growing risk of manufacturing sustainability in all manufacturing facilities, including automotive. Contingency testing has also been identified by organizations and CBS as an area in need of clarification. This update provides details of what is to be tested as part of a cyber-attack contingency plan validation.

KEY POINTS: Internal and external risks; Contingency according to customer impact; Effective Contingency Plan; Test and review the Contingency Plan; Multidisciplinary approach with Top Management; Annual revision; Natural Disasters (Disruptions from suppliers, Fire, Labour Shortages, Infrastructure disruptions); Key Equipment Failure (Robots, Assembling lines, IT Equipment’s Production Line and Office, Software, Cyber-attack ).

Due to the expansion of the coronavirus, it is a threat to our business activity and there is an evident risk regarding the possible lack of personnel, we should considerer it convenient to update the Risk Analysis Template and the Contingency Plan, including it.

If you want training and even advice to implement the IATF 16949 standard in your company, please contact our team of ISO Consultants by visiting the website: www.xavierhernandezconsulting.com .

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• Project management

Stop project failure in its tracks with a contingency plan

Georgina Guthrie

April 08, 2021

This post was originally published on June 21, 2019, and updated most recently on April 8, 2021.

Fallback. Plan B. Safety net. Whatever you call it, having a second option for when things don’t go as expected is always a good idea. This is what’s broadly known as a contingency plan.

There’s no shame in having a contingency plan in place. And it certainly doesn’t mean you don’t have confidence in your first option. It just means you’re sensible. Markets are unstable; disasters happen; politics change, technology fails. Seasoned leaders love a contingency plan. They know that no project — no matter how well organized — is entirely without risk .

Having a backup option (or options) in place not only dramatically decreases the risk of a complete project or business failure, but it also shows you’re practicing due diligence. If things do go wrong, having a pre-planned escape route helps you stay calm, collected, and prepared for your team .

What is a contingency plan?

Contingency plans are a part of your risk management strategy. Risk management is all about identifying, avoiding, mitigating, and accepting risk. A contingency plan is about developing a procedure to deal with any likely situation once it occurs.

They’re often created to help organizations respond to negative events. Governments create them to respond to natural disasters or economic crises. Businesses create them to deal with situations that could impact their financial livelihood, reputation, or legal responsibility. But, unlike a crisis management strategy or a mitigation plan , contingency plans aren’t always a response to negative events.

There are positive contingency plans, too. For example, when a business achieves far higher sales than it anticipated, an advertising campaign goes viral, or teams can release software early. The contingency plan, in this case, helps the business take full advantage of the opportunity, rather than failing to react quickly enough to success.

In short, a contingency plan is a proactive strategy to help you deal with any kind of disruptive event, positive or negative .

How to create a contingency plan

Step 1: draft your plan.

Work out the risks & opportunities

Start by asking yourself ‘what if?’ and go from there. Do some research to identify any key threats or opportunities (you may want to create a SWOT diagram for this). Speak to people across the organization to get a fuller picture. Risks and opportunities can be external and internal, so make sure you cover as many bases as possible.

Create a contingency plan for each threat/opportunity you identify, starting with the most critical/likely, then progressing to plans for lesser threats or opportunities.

Identify and prioritize your resources

Work out what’s available to you, such as resources, budget, and tools, then organize it in order of importance. It’s also useful to note where these resources are, so you can access everything quickly in the event of an emergency. This includes the contingency plan itself.

Identify who you will need to involve and what they need to do

You may need to enlist the help or guidance of people outside your direct team, including external specialists. For example, if there’s a cybercrime attack, you’ll need to work with the IT team more closely than normal. That means pulling them from their regular schedule and applying them to the plan. You need each manager’s input and agreement.

Work out when, where, and how it will happen

Have guidelines for managing and reporting during the implementation. This includes a reporting process in place for customers, stakeholders, and PR teams.

Fine-tune your plan

Go over your plan and see whether you can spot any alternative routes. Your contingency plan can have several different versions; a little flexibility is a good thing. Don’t forget to assess the risks of your contingency plan, too. Work out if there are any weak points or dates that, if missed, could cause problems.

Step 2: Share your plan

Once approved, share the final version with all relevant internal parties. Make sure it’s properly communicated throughout the organization, so everyone can act fast if it needs to be implemented.

Step 3. Revisit the plan

Businesses, markets, employees, and resources change. Be sure to visit your plan periodically to ensure it’s fully up to date. You should also use this opportunity to check for any new threats or opportunities.

3 challenges you need to understand

• Getting everyone to understand their importance. Because contingency plans deal with ‘what if’ scenarios, many view them as a luxury. But remember, a contingency plan is a vital component of any risk strategy and could be the thing that saves your business or project.
• Convincing managers to invest time in them. Managers and team members can become overconfident in Plan A, and therefore don’t put time or effort into developing a practical Plan B because they think it takes time away from developing Plan A. Risk management can be a hard sell when under tight deadlines.
• Making sure everyone knows about them. It doesn’t matter how detailed your plan is if no one knows about it. Make sure each member understands how to find and follow the plan. Lack of awareness or buy-in could cause serious delays.

Keep it simple

A final piece of advice in parting to simply to keep it simple. Overcomplicate your plan and you make it difficult to enact or understand the pieces. You need to make sure everyone can understand the plan without you have to continually explain it, there’s always a chance you won’t be around when something goes awry. The simpler, the better.

Final thoughts

Creating a contingency plan may seem like a luxury, but failing to have a backup puts your project or business at undue risk. The time you put in now will pay off if you do ever need it — and if you don’t, you’ll still have peace of mind and look like an experienced manager who knows how to take smart risks.

Using the right tools can help your contingency plan creation run smoothly. Taking advantage of cloud-based project management software means you can create your strategy and house it right alongside your projects. Wikis are an excellent and easily accessible place everyone can access — no matter where they’re working from. And, in the event that you need to spring into action with a plan B, you’ll be able to track changes and monitor progress in real-time.

Here’s why you should add progress reports to your PM toolkit

A simple guide to your first risk breakdown structure

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• What is a contingency plan? A guide to ...

What is a contingency plan? A guide to contingency planning

A business contingency plan is a backup strategy for your team or organization. It lays out how you’ll respond if unforeseen events knock your plans off track—like how you’ll pivot if you lose a key client, or what you’ll do if your software service goes down for more than three hours. Get step-by-step instructions to create an effective contingency plan, so if the unexpected happens, your team can spring into action and get things back on track.

No one wants Plan A to fail—but having a strong plan B in place is the best way to be prepared for any situation. With a solid backup plan, you can effectively respond to unforeseen events effectively and get back on track as quickly as possible. 

A contingency plan is a proactive strategy to help you address negative developments and ensure business continuity. In this article, learn how to create a contingency plan for unexpected events and build recovery strategies to ensure your business remains healthy.

What is contingency planning?

What is a contingency plan .

A contingency plan is a strategy for how your organization will respond to important or business-critical events that knock your original plans off track. Executed correctly, a business contingency plan can mitigate risk and help you get back to business as usual—as quickly as possible. 

You might be familiar with contingency plans to respond to natural disasters—businesses and governments typically create contingency plans for disaster recovery after floods, earthquakes, or tornadoes. 

But contingency plans are just as important for business risks. For example, you might create a contingency plan outlining what you will do if your primary competitors merge or how you’ll pivot if you lose a key client. You could even create a contingency plan for smaller occurrences that would have a big impact—like your software service going down for more than three hours.

Contingency planning vs risk management

Project risk management is the process of identifying, monitoring, and addressing project-level risks. Apply project risk management at the beginning of the project planning process to prepare for any risks that might come up. To do so, create a risk register to identify and monitor potential project risks. If a risk does happen, you can use your risk register to proactively target that risk and resolve it as quickly as possible. 

A contingency plan is similar to a project risk management plan or a crisis management plan because it also helps you identify and resolve risks. However, a business contingency plan should cover risks that span multiple projects or even risks that could affect multiple departments. To create a contingency plan, identify and prepare for large, business-level risks.

Contingency planning vs crisis management

Contingency planning is a proactive approach that prepares organizations for potential emergencies by implementing pre-planned risk mitigation strategies. It involves identifying threats and crafting strategies in advance. 

Crisis management , on the other hand, is reactive, focusing on immediate response and damage control when a crisis occurs. While contingency planning sets the stage for effective handling of emergencies, crisis management involves real-time decision-making and project management during an actual crisis. Both are important for organizations and businesses to maintain their stability and resilience.

Contingency plan examples

There are a variety of reasons you’d want to set up a contingency plan. Rather than building one contingency plan, you should build one plan for each type of large-scale risk or disaster that might strike. 

Business contingency plan

A business contingency plan is a specialized strategy that organizations develop to respond to particular, unforeseen events that threaten to disrupt regular operations. It's kind of like a business continuity plan, but there's one key difference. 

While business continuity plans aim to ensure the uninterrupted operation of the entire business during a crisis, a business contingency plan zeroes in on procedures and solutions for specific critical incidents, such as data breaches, supply chain interruptions, or key staff unavailability. 

A business contingency plan could include:

Strategies to ensure minimal operational disruption during crises, such as unexpected market shifts, regulatory compliance changes, or severe staff shortages.

Partnerships with external agencies that can provide support in scenarios like environmental hazards or public health emergencies.

A comprehensive communication strategy with internal and external stakeholders to provide clear, timely information flow during crises like brand reputation threats or legal challenges.

Environmental contingency plan

While severe earthquakes aren’t particularly common, being unprepared when “the big one” strikes could prove to be catastrophic. This is why governments and businesses in regions prone to earthquakes create preparedness initiatives and contingency plans.

A government contingency plan for an earthquake could include things like: 

The names and information of the people designated to handle certain tasks in advance to ensure the emergency response is quick and concise

Ways to educate the public on how to respond when an earthquake hits

A timeline for emergency responders.

Technology contingency plan

If your business is particularly data-heavy, for example, ensuring the safety and cybersecurity of your information systems is critical. Whether a power surge damages your servers or a hacker attempts to infiltrate your network, you’ll want to have an emergency response in place.

A business’s contingency plan for a data breach could involve: 

Steps to take and key team members to notify in order to get data adequately secured once more

The names and information of stakeholders to contact to discuss the impact of the data breach and the plan to protect their investment

A timeline to document what is being done to address the breach and what will need to be done to prevent data breaches in the future

Supply chain contingency plan

Businesses that are integral parts of the supply chain, such as manufacturing entities, retail companies, and logistics providers, need an effective supply chain contingency plan to continue functioning smoothly under unforeseen circumstances.

These plans hedge against supply chain disruptions caused by events like natural disasters or technological outages and help organizations reduce downtime and ensure real-time operational capabilities. 

A supply chain contingency plan could include:

Secure critical data and systems while promptly notifying key team members, such as IT staff and management, for immediate action.

A predetermined list of essential stakeholders, including suppliers, customers, investors, and authorities, should be contacted to inform them about the disruption and steps being taken.

A detailed timeline is essential for documenting the immediate response and outlining long-term strategies to prevent future disruptions in the supply chain.

Pandemic contingency plan

In the face of a global health crisis, a pandemic contingency plan is vital for organizations in healthcare, retail, and manufacturing. This plan focuses on mitigation strategies to minimize operational disruptions and ensure the safety of employees while maintaining business continuity. 

A pandemic response plan could include:

A comprehensive health and safety protocol for employees, which integrates regular health screenings, detailed risk analysis, and emergency medical support as key components.

Flexible work arrangements and protocols for remote operations and digital communication.

A list of key personnel and communication channels for immediate response and coordination.

Regularly reviewing and adapting the pandemic contingency plan as part of an ongoing disaster recovery plan to address evolving challenges and lessons learned.

How to create a contingency plan

You can create a contingency plan at various levels of your organization. For example, if you're a team lead, you could create a contingency plan for your team or department. Alternatively, company executives should create business contingency plans for situations that could impact the entire organization. 

As you create your contingency plan, make sure you evaluate the likelihood and severity of each risk. Then, once you’ve created your plan—or plans—get it approved by your manager or department head. That way, if a negative event does occur, your team can leap to action and quickly resolve the risk without having to wait for approvals.

1. Make a list of risks

Before you can resolve risks, you first need to identify them. Start by making a list of any and all risks that might impact your company. Remember: there are different levels of contingency planning—you could be planning at the business, department, or program level. Make sure your contingency plans are aligned with the scope and magnitude of the risks you’re responsible for addressing. 

A contingency plan is a large-scale effort, so hold a brainstorming session with relevant stakeholders to identify and discuss potential risks. If you aren’t sure who should be included in your brainstorming session, create a stakeholder analysis map to identify who should be involved.

2. Weigh risks based on severity and likelihood

You don’t need to create a contingency plan for every risk you lay out. Once you outline risks and potential threats, work with your stakeholders to identify the potential impact of each risk. 

Evaluate each risk based on two metrics: the severity of the impact if the risk were to happen and the likelihood of the risk occurring. During the risk assessment phase, assign each risk a severity and likelihood—we recommend using high, medium, and low. 

3. Identify important risks

Once you’ve assigned severity and likelihood to each risk, it’s up to you and your stakeholders to decide which risks are most important to address. For example, you should definitely create a contingency plan for a risk that’s high likelihood and high severity, whereas you probably don’t need to create a contingency plan for a risk that’s low likelihood and low severity. 

You and your stakeholders should decide where to draw the line.

4. Conduct a business impact analysis

A business impact analysis (BIA) is a deep dive into your operations to identify exactly which systems keep your operations ticking. A BIA will help you predict what impact a specific risk could have on your business and, in turn, the response you and your team should take if that risk were to occur. 

Understanding the severity and likelihood of each risk will help you determine exactly how you will need to proceed to minimize the impact of the threat to your business. 

For example, what are you going to do about risks that have low severity but high likelihood? What about risks that are high in severity, but relatively low in likelihood? 

Determining exactly what makes your business tick will help you create a contingency plan for every risk, no matter the likelihood or severity.  

5. Create contingency plans for the biggest risks

Create a contingency plan for each risk you’ve identified as important. As part of that contingency plan, describe the risk and brainstorm what your team will do if the risk comes to pass. Each plan should include all of the steps you need to take to return to business as usual.

Your contingency plan should include information about:

The triggers that will set this plan into motion

The immediate response

Who should be involved and informed?

Key responsibilities, including a RACI chart if necessary

The timeline of your response (i.e. immediate things to do vs. longer-term things to do)

For example, let’s say you’ve identified a potential staff shortage as a likely and severe risk. This would significantly impact normal operations, so you want to create a contingency plan to prepare for it. Each person on your team has a very particular skill set, and it would be difficult to manage team responsibilities if more than one person left at the same time. Your contingency plan might include who can cover certain projects or processes while you hire a backfill, or how to improve team documentation to prevent siloed skillsets. 

6. Get approval for contingency plans

Make sure relevant company leaders know about the plan and agree with your course of action. This is especially relevant if you’re creating team- or department-level plans. By creating a contingency plan, you’re empowering your team to respond quickly to a risk, but you want to make sure that course of action is the right one. Plus, pre-approval will allow you to set the plan in motion with confidence—knowing you’re on the right track—and without having to ask for approvals beforehand.

7. Share your contingency plans

Once you’ve created your contingency plans, share them with the right people. Make sure everyone knows what you’ll do, so if and when the time comes, you can act as quickly and seamlessly as possible. Keep your contingency plans in a central source of truth so everyone can easily access them if necessary.

Creating a project in a work management platform is a great way of distributing the plan and ensuring everyone has a step-by-step guide for how to enact it.

8. Monitor contingency plans

Review your contingency plan frequently to make sure it’s still accurate. Take into account new risks or new opportunities, like new hires or a changing business landscape. If a new executive leader joins the team, make sure to surface the contingency plan for their review as well. 

9. Create new contingency plans (if necessary)

It’s great if you’ve created contingency plans for all the risks you found, but make sure you’re constantly monitoring for new risks. If you discover a new risk, and it has a high enough severity or likelihood, create a new contingency plan for that risk. Likewise, you may look back on your plans and realize that some of the scenarios you once worried about aren’t likely to happen or, if they do, they won’t impact your team as much.

Common contingency planning pitfalls—and how to avoid them

A contingency plan is a powerful tool to help you get back to normal business functions quickly. To ensure your contingency planning process is as smooth as possible, watch out for common pitfalls, like: 

Lack of buy-in

It takes a lot of work to create a contingency plan, so before you get started, ensure you have support from executive stakeholders. As you create your plan, continuously check in with your sponsors to ensure you’ve addressed key risks and that your action plan is solid. By doing so, you can ensure your stakeholders see your contingency plan as something they can get behind.

Bias against “Plan B” thinking

Some company cultures don’t like to think of Plan B—they like to throw everything they have at Plan A and hope it works. But thinking this way can actually expose your team to more risks than if you proactively create a Plan B.

Think of it like checking the weather before going sailing so you don’t accidentally get caught in a storm. Nine times out of ten, a clear sunny day won’t suddenly turn stormy, but it’s always better to be prepared. Creating a contingency plan can help you ensure that, if a negative event does occur, your company will be ready to face it and bounce back as quickly as possible. 

One-and-done contingency plans

It takes a lot of work to put a contingency plan together. Sometimes when you’ve finished, it can be tempting to consider it a job well done and forget about it. But make sure you schedule regular reminders (maybe once or twice a year) to review and update your contingency plan if necessary. If new risks pop up, or if your business operations change, updating your contingency plan can ensure you have the best response to negative events.  

You’ve created a contingency plan—now what?

A contingency plan can be a lot of work to create, but if you ever need to use it, you’ll be glad you made one. In addition to creating a strong contingency plan, make sure you keep your plan up-to-date.

Being proactive can help you mitigate risks before they happen—so make sure to communicate your contingency plan to the team members who will be responsible for carrying them out if a risk does happen. Don’t leave your contingency plan in a document to collect dust—after creating it, you should use it if need be!

Once you’ve created the plan, make sure you store it in a central location that everyone can access, like a work management platform . If it does come time to use one of your contingency plans, storing them in a centrally accessible location can help your team quickly turn plans into action.

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Key Components to an Effective Business Contingency Plan

When disaster strikes, your business should be prepared with a detailed plan to become operational again with minimal downtime. The faster you can recover from an unexpected event, the less your workers, reputation, and bottom line will suffer. Learn how to create an effective business contingency plan with risk response to help you get back to normal operations after a disaster or incident.

What is a contingency plan?

Businesses may not be able to predict every scenario that can disrupt a facility, but leadership teams can create a roadmap based on the risks associated with a business model to guide decision-makers during a crisis.

That's what a contingency plan does. It provides important information for your management team to use during an unexpected event to help resume normal operations as quickly as possible. A contingency plan helps protect lives and equipment, saves time and money, and speeds up recovery time.

What are the benefits of contingency planning?

• Saving time and money. When management knows an incident plan ahead of time, they can respond to the unexpected faster, minimizing downtime. This can often protect employees and equipment from harm, as well as your bottom line.
• Saving lives. Some disasters are life-threatening. Having a contingency plan in place can help management take swift action to mitigate dangerous situations.
• Quick recovery time. Contingency plans reduce response time, giving your team the information they need to recover from an incident sooner.
• Minimizing damage. A contingency plan helps management make important decisions in the heat of the moment to help minimize damage to the facility.
• Avoiding negative press. How a business reacts to an unexpected event is a crucial part of brand reputation management. The above contingency plan benefits can minimize the impact of an incident, reducing or preventing negative press.

6 Important Contingency Plan Steps to Minimize Facility Damage and Recovery Time

Contingency plans give leadership teams information on how to best react and what to do next during a crisis. To do this effectively, you'll want to include the following steps in your contingency planning process.

1. Identify key risks in your business model.

A contingency plan should start by identifying any key risks a business model may have. Try to think of these categorically. For instance, equipment failure, loss of staff, or lacking key parts/materials could all fall under the category of resource disruption. While you'll want to create a unique plan of action for each identified risk, those that share a category often have similar disaster response information or steps. Categories you might want to include are:

• Natural disasters
• Accidental man-made disruptions
• Intentional man-made disruptions
• Critical equipment breakdown
• Resource disruption

Once you've identified the key risks to your business, you can create a step-by-step plan required to get your business back up and running in each scenario. This is the foundation of your contingency plan.

2. Choose a specialized and trusted recovery partner.

Now that you have an idea of which incidents and risks you would like to protect your business from, it’s time to choose trusted recovery partners. Recovery partners are companies that specialize in helping businesses resume operations as quickly as possible after an unexpected event occurs. They might provide services such as facility cleaning, equipment decontamination/repair/recertification, and much more. They are also key partners to work with during the contingency planning process.

These professionals can offer helpful advice on a wide variety of disastrous scenarios, some of which may not have been considered during your own risk evaluation. They also have extensive experience in what will be needed to recover from these incidents quickly. Be sure your partner has a 24/7 emergency response team because disaster doesn’t always happen during business hours.

3. Learn about your community.

Local know-how is important to create an effective contingency plan. Research weather trends in the area and any possible natural disasters. Understand how to contact all the local emergency services, include this information in your contingency plan, and post it throughout the facility so employees aren’t searching for contact information in an emergency.

Review your community's critical systems (and your own) to determine what is needed to keep your system up and running should the community system fault. Having a standby natural gas- powered generator, or a backup commercial sump pump in geographical areas that accommodate underground operations/storage may be crucial to minimize the impact during a community system failure.

4. Determine your site needs before disaster strikes.

Carefully consider your facility’s unique needs while creating a contingency plan. Documenting these needs will help you make a better plan for each risk scenario. Start with an initial site inspection. This might clue you in to additional risks that were not initially considered while also helping tailor your plan to the facility itself.There are two additional site considerations you'll want to include in your contingency plan:

• Access points throughout the facility. Build a map of all access points to the facility, listing which doors or access points are locked or secured. Include this in your contingency plan, so you can share it with emergency responders if necessary.
• Directions to your location. Include a list of clear directions to your facility so employees don’t have to remember this information during a crisis. This will help emergency responders find you as soon as possible.

5. Develop a quickly-activated emergency response plan.

Now that you’ve identified possible risks, know how the community might impact your facility, and have completed an initial site inspection, it is time to document the response plan. Consider items such as an equipment rental contact list, an equipment restoration or reconditioning partner list, any emergency system shutdown action items, a PR response plan, and so on. A detailed emergency response plan will conclude your contingency planning process. Once drafted, the plan should be reviewed by any key stakeholders for feedback and potential changes.

6. Educate facility managers and their decision-makers.

Once you've created a business contingency plan, be sure the right people know about it. Share it with facility managers and have them walk through the plan with their teams, ensuring decision-makers have access to the written plan and understand it thoroughly. Post contact information for emergency response teams and recovery experts throughout the facility, noting to employees where they can find this information. Also include how each point of contact can help with answers, equipment, or emergency response.

Businesses seeking a disaster recovery partner for building and production equipment should talk to the AREPA team. We can help get your business back to normal operation quickly after any incident. With 24/7 services and response teams around the world, we can be there when you need us.

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Maintenance Contingency Planning Guide for Manufacturers

What is a contingency plan?

Not everything in the world of manufacturing goes as smoothly as it should. When breakdowns or interruptions in production occur, a rapid and coordinated response is crucial for getting things back on track. This is where having a contingency plan is essential. When manufacturers have a clearly defined course of action they can follow when they encounter an issue, they can resolve it as quickly and efficiently as possible.

The COVID-19 pandemic has shown that in manufacturing, as in all business, a contingency plan is a key to facing and working through such disruptive events. In manufacturing especially, maintenance contingency planning should be a major consideration since machinery and assets are critical components of all manufacturing operations. Below, we break down the importance of contingency planning in risk management, and provide the steps needed to create a successful maintenance contingency plan.

The benefits of maintenance contingency planning

A contingency plan gives manufacturers a proactive plan of action that can be immediately implemented once a crisis or disruption occurs. As opposed to a crisis management plan, which is more reactive, contingency planning is meant to trigger events, policies and processes that prevent disruption to the business as much as possible, even as external factors are disrupted. With a comprehensive contingency plan in place, manufacturers can realize several benefits:

• Proactive steps to get ahead of disruptions as much as possible
• Favorable pricing with the advantage of foresight against supply and demand fluctuations
• Access to alternative supply chain sources to keep raw material inventory stocked
• Uninterrupted maintenance, ensuring asset investments remain protected and functional

A contingency plan that enables a facility to continue operating core processes will see the benefits of remaining functional, but will also be able to handle order increases in times of increased demand – which may not be the case for those that did not prepare. Without a contingency plan that includes maintenance as a core piece, a manufacturing facility may encounter numerous issues, even if other pieces of the plan are in place. These may include:

• Increased downtime and repair time if regularly scheduled maintenance is neglected
• Damage to machinery
• Defective or damaged parts
• Excessive lost production
• Increased maintenance costs for emergency repairs
• Loss of confidence and potential lost orders if production deadlines are missed

How to make a contingency plan

While every contingency plan should be tailored to the specifics of a facility’s operations, there are several general steps that can help get a contingency plan off the ground. These are:

• 1. List your key resources:  Resources include equipment, people and inventory. Resources may also include tools, software, teams, proprietary processes and more. As you identify these resources, prioritize them so that you understand which resources are the most crucial to your operations.
• 2. Identify risk factors:  What are the key risks that might impact your resources, and their ability to complete their functions as required? Some of these may not always be obvious, and some may seem far-fetched (much in the way that  COVID-19 disruptions  may have seemed unlikely at this time last year). Consider external consultants and maintenance experts to help you identify risks of which you may not be aware.
• 3. Analyze risks based on severity and likelihood: One of the most important elements of the contingency planning process is breaking down the risks and prioritizing them. Those that have the most potential to impact your productivity severely should be at the highest level. Additionally, those that are deemed the most likely to happen at any given time also should be a prominent part of your plans. This will ensure the greatest odds of success in the event of an incident.
• 4. Consider risk mitigation strategies: Setting contingency plans in an organization means choosing the most effective means of resolving any problems you might encounter. Once you’ve identified the most common and impactful issues you might face, it’s time to decide the most appropriate course of action for each.
• 5. Draft the plan:  Using your top risk factors as a basis, create a contingency plan to address each risk. Remember that a contingency plan should be proactive, including tangible steps that can be initiated once a disruption or threat to your operations is identified.
• 6. Review and finalize your plan:  Circulate the plan to those who would be impacted by risk factors and who would implement the plan. Solicit feedback to ensure that you have addressed their concerns and to learn whether the plan seems sound to them. Once the plan is satisfactory to all relevant personnel, finalize the plan, document it, and make sure it is known and available throughout your organization.
• 7. Test and monitor your plan: It isn’t enough to simply draft a plan — you need to make sure it will work when you need it to and keep it up to date. Any changes to your processes need to be taken into account and your plan adjusted as merited.

Maintenance contingency with ATS

Are you considering drafting a maintenance contingency plan for your manufacturing operations? As experts with over three decades of experience in the industrial maintenance field, ATS has a broad base of knowledge in the risk factors that can affect maintenance processes and manufacturing operations as a whole. Our short-term maintenance capabilities can effectively support your contingency plan while limiting downtime, reducing emergency repair costs, and filling gaps in maintenance personnel. For more information on how we can help with your maintenance contingency planning, contact us today .

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Explore the latest industrial maintenance best practices, trends and news from ATS and learn from industry experts and leading manufacturers.

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Contingency Planning: How Do You Plan for Failures?

“I am convinced that there are only two types of companies: those that have been hacked, and those that will be,” said Robert Mueller, former FBI Director, in a statement . “Even that is merging into one category: those that have been hacked and will be again.”

So, what is your organization doing about it? How do you plan for failures and security breaches?

Business Impact Analysis

While many organizations have evaluated risk in efforts to establish their initial security stance as defined by their organizational security policy, few have taken the advanced step of performing risk assessment on a business process basis.

The concept of business impact analysis is the application of quantitative and qualitative risk analysis on business processes rather than individual assets. The goal is to understand which processes are mission-critical, important, necessary, or desired/optional as well as each process's dependencies and requirements.

Once understood, the findings of business impact analysis can lead an organization into proper business continuity and disaster recovery planning.

Communication Plan

Communication is an essential part of a successful business. It is critical to communicate within the organization and with external entities effectively. A communication plan helps clarify lines and methods of communication. It establishes a classification or valuation criteria for all data items and information sources.

It clarifies where information can be freely exchanged as well as defines the limitations, restrictions, and boundaries to protect information when it cannot be freely exchanged (such as PII (personally identifiable information), PHI (protected health information), IP (intellectual property), trade secrets, or other forms of private or proprietary information). A communication plan also focuses on the public relations of an organization and establishes a "face" or image when communicating with the public.

Continuity of Operations Plan

A COOP (continuity of operation plan) is an integrated policy designed to protect the organization from slipping into a disaster in the event of a minor or modest compromise or failure occurs. The COOP addresses two primary issues:

• First, it focuses on the means to restore normalcy when business operations are under threat. While the organization is operating on limited capacity, on reduced capabilities, or within restricted resources, the COOP strives to prevent a full interruption while working to resolve problems and return to normal, stable, full capacity. This aspect of the COOP is often referred to as the business continuity plan (BCP).
• Second, the COOP implements additional protections and preventative measures to prevent such forms of near-disaster issues from actually affecting the business in the first place. With a properly maintained COOP, organizations can avoid many instances of loss or reduced productivity while being able to efficiently restore full operations in the event an incident still occurs.

Disaster Recovery Plan

A disaster is the complete interruption of any mission-critical business task. Once a mission-critical task is offline, the life of the organization is at stake. Without swift recovery to at least partial operations, a disaster could mean the business must close its doors permanently.

A disaster recovery plan (DRP) typically includes the preparation of an alternate operations site. An alternate operations site could be a duplicate of the primary, use of multiple locations instead of a single location, use of cloud services, or many other options.

The idea is to provide a means to perform mission-critical business tasks while the primary site is repaired. There are many essential elements in a functional disaster recovery plan including backup and recovery, hardware replacements, facility management, personnel management, training, drill and simulation, plan maintenance, and others.

Related Concerns

The core cybersecurity competencies of asset protection, threat management, access control, incident management, configuration management, and contingency planning address all of the essential concerns to an organization when designing and developing a security stance.

However, there are a few other important related concerns you should include in your overall assessment and preparedness plans:

Security Awareness

Security awareness is a business operations issue and a training issue. It is the goal of a business to have all of its members work toward a common and consistent goal — namely efficient and productive operations toward providing competent products and services. To accomplish that goal, workers, managers, administrators, and even C-level executives all need security training specific to their job tasks and work requirements.

Security awareness and training should begin with foundational ideas that are common and static across the organization, such as don't share passwords, if you unlock a door you should close and re-lock it, and report any suspicious event or behavior. Once awareness is established, job-specific training can build upon that foundation to enable everyone to perform their work tasks with greater efficiency and skill within the boundaries of security..

Certification & Accreditation

Whether you are a government agency, a military division, a government/military contractor, a financial institution, a medical organization, or a retail outlet, just about every organization has laws, regulations, and/or contractual obligations to fulfill. Compliance failure is often grounds for loss of approval to operate, loss of contract and funding, legal actions, and/or fines. Regular periodic self and third-party compliance verifications or audits help to make sure that your organization is not only secured in terms of general best business practices, but also focused on real cybersecurity threats, and are in compliance with known requirements based on your industry or affiliation.

This process often starts with self-analysis to assess the level of compliance or lack thereof to a security policy, framework, standard, or regulation. Once you have addressed all known gaps or failures in your compliance, you can seek verification performed by a designated and approved appraiser or auditor (internal or external/third party).

As the number of laws, regulations, and contractual obligations to which your organization must align increases, a solid understanding of the requirements as well as the assessment processes is even more of an essential business skill necessary to stay in compliance and operation.

Take Action

Now that you know more about contingency planning you should recognize that this is just a starting point of obtaining security knowledge. There are many other important security concerns that you need to be aware of. Because only with knowledge can you make a change for the better. Everyone has security responsibilities, both for themselves and for their employer. That responsibility starts with knowing more and seeking out the means to gain more knowledge.

One source of additional knowledge is the educational materials made available from Global Knowledge. Global Knowledge offers a wealth of online resources such as this white paper and other online materials. Global Knowledge is also a world leader in training, both live and on-demand courses.

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• CISM Certification Prep Course

A Facility Manager’s Guide to Contingency Planning

Ted Markgren, CO, Senior Surveyor

As a surveyor, I see many “that will never happen to me” situations. Several years ago, an O&P facility suffered a catastrophic fire with damages more than $500,000. That same year, another facility suffered a loss of patient and financial records when a flood filled their basement storage area with water and mud. And most recently, a small facility in Pennsylvania had to close its doors for over a month after its sole prosthetist/orthotist contracted COVID and was hospitalized. Thankfully, he recovered, but the extended illness left his patients waiting for care or turning to another facility resulting in no revenue for that month. The lesson here? Disasters do happen and unfortunately you aren’t immune to them.

So how do you prepare for the worst? By creating a contingency plan. The Medicare Quality Standards require that you have a written contingency plan to address your ability to provide care or services in the event of a disaster. Most often we think of natural disasters such as floods, tornadoes or hurricanes. But disasters can also occur because of power outages, equipment failure, fires, and now, as we’ve learned over the past two years, we can add global pandemic to the list! None of us ever imagined COVID-19 would hit so hard, but here we are. That’s why contingency plans are so crucial. 

ABC includes the Medicare contingency requirements in FS.3.3: There is a disaster preparedness program designed to manage the consequences of natural disasters or other events that threaten the business’s structural integrity, infrastructure and/or ability to service its patients. This standard is all encompassing – it not only includes the physical facility but also the facility’s infrastructure, its ability to recover clinical and financial records, maintain continuity of care and deliver prescribed services under adverse conditions. While it is important that you have a contingency plan, it is equally important that you document your plan and communicate it with staff. 

So, how do you prepare a contingency plan? Start with the most obvious. Think of events that might disrupt most businesses like a fire, a roof failure from heavy snow or rain or even a loss of computer files. Then, mix in scenarios based on what is most common for the area in which your business is located or the types of services you provide. 

Now, what backups can you put in place? Perhaps you can strike an agreement with another local facility to use their fabrication facility until yours is restored; or you may have an agreement with a local central fabrication business to use their equipment after hours or to provide you with services. You might talk to your landlord to arrange for alternate clinic space in advance of a need. The likelihood is low that such arrangements will ever be needed, but it is better to have the plan in place than to scramble for solutions after a disaster. Your data can be protected by using one of the many online backup services. Most O&P software programs include this feature as part of their product offering. If you haven’t enrolled, it may be time to consider doing so. 

Now that you know a little more about contingency planning, how does your contingency plan look? Does it need more documentation? Does it address the most likely disasters? Have you communicated it to your staff and patients? Now is a good time to review your facility’s plan and see how it shapes up!

For additional tips on including COVID-19 into your existing contingency plan, be sure to check out the CDC’s Natural Disasters, Severe Weather, and COVID-19 resources page . 

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What Is Contingency Planning? Creating a Contingency Plan

Table of Contents

What is contingency planning, what is a contingency plan, contingency plan example, how to create a contingency plan, business contingency plans, project contingency plans.

Contingency plans are used by smart managers who are aware that there are always risks that can sideline any project or business. Without having a contingency plan in place, your organization won’t be well prepared for risk management .

The term contingency planning refers to the process of preparing a plan to respond to any risks or unexpected events that might affect an organization. Contingency planning starts with a thorough risk assessment to identify any risks and then develop a contingency plan to resolve them or at least mitigate their negative impact.

Contingency planning takes many shapes as it’s used for helping businesses and projects across industries. Even governments use contingency plans to prepare for disaster recovery or economic disruption, such as those caused by natural disasters.

A contingency plan is an action plan that’s meant to help organizations mitigate the negative effects of risks. In simple terms, a contingency plan is an action plan that organizations should execute when things don’t go as expected.

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Action Plan Template

Use this free Action Plan Template for Excel to manage your projects better.

Now that we’ve briefly defined what contingency planning is, let’s take a look at a contingency plan example involving a manufacturing project.

Let’s imagine a business that’s planning to manufacture a batch of products for an important client. Both parties have signed a contract that requires the manufacturer to deliver the products at a certain date or there may be negative consequences as stated on the purchase agreement. To avoid this, the business leaders of this manufacturing company start building a contingency plan.

To keep this project contingency plan example simple, let’s focus on three key risks this company should prepare for.

• Supply chain shortages: The supply chain is one of the most important business processes for this manufacturing company. Therefore, one of the most impactful risks is a raw material shortage which may occur if their main supplier is unable to deliver the materials they need on time. To prepare a contingency action for this risk, the business owners decide to reach out to other suppliers and place standing purchase orders which give them the opportunity to ask for a certain quantity of materials at some point in the future. If the risk of a supply chain shortage occurs, they’ll have multiple sources of raw materials available in case their main supplier can’t keep up with their demand levels.
• Machinery breakdown: Another risk that might halt production is the malfunction of machinery. To prepare for this, business leaders hire extra maintenance personnel and order spare parts for their production line machinery as part of their contingency plan. If the risk of machinery breakdown becomes a reality, the organization will have the labor and resources that are needed to mitigate it.
• The team is not meeting the schedule: If the manufacturing team members are failing to meet their goals on time for whatever reason, the manufacturing business will need to allocate more resources such as extra labor and equipment to complete the work faster. However, this contingency action will generate additional costs and reduce the profitability of the project.

ProjectManager has everything you need to build contingency plans to ensure your organization can respond effectively to risks. Use multiple planning tools such as Gantt charts, kanban boards and project calendars to assign work to your team and collaborate in real time. Plus, dashboards and reports let you track progress, costs and timelines. Get started today for free.

Like a project plan , a contingency plan requires a great deal of research and brainstorming. And like any good plan, there are steps to take to make sure you’re doing it right.

1. Identify Key Business Processes and Resources

To create an effective contingency plan you should first identify what are the key processes and resources that allow your organization to reach its business goals. This will help you understand what risks could be the most impactful to your organization. Research your company and list its crucial processes such as supply chain management or production planning as well as key resources, such as teams, tools, facilities, etc., then prioritize that list from most important to least important.

2. Identify the Risks

Now, identify all the risks that might affect your organization based on the processes and resources you’ve previously identified. Figure out where you’re vulnerable by brainstorming with employees, executives and stakeholders to get a full picture of what events could compromise your key business processes and resources; hire an outside consultant, if necessary. Once you’ve identified all the risks, you should use a risk log to track them later.

3. Analyze Risks Using a Risk Matrix

Once you’ve identified all the risks that might affect your processes and resources, you’ll need to establish the likelihood and level of impact for each of those risks by using a risk assessment matrix . This allows you to determine which risks should be prioritized.

4. Think About Risk Mitigation Strategies

Now, write a risk mitigation strategy for each risk that you identified in the above steps. Start with the risks that have a higher probability and higher impact, as those are the most critical to your business. As time permits you can create a plan for everything on your list.

5. Draft a Contingency Plan

Contingency plans should be simple and easy to understand for the different members of your audience, such as employees, executives and any other internal stakeholder. The main goal of a contingency plan is to ensure your team members know how to proceed if project risks occur so they can resume normal business operations.

6. Share the Plan

When you’ve written the contingency plan and it’s been approved, the next step is to ensure everyone in the organization has a copy. A contingency plan, no matter how thorough, isn’t effective if it hasn’t been properly communicated .

7. Revisit the Plan

A contingency plan isn’t chiseled in stone. It must be revisited, revised and maintained to reflect changes to the organization. As new employees, technologies and resources enter the picture, the contingency plan must be updated to handle them.

Contingency Plan Template

We’ve created an action plan template for Excel to help you as you go through the contingency planning process. With this template, you can list down tasks, resources, costs, due dates among other important details of your contingency plan.

A business contingency plan is an action plan that is used to respond to future events that might or might not affect a company in the future. In most cases, a contingency plan is devised to respond to a negative event that can tarnish a company’s reputation or even its business continuity. However, there are positive contingency plans, such as what to do if the organization receives an unexpected sum of money or other project resources .

The contingency plan is a proactive strategy, different from a risk response plan , which is more of a reaction to a risk event. A business contingency plan is set up to account for those disruptive events, so you’re prepared if and when they arrive.

While any organization is going to plan for its product or service to work successfully in the marketplace, that marketplace is anything but stable. That’s why every company needs a business contingency plan to be ready for both positive and negative risk management.

In project management, contingency planning is often part of risk management. Any project manager knows that a project plan is only an outline. Sometimes, unexpected changes and risks cause projects to extend beyond those lines. The more a manager can prepare for those risks, the more effective his project will be.

But risk management isn’t the same as contingency planning. Risk management is a project management knowledge area that consists of a set of tools and techniques that are used by project managers to create a risk management plan.

A risk management plan is a comprehensive document that covers everything about identifying, assessing, avoiding and mitigating risks.

On the other hand, a contingency plan is about developing risk management strategies to take when an actual issue occurs, similar to a risk response plan. Creating a contingency plan in project management can be as simple as asking, “What if…?” and then outlining the steps to your plan as you answer that question.

Using ProjectManager to Create a Contingency Plan

ProjectManager has the project planning and risk management tools you need to make a reliable contingency plan that can quickly be executed in a dire situation.

Use Task Lists to Outline the Elements

Use our task list feature to outline all the elements of a contingency plan. Since a contingency plan likely wouldn’t have any hard deadlines at first, this is a good way to list all the necessary tasks and resources. You can add comments and files to each task, so everyone will know what to do when the time comes.

Reference Dashboards to Monitor the Contingency Plan

Our dashboard gives you a bird’s eye view of all of the critical project metrics. It displays live data so you’re getting a real-time look at how your project is progressing. This live information can help you spot issues and resolve them to make sure that your contingency plan is a success. Which, given that it’s your plan B, is tantamount.

If you’re planning a project, include a contingency plan, and if you’re working on a contingency plan then have the right tools to get it done right. ProjectManager is online project management software that helps you create a shareable contingency plan, and then, if you need to, execute it, track its progress and make certain to resolve whatever problems it’s addressing. You can do this all in real time! What are you waiting for? Check out ProjectManager with this free 30-day trial today!

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Article • 10 min read

Contingency Planning

Developing a good "plan b".

By the Mind Tools Content Team

Fires, floods, tornadoes, pandemics – these are the types of events that we often associate with contingency planning.

But what if your main supplier suddenly goes bankrupt, your entire sales force comes down with food poisoning, or your website is held to ransom by hackers?

Contingency planning isn't just about major crises and natural disasters. It can also prepare you for more commonplace problems, such as the loss of data, staff, customers, or business relationships. That's why it's important to make contingency planning a routine part of the way you work.

In this article, we explore how to create and maintain robust contingency plans, so that you've always got a backup option when things go wrong.

Conducting a Risk Assessment

Every organization faces a unique set of risks that it needs to plan for. The key to identifying yours is to conduct a thorough risk assessment.

The first step is to identify your business-critical operations . These are the key processes and functions without which your organization could not operate – for example, your supply chain, your internet connection, or your ability to comply with legal standards.

Next, identify the threats that could harm each critical operation. These could include the loss of key staff, technical failure, or a change in government policy, for example. (Our article, Risk Analysis and Risk Management covers this process in more detail.)

Chances are, you'll end up with a long list of potential threats. It may be unrealistic to attempt contingency planning for all of them, so you need to prioritize.

Risk Impact/Probability Charts are a good way to do this. These charts help you to analyze the impact of each risk and to estimate how likely it is to happen. This reveals which risks require the expense and effort of risk mitigation. Business processes that are essential to your organization's survival, such as maintaining cash flow and market share, are typically at the top of the list.

Contingency planning is one response to risk. But in some cases, it may be safer or more cost-effective to tackle it in other ways: to avoid the risk, by investing in new equipment, for example; or to share the risk, by purchasing an insurance policy. Or you may choose not to formally plan for some lower-priority risks at all, but to manage them if they do happen.

What Does a Contingency Plan Cover?

A good contingency plan can prevent your business from "going under" when unexpected events occur, so it's vital to ensure that it's fit for purpose.

Here are the key elements to include:

Refer to your risk assessment and impact/probability charts and choose the most damaging or most likely scenarios that you want to plan for. Then, map out what should happen in each case (see examples 1 and 2, below).

Aim to include a broad range of scenarios – for instance, cyber attacks, prolonged staff absences, IT malfunctions, loss of suppliers, serious power outages, or structural problems with your business premises.

Specify what, exactly, will cause you to put your contingency plan into action. If you have a plan for heavy snow, will it be triggered by a severe weather warning, or only by actual snowfall?

One event could also have multiple triggers, each of which initiates a different part of your plan (see example 2, below).

Include a brief overview of the strategy that you will follow in response to the event. This provides a context for the actions that you ask your people to take.

Who to Inform

Identify the people who need to know about what's happened. This could include employees, suppliers, customers, and the wider public, as appropriate. Our article, Communicating in a Crisis , explores how to plan and deliver effective communication in difficult situations.

Also, make sure that you're aware of your legal obligations, and that any incidents are reported to the relevant authorities where necessary.

Key Responsibilities

Define who's responsible for each element of the plan, who will be in charge at each stage, and what you expect them to accomplish. The Responsibility Assignment Matrix and the RACI Model are useful tools here.

State what needs to be done within the first hour, day and week of the plan being implemented.

This could be as simple as, "Inform employees of the situation immediately." But you may need far more detailed timelines for certain situations, such as data breaches , serious workplace injuries, or leaks of hazardous materials.

Also include details of when you would expect normal business to resume, and what will signal that your organization is ready for this.

Contingency Plan Examples

Click on the links below to see two scenarios and contingency plans for an online retailer with an office of 20 employees and a warehouse full of stock.

Example 1 – A Minor Business Disruption

Example 2 – A Significant Business Disruption

These examples show just one possible way to present your contingency plan. You may prefer to use another format, such as a flow chart or slideshow. Choose a style that suits your needs, and one that captures all of the necessary information.

Developing Your Contingency Plan

When you develop your contingency plan, remember that your primary aim is to maintain or restore critical business operations, so look closely at how these might be affected by each scenario.

Be aware of knock-on effects. Will your organization be able to function at full capacity when you implement your "Plan B," or will productivity drop? If so, for how long?

Involve Your People

To answer questions like these, it's useful to consult people from across your organization.

Managers from different departments can advise you on the impact of disruptive events on services, staff, resources, and business functions. And "frontline" employees are often best placed to tell you about the minimum tools and support they require to maintain essential operations.

Take the time to share your plan across your organization, so that people can offer feedback and ask questions. Use this process to make your plan even more robust.

And, if possible, conduct drills to assess the efficacy of your plan. This can highlight areas for improvement, and reveal skills gaps or training needs .

People are often poorly motivated to develop a strong "Plan B." They may already be invested in "Plan A," or they may perceive the risks to be low and see no need for a contingency plan. As such, getting people to contribute to your plan can be a challenge.

To offset this resistance, stress the importance of the task and the potential consequences of not having a plan in place. Lead by example , by completing any contingency-plan-related tasks of your own. And, if it's within your power to do so, set people deadlines for submitting their contribution, or make it a performance review objective.

Keep It Simple

When you write your contingency plan, be sure to use simple, plain language . You don't know when the plan will be used, or who will read and implement it when it's needed. For the same reason, use job titles or roles instead of names when you define people's responsibilities. This will help to keep your plan relevant, regardless of any changes in personnel.

And don't forget that your people are business-critical, too. Sudden, unexpected events can be difficult or stressful for them – and for you. At such times, clear communication is essential to reassure everyone that the situation is under control, and to avoid potentially damaging rumors and gossip. Read our article, How to Keep Calm in a Crisis , for more on this.

Maintaining Your Contingency Plan

Your contingency plan must be reviewed and updated regularly if it's to remain useful and credible.

When you review it, take all relevant technological, operational and personnel changes into account and reassess the risks accordingly. Then, discard old versions of the plan.

The coronavirus pandemic demonstrated how quickly whole organizations can change the way they operate – having everyone suddenly working from home, for example. So bear this in mind when you're writing your contingency plan. It needs to work in any workplace scenario, whether everyone's in the office, everyone's remote, or there's a hybrid approach in place.

When new employees join your organization, provide them with the contingency plan as part of their induction so that they're familiar with it, and so that they know what to do if there's a problem.

And finally, keep your plans safe, and make sure that they're accessible by the right people at the right times. If a crisis occurs, you won't want to be searching for passwords or struggling to give people access rights. Treat your contingency plans with the same care that you give to all your business-critical information.

The specifics of disaster recovery are beyond the scope of this article. For more information on this topic, listen to our Expert Interview with Kathy McKee, Leading People Through Disasters .

Contingency plans are an essential part of risk management. They help to ensure that you've always got a backup option when things go wrong, or when the unexpected happens.

To develop a contingency plan, first conduct a risk assessment: identify your business-critical operations, identify the threats to those operations, and analyze the potential impact of each threat.

Then, include the following points for each threat:

• Response overview.
• People to inform.
• Key responsibilities.

To create the most robust plan, consult widely within your organization, conduct trial runs, update the plan regularly, and store it securely.

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Mastering Contingency Planning: Expert Strategies, Proven Best Practices, and Testing Techniques for Optimal Results

By Joe Weller | May 9, 2023

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Successful organizations must understand potential risks and have contingency plans in place to address them. We’ve assembled expert tips on effective contingency planning and offer practical insights on how to test those contingency plans.

Included on this page, you’ll find the benefits of contingency planning , steps to take to create a contingency plan, examples of contingency plans , and information on a range of exercises your team can do to test its contingency plans.

What Is a Contingency Plan?

A contingency plan is a proactive strategy that outlines the actions a person or entity will take in response to a potential future event. Businesses often develop contingency plans to prepare for risks and mitigate their impact on the business.

What Is Business Contingency Planning?

Business contingency planning is work an organization does to determine how it responds to future events that might affect the business. The goal is to prepare an organization to respond to negative events and mitigate their impact on the business.

A business contingency plan is a written document that outlines an organization’s contingency planning efforts. It typically includes a comprehensive assessment of possible risks to the business and corresponding measures the organization has planned to mitigate these risks, such as legal and budget contingency.

Why Is a Business Contingency Plan Important?

A business contingency plan is crucial for any organization, as it helps them respond quickly and effectively to negative events. With a solid contingency plan in place, companies can minimize damages and continue to thrive even amid challenges.

While an organization might develop a contingency plan for risks to individual projects or general risks to the enterprise as a whole, business contingency plans refer specifically to general risks to the enterprise. This document details all of the most important risks that a business or organization faces.

In recent years, the importance of business contingency plans has increased significantly. With the rise of climate change, natural disasters have become more frequent and disruptive, underscoring the need for organizations to have effective contingency plans. In addition, the ever-growing threat of cybercrime has further highlighted the importance of contingency planning, as businesses increasingly rely on technology to operate.

“Before, you might have said, ‘What are the odds of a 100-year flood?’” says Luis Contreras, President and Principal Consultant for AzTech International , a California consultancy that helps organizations manage large, complex projects. “Well, they are happening more often now. ‘What are the odds of a cyber incident?’ Well, they're happening more often.”

Many organizations take steps in their risk management programs to try to completely eliminate certain risks. However, it’s almost impossible for any organization to completely eliminate the chance of a risk happening, says Erika Andresen,  a business continuity and resilience expert, author, and founder of EaaS Consulting . Business contingency planning is important, she says, “because your risk management will fail at a certain point.”

The Benefits of a Contingency Plan

Contingency plans offer several benefits to organizations. They enable organizations to respond promptly and effectively to unexpected events, minimize damages, and facilitate a quick recovery. With a contingency plan in place, organizations can take proactive measures to mitigate risks.

Here are some of the primary benefits of having a contingency plan in place:

• Improves Event Responsiveness: By having a clear plan in place, there is no confusion and individuals know how to react without blindly searching for direction. This enables the organization to take swift and effective action, minimizing response times and ensuring continuity of operations.

• Facilitates Quick Recovery: Organizations with good contingency plans bounce back quickly from negative events. For example, a severe storm or power outage might have a huge effect on a state or metropolitan area, but businesses that have backup generators and other contingency plans can often resume operations quickly. “It's resilience — it's how your company stays a company,” Andresen says. “That's how the company is able to grow and thrive. You've figured out that you're going to have a risk that is going to impact your operations. And then you worked and took the extra step to put in policies and procedures to get yourself back up and running with minimal disruption.”
• Decentralizes and Disseminates Important Information: Business contingency planning forces organization leaders to gather people to assess the organization’s potential response to various events. This work necessitates the sharing of important information about the company and its operations, resulting in more people knowing how to assist in the company’s response. Accessible, decentralized information is invaluable in a crisis event or when top leaders in a company suddenly leave.“If you have a company with one or two top leaders, then it makes it even more important,” says Lokenauth. “If one person has all the knowledge, when something happens to that one person, how does the company function?”
• Gives the Company Confidence in Its Operations: When you create effective contingency plans, you boost the confidence of everyone in the company. You instill a sense of trust that the company will respond well in an emergency. Moreover, you enhance confidence in the company’s overall preparedness, foresight, and integrity.

What Does a Contingency Plan Cover?

A contingency plan covers the important risks the organization is monitoring and any possible triggers to those risks. It also outlines the specific actions organization staff will take to respond to them.

A contingency plan often includes the following components:

• Triggering Events: Identify the events that can make a risk event more likely to happen, such as weather patterns or market conditions.
• Response Details: Outline specific actions the organization will take in response to a risk event, including preventive measures and mitigation strategies.
• Organizational Responsibilities: Detail the roles and responsibilities of key personnel within the organization, such as the crisis management team and first responders. This might include a RACI chart that outlines who is responsible, accountable, consulted, or informed about specific response actions.
• Key Contacts: Include contact information for key people or organizations that will be involved in the response efforts, such as emergency services, suppliers, and customers.
• Outside Experts: Identify outside experts or consultants the organization might need to engage for help when responding to the risk event, such as legal advisors, public relations firms, or technical specialists.
• Response Timeline: Include a timeline that details when certain responses need to happen, such as when to activate the crisis management team, notify stakeholders, or implement recovery measures.

Learn more about important components and how to write an effective contingency plan in this all-inclusive guide to writing contingency plans.

How to Develop a Contingency Plan

Developing a contingency plan begins with identifying and assessing potential risks. Next, teams outline an appropriate response to each risk, including specific actions that need to be taken and who will be responsible for executing those actions.

Steps in Business Contingency Planning

To develop an effective contingency plan, businesses need to follow some critical steps. The process starts with identifying and assessing potential risks and creating a response plan. Teams should then be trained on the plan and continually monitor potential risks.

These are the important steps to creating an effective contingency plan:

• Identify and Assess Risks: Identify potential risks that could have the most significant impact on your organization. This assessment might involve conducting a business risk analysis to evaluate potential threats, vulnerabilities, and consequences. Learn more about this step in the contingency planning process in this comprehensive guide to risk mitigation .
• Identify Resources: Identify what resources your organization already has that can help with contingency responses. This might include people, tools, or services that can be used to respond quickly to an unexpected event. Gather and coordinate those resources.
• Create Contingency Plans: Create a contingency plan for each risk that your organization has identified as critical. This plan should outline specific actions that need to be taken, who will be responsible for those actions, and a timeline for executing the plan.
• Seek Input and Secure Approvals: Get input from stakeholders and people within your organization on your draft contingency plans. Once you’ve gathered feedback, finalize plans and get approval from the organization’s leaders.
• Share Your Plans: Communicate your contingency plans to all relevant stakeholders within your organization. This includes making sure that everyone understands what the plans are, what their role is in executing the plans, and any necessary training or resources required to implement them.
• Perform Training Exercises: Train all relevant staff members on the contingency plans, and make sure they understand their roles in executing them. To test the effectiveness of the plans, perform exercises or drills that simulate potential risk events.
• Monitor Risks and Contingency Plans: ​​Regularly review and assess business risks to ensure that your contingency plans remain effective and relevant. Evaluate whether the current plan provides the best response to potential risks and consider making updates or modifications as necessary.
• Create New or Adjusted Contingency Plans as Needed: If your monitoring indicates that your contingency plans require adjustments, take action and promptly update them.

Business Contingency Planning Grid Template

Download a Sample Business Contingency Planning Grid Template for  Excel | Microsoft Word

Download a Business Contingency Planning Grid Template for  Excel | Microsoft Word

Download this business contingency planning grid template to assist your team in identifying potential risks to consider in your organization’s business contingency planning. This template provides a comprehensive list of broad risk categories and specific risks within those categories. By using this tool, you can evaluate which risks are relevant to your organization and develop appropriate contingency plans.

Contingency Planning for IT

Contingency planning in IT follows the same basic steps as other organizations. However, it often begins with a contingency planning policy statement , which outlines an organization’s broad approach to contingency planning.

What to Include in a Contingency Planning Policy Statement

A contingency planning policy statement is a document that outlines how an organization will perform contingency planning. It includes details on objectives, roles and responsibilities, resource and training requirements, testing schedules, and data backup and storage plans.

A contingency planning policy statement should include the following components:

• Objectives: Describe the organization's overall contingency planning objectives — for example, what types of risks the organization is preparing to address and how the organization's contingency planning efforts align with its overall business goals.
• Roles and Responsibilities: Outline the specific roles and responsibilities for performing contingency planning within the organization. This should include both high-level positions and specific individuals who will be responsible for carrying out different components of the plan.
• Organizational Functions and Departments: Identify which organizational functions and departments will be responsible for performing contingency planning. This helps ensure that all relevant areas of the organization are involved in the planning process.
• Resource Requirements: Determine the resources needed to support contingency planning efforts, including funding, personnel, equipment, and other necessary resources.
• Employee Training Requirements: Develop a plan for training employees on their roles and responsibilities in the event of a contingency situation. This might include both general training on contingency planning concepts and specific training on the organization's specific plan.
• Schedules of Exercises and Tests: Establish a schedule for conducting exercises and tests of contingency plans to ensure that they are effective.
• Procedures for Maintaining and Updating: Develop procedures for maintaining and updating contingency plans over time, including regular reviews and updates to reflect changes in the organization's risk landscape or other relevant factors.
• Data Backup and Storage: Determine how the organization will back up and store all electronic data to ensure that critical information is not lost in the event of a contingency situation.

A Contingency Plan Model for IT

The National Institute of Standards and Technology (NIST) has created SP 800-34, a popular contingency plan guide for IT. The guide outlines the steps and considerations that organizations should take when developing, implementing, and maintaining an effective contingency plan.

The SP 800-34 guide covers the entire contingency planning process, from risk assessment to plan testing and maintenance. It is widely used as a reference by government agencies, private organizations, and security professionals.

IT Preventive Controls

Any organization’s IT contingency plan should include preventive controls. These are measures an organization can take to prevent interruptions to information services or technology.

 Here are some basic IT preventive controls recommended by the NIST for federal information systems:

• Uninterruptible power supplies (UPS): To provide short-term backup power to all components, appropriate for the size of your system.
• Fuel-powered generators: To provide power over the longer term.
• Air-conditioning systems: Establish adequate capacity to prevent failure of components that malfunction when overheated.
• Fire and smoke detectors: Install in appropriate locations.
• Fire suppression systems: Install to minimize potential damages.
• Water sensors: Place in the ceiling and floor of rooms where computer equipment is located.
• Containers for backup media and vital non-digital records: Ensure they are heat resistant and waterproof.
• Master system shutdown switch: Make available for emergencies.
• Off-site storage areas: Use them for backup media, system documentation, and important non-digital records.
• Technical security controls: This includes management of cryptographic keys.
• Frequent scheduled backups of data: This includes information on where the backups are stored, onsite and offsite.

Examples of Contingency Plans

Contingency plan examples can help your team understand what to consider in creating a plan and the important components to include.

You can learn more about contingency planning and download blank and example contingency plans.

Business Contingency Planning Best Practices

To improve your organization’s business contingency planning, experts recommend following a number of best practices, such as performing an effective risk assessment, training employees on the plan, and conducting exercises to test the plan.

These are some best practices to follow for effective business contingency planning:

• Perform Good Risk Assessment and Analysis: Your team should identify the most critical risks through a thorough risk assessment. This includes analyzing the potential impact of each risk and determining which risks require a comprehensive contingency response.
• Ensure All Team Members Are Aware of Contingency Plans: Contingency plans will not be effective if the employees in your organization are not aware or have only a vague understanding of them. Incorporate contingency planning into employee training and orientation programs, and communicate regular reminders and updates on the plans through team meetings, newsletters, and other internal communication channels.
• Train Staff and Conduct Regular Drills: Your organization should train all employees responsible for specific tasks in the plan. Conducting exercises or drills where employees simulate a risk event scenario can help teams identify potential gaps or issues in the plan and improve its effectiveness. Many organizations will complete a business continuity or contingency plan, then “put it on a shelf and say, ‘OK, I did it.’ No, you didn’t,” says Andresen. “You haven't done it. You don’t know what’s in it. You don’t have the muscle memory for what the procedures are. When the disaster happens, you don’t want to be saying, ‘Hold on, let me flip through the pages.’ That's another integral part to business continuity planning or contingency planning: to train the plan and exercise the plan. That’s how you figure out if the plan works.”
• Continually Review Plans and Make Necessary Adjustments: Drills and exercises are crucial to contingency planning, as they allow organizations to identify which contingency are ineffective and need to be revised. It is essential to modify plans when necessary, whether due to changing risks or other factors. After conducting a drill on a contingency plan, Andresen advises, “Go back and relook at the plan and say, ‘OK, we did this well. This didn't work. This needs to be improved.’” By doing so, teams can ensure that their contingency plans actually work. “This is why this needs to be revisited continuously so that the plan is not just a heavy paperweight,” says Andresen. “Don't break your arm patting yourself on the back that you've accomplished making the plan — actually do something with it.”

Types of Exercises to Test Your Contingency Plan

Conducting a variety of drills and exercises for contingency plans is essential for organizations that want to be prepared for any potential risks. The following chart outlines different types of exercises that can test and improve your contingency plans.

Common Contingency Planning Pitfalls to Avoid

To achieve effective contingency planning, it is important to be aware of common challenges and pitfalls. One such challenge: organizations not allocating sufficient resources to planning and executing responses that are part of the plans.

These are some of the most common challenges and pitfalls to avoid:

• Lack of Resources Devoted to Contingency Planning and Actions: To create effective contingency plans, organizations must allocate staff time and resources for both planning and response. This includes significant resources to execute the actions required in response to a risk event. Neglecting these necessary resources can result in ineffective contingency plans and costly responses to risks.
• Lack of Buy-in From Organizational Leaders: Lack of buy-in from organizational leaders often results in a lack of resources. Leaders who don’t value contingency planning might not provide the necessary funding, time, or attention to ensure the plans are effective. This can result in plans that are incomplete, inadequate, or not tested or updated regularly. “Every level of employee is going to look at leadership and see if they take this seriously,” Andresen says. “Is this some simple extra duty? If leadership is saying, ‘No, this is really important, and this is why this is important,’ they get the employees behind that. Then the employees are going to take it seriously.”
• Bias Against Plan B Thinking: Contingency planning assumes that at some point, an organization’s mission is going to fail. Unfortunately, some organizational leaders have a bias against this, as they perceive it as thinking about a Plan B. However, these leaders must work to understand that having contingency plans is vital for the organization’s future and doesn’t reflect a lack of confidence in Plan A.
• One-and-Done Contingency Plans: According to Andresen, organizations often develop contingency plans because they are deemed useful or someone within the organization encourages their development. However, these contingency plans are often completed, then disregarded. In order for contingency plans to be effective, organizations must share them widely, train their employees on them, and continuously adapt them to changing circumstances.

Effective vs. Ineffective Contingency Planning Example

The table below demonstrates the varying outcomes between a well-considered contingency plan and one that is less so. The consequences of these differing results can be significant for both the organization and the community.

Resource and Environment at Risk: An oil production facility has above-ground oil flowlines that run for 7,000 feet. The facility is located half a mile west of a major creek and six miles north of a river. The creek flows into the river, which flows into a town of 150,000 people located 12 miles away.

Contingency Plan Purpose: Detect and mitigate any significant oil leak from the facility's flowlines, with the goal of minimizing environmental damage. The plan places a special emphasis on preventing oil from reaching the nearby creek or river.

Business Contingency Plan vs. Business Continuity Plan

A business continuity plan and a business contingency plan share some similarities, but a business continuity plan primarily focuses on how an organization can continue operations during an emergency, whereas a contingency plan addresses a broader range of risks.

• Business Continuity Plan: A business continuity plan outlines the steps an organization will take to maintain normal operations following a major and disruptive event, such as an earthquake, fire, or major data breach.
• Business Contingency Plan: A business contingency plan covers a broader range of risks that an organization might face and outlines how the organization plans to respond. These risks can include potential major disruptions or events that might not directly affect operations but still require an effective response.

Business Contingency Plan vs. Project Risk Management Plan

Business contingency plans and project risk management plans both identify potential risks and determine ways to respond to them. The former focuses on risks to the entire organization, while the latter focuses on risks to a particular project.

In a project risk management plan , teams identify and assess possible risks to a specific project. It then determines how project leaders can respond to, eliminate, or mitigate those risks.

A business contingency plan identifies potential threats to an organization's ability to continue operating. It assesses risks that could temporarily or permanently halt operations, and then outlines plans to mitigate or eliminate those risks.

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August 30, 2022

| 6 min read

5 causes of equipment failure (and how to prevent them)

• By: Tanya Goncalves
• Reviewed by: Eric Wallace, C.E.T.
• Asset management , Blog

Back to blog

Table of contents

5 common causes of equipment failure

Cause #1: improper operation, cause #2: failure to perform preventive maintenance, cause #3: too much preventive maintenance, cause #4: failure to continuously monitor equipment, cause #5: bad (or no) reliability culture.

• The bottom line

Equipment failure happens. The impact of it can run the gamut from easily fixed with minimal losses to catastrophic, depending on factors like repair costs, total downtime, health and safety implications, and impact on production and delivery of services.

There are several common reasons equipment failure can happen. Understanding each one, and how to prevent them, is your first line of defense against the serious consequences of unplanned downtime.

Use these seven secrets to reduce costly downtime and get ahead of equipment failure

Beat equipment failure

There are a whole bunch of people who might be in and around critical equipment on a daily basis who could have a significant impact on its overall operating condition.

Equipment operators are one such group. They typically receive in-depth training on appropriate operating procedures, basic troubleshooting, and best practices for safe equipment use relevant to the machines they’ll be working with. However, the day might come when an operator ends up working on a machine they haven’t been adequately trained for. Sometimes this situation arises as a result of short staffing or unexpected absences. Other times emergencies come up that require quick remediation with available staff who might not necessarily have the expertise that your most experienced operators have.

One solution is to ensure that you have enough trained operators to allow for flexibility during staff shortage emergencies. If possible, all of your operators should have some training on every piece of equipment—even assets they don’t typically work with.

Most importantly, never allow an operator to use equipment they are not qualified to run. Not only will this help to reduce operational errors, but in some industries, it’s imperative for regulatory compliance. The Occupational Safety and Health Administration ( OSHA ) sets regulations for operator training requirements for certain types of equipment and for general occupational safety. It’s up to you, however, to know the regulations applicable to your industry and ensure that you have adequate compliance procedures in place.

Most equipment requires regular maintenance for optimal performance, but too often, preventive maintenance is the first task to go when you’re short-staffed and overwhelmed. It’s easy to brush off regular maintenance when things seem to be running just fine, and many companies work under the assumption that experienced workers will identify impending trouble before total equipment failure.

Equipment failures aren’t easily detectable and often go unnoticed. In other cases, companies simply lack efficient planning methods for ensuring that ongoing maintenance is performed. Tracking equipment and machinery with asset tags can help to keep maintenance schedules on track and equipment operating at maximum operational efficiency.

Preventive maintenance is one ongoing function that should never be allowed to fall by the wayside. Taking care of your equipment with regular tune-ups will extend the usable life of your equipment, ultimately giving you more for every dollar. Additionally, preventive maintenance can identify small problems with inexpensive solutions before they become major, costly breakdowns. When you use effective inventory control strategies to ensure that you have the right spare parts in supply for the most common maintenance tasks and malfunctions, equipment downtime for routine maintenance and repairs is minimal. In fact, the U.S. Department of Energy estimates that preventive maintenance results in:

• Up to a 30% reduction in energy and maintenance costs
• 35% to 45% fewer breakdowns on machinery
• Reductions in downtime by up to 75%

Stop fighting fires all day with this free preventive maintenance schedule template

“Surely this is a mistake,” you’re thinking. “You just told me that NOT doing preventive maintenance will cause things to break.” It’s true— there’s a bit of a Goldilocks situation going on when it comes to preventive maintenance. Not enough can be problematic for the reasons we outlined above, but too much is also a major cause for concern.

We’ve written about this in-depth before, so check out this blog if you want to get deeper into the concept of post-maintenance breakdowns . But here are the Coles Notes: Every time you get into a machine to maintain it, you open up that piece of equipment to a whole set of risks, and over time those risks can compound and lead to machine failure.

Not enough PMs

Signs of early failure are missed

Maintenance schedules suffer

Failure rate of machinery increases

Reduced equipment efficiency

Asset lifespan shrinks

Breakdowns and downtime rise

Costs skyrocket

Just enough PMs

Costs are controlled

Just-in-time delivery is achieved

Downtime is cut

Technician efficiency is boosted

Regular inspections occur on time

Safety improves

Productivity of critical assets is optimized

Too many PMs

Overspending increases

Wear and tear on asset soars

Technician time is wasted

Unnecessary inventory is used

Inaccurate information is collected

Make sure you’re not doing too many PMs with this maintenance log template

Think of it in terms of surgery— a triple bypass is a life-saving operation. But you don’t want to undergo open heart surgery on a regular basis simply because a few years have passed, or your heart has beat a few million times. But so often, that’s exactly how we approach preventive maintenance. It’s done on a predefined schedule (generally time- or usage-based) without taking the actual operating condition of the asset into consideration.

Which brings us to…

So how do you find the right balance of preventive maintenance? The cure here is simple in concept but a bit more complex in execution: condition-based maintenance . This is maintenance that’s done based on the operating condition of a piece of equipment, instead of just a ‘set it and forget it’ schedule. It takes a lot of things into account, from manufacturer information equipment history to real-time data like vibration analysis .

Continuous monitoring relies on sensor data to establish a baseline for what good equipment condition looks like in order to detect subtle changes, which can be used to predict breakdowns and failures. This allows more time for contingency planning and scheduling downtime to minimize production interruptions. This type of monitoring, and the data that’s collected in the process, can help companies identify the causes of increased stress on equipment, and adjust the workloads and schedules to prevent asset failure.

Prepare for every failure on your critical assets with this FMEA template

The catch here is that this is actually really hard to do if you’re managing maintenance with pen and paper or Excel. If this is where you want your maintenance operations to go, it might be time to consider moving to a digital maintenance solution .

When to use condition-based monitoring

Everyone has been there— major pressure from the top means there’s not a second to spare if you have any hope of hitting your production goals. In these circumstances, it can be so tempting (and so easy) for an operator or maintenance worker to notice something’s not working at 100%, slap a band-aid solution on it and say, “I’ll figure this out when things calm down”. The problem is that realistically, things never calm down to the extent where you’ll have time to revisit that work. Which means that band-aid solution becomes a semi-permanent solution until it stops working and becomes a full-fledged failure. This kind of fix can lead to personal injury, a major accident, or damage.

A really good example of this is Boeing. You’re probably familiar with the two deadly crashes involving the company’s 737 Max aircraft. The crashes raised questions about whether Boeing’s rush to get the plane through production led to safety risks that resulted in defective equipment, equipment breakdown and, sadly, the crashes.

But the quieter story concerns a different plane model— the 787 Dreamliner. Several whistleblowers have come forward to raise the alarm about the Dreamliners, which were manufactured in 2009 at a then-new plant near Charleston, South Carolina. From the beginning, sloppy production was an issue which was consistently swept under the rug in favour of aggressive production schedules.

If you want the full story, check out the full New York Times article here (or the related podcast from the Daily if you’re more of an audio person). The situation at Boeing is a really good example of competitive pressure at the highest levels of a business having a ripple effect all the way down the chain of command. Bad culture at the top creates a “get it done quickly” mentality that can result in devastating oversights, band-aid solutions, and mistakes.

What can you do if bad culture is at the root of your equipment failure? We’ve covered the topic of how to start establishing a culture that’s focused on reliability , so go ahead and check out one (or all!) of these pieces to give yourself a firm foundation for equipment reliability.

The bottom line: Trained operators, a solid PM schedule, and a focus on reliability culture are your tickets to fewer failures

Equipment failure happens when people make mistakes, parts get old, and preventive maintenance is deprioritized. But by ensuring adequate operator training, running preventive or condition-based equipment maintenance at the right time, and working towards proper operation and a better overall culture, you’ll have a much better shot at keeping your equipment running in tip-top shape.

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Why Having a Contingency Plan Is So Important — and How to Develop an Effective One Let's discuss the importance of contingency planning, what a comprehensive contingency plan should include and how to implement one effectively.

By Greg Davis • Apr 27, 2023

Opinions expressed by Entrepreneur contributors are their own.

In today's ever-changing business environment, business owners, entrepreneurs and franchise owners need to be prepared for the unexpected. Contingency planning is a critical component of business growth, enabling organizations to minimize disruptions and recover quickly from unforeseen events.

In this article, we will discuss the importance of contingency planning, the key elements of a comprehensive plan and how to implement a contingency plan effectively. By taking proactive steps to prepare for potential challenges, businesses can build resilience and ensure continued growth and success.

Related: 4 Ways to Prepare Now so Your Business Survives the Unexpected Later

Why contingency planning matters

Disruptions can come in many forms, from natural disasters to cybersecurity breaches, equipment failures or even changes in the competitive landscape. Without proper planning, these events can have a devastating impact on a business's operations, finances and reputation. Contingency planning helps businesses minimize the impact of disruptions, maintain operational continuity and recover more quickly from setbacks. This resilience is crucial for business growth, as it enables organizations to adapt to changing conditions and capitalize on new opportunities.

Elements of a comprehensive contingency plan

Developing an effective contingency plan involves several key steps:

Step 1: Identify potential risks and vulnerabilities

The first step in creating a contingency plan is to identify potential risks and vulnerabilities that could impact your business. This includes both internal and external factors, such as natural disasters , equipment or network failures, supply chain disruptions, cybersecurity breaches, changes in the landscape or the loss of key personnel. By identifying potential threats, businesses can better understand their exposure and develop targeted strategies to address these risks.

Step 2: Develop response strategies

Once potential risks have been identified, businesses should develop response strategies to mitigate the impact of these events. This may involve developing alternative suppliers, establishing backup systems or processes or implementing new security measures. Response strategies should be tailored to the specific risks faced by the business and should take into account factors such as the likelihood of the event occurring, the potential impact on operations and the resources required to implement the strategy.

Step 3: Establish a communication plan

In the event of a disruption, clear communication is essential to ensure that all stakeholders, including employees, customers and suppliers, are aware of the situation and know what steps are being taken to address the issue. A comprehensive communication plan should outline how the information will be shared, who will be responsible for providing updates and what channels will be used to communicate with different stakeholders.

Step 4: Train employees and build awareness

For a contingency plan to be effective, employees need to be aware of the potential risks facing the business and understand their roles and responsibilities in the event of a disruption. This may involve training employees in new processes or procedures, providing guidance on emergency response protocols or conducting regular drills to ensure that all team members are prepared to act quickly and effectively in the event of a crisis.

Step 5: Review and update the plan regularly

As the business environment continues to evolve, it is essential that contingency plans are regularly reviewed and updated to reflect changes in the company's operations, industry dynamics or the broader economic landscape. This may involve conducting periodic risk assessments, updating response strategies or refining communication protocols to ensure that the plan remains relevant and effective.

Related: 5 Reasons Why You Should Create an Emergency Response Program for Your Business

Implementing a contingency plan

With a comprehensive contingency plan in place, businesses can take steps to minimize the impact of disruptions and maintain operational continuity . Key steps in the implementation process include:

Developing an action plan

An action plan should outline the specific steps that will be taken to address each identified risk, including timelines, resources and responsibilities. This plan should be clear, concise and easily accessible to all team members, ensuring that everyone understands their role in the event of a disruption .

Allocating resources

Contingency planning may require the allocation of resources, such as budget, personnel or equipment, to implement response strategies effectively. Businesses should prioritize resources based on the likelihood and potential impact of each identified risk, ensuring that the most critical vulnerabilities are addressed first.

Testing and refining the plan

Once the plan has been developed, it is essential to test its effectiveness through simulation exercises, drills or other means. This will help identify any weaknesses or gaps in the plan and enable the business to refine its strategies accordingly. Regular testing also helps ensure that employees are familiar with the plan and prepared to act in the event of a disruption.

Monitoring the environment and adapting

Contingency planning is an ongoing process that requires businesses to monitor changes in their operating environment and adapt their strategies accordingly. This may involve updating the plan to address new risks, adjusting response strategies in light of changing circumstances, or reallocating resources as needed. By staying attuned to the evolving business landscape, organizations can remain agile and resilient in the face of uncertainty .

Contingency planning is a critical component of business growth, enabling organizations to navigate the unexpected and maintain operational continuity in the face of disruptions. By identifying potential risks, developing targeted response strategies and implementing a comprehensive plan, businesses can build resilience and drive continued success. As the business environment continues to evolve, contingency planning will remain a vital tool for business owners, entrepreneurs and franchise owners seeking to capitalize on new opportunities and protect their organizations from unforeseen challenges .

Related: How to Create a Disaster Plan for Your Business

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Equipment Failure As A Supply Chain Risk

Because of  the supply-chain disruptions in the past few years, many companies have learned the need for planning ahead and having contingency plans in place if key parts, merchandise or other inputs fail to show up at their doorstep.

However, many businesses also face internal supply chain risks , and one of the biggest is machinery or equipment breaking down.

Knowing the right steps to take in advance can save you from making a bad situation worse or significantly delaying the resumption of operations.

Preparing for failure of a key piece of equipment or machinery, can keep you from scrambling to figure out your next step in times of internal disruption or crisis. Making decisions at such times can often lead to more problems and added costs.

Your risk management plan to deal with such failures should include:

A list of key equipment

• Production machinery, including gear sets, motors, compressors, belts and fans.
• Boilers and pressure vessels.
• IT and communications systems, including wiring and cables.
• Electrical equipment or systems, including transformers, switch boxes, cables, wiring and motors.

  An inventory of spare parts

Optimally, you should keep all the key spare and replacement parts for your main systems on-site. You can ask the manufacturers or service companies of those systems to assist you in having an emergency inventory on hand.

Still, it may not be feasible to have all items on-site. In that case, you should compile a list of the other parts that could break and need replacement, and how to quickly order them from the correct supplier. You should include on this list the cost of those items and delivery times, and update the list at least every year.

A plan for renting replacement equipment

As part of your planning, you should obtain quotes from companies that rent out the same type of equipment or machinery that you use, and update the quotes every year.

The quotes should include all pricing like transportation and set-up fees, as well as estimated time from ordering to delivery and start-up.    Don’t forget to include alternative suppliers.

Repair firms

You should also have at the ready information on the various contractors that are able to repair the equipment that’s broken down. This information should be listed by equipment item and include contractor capabilities, contact information and availability.

Again, you should update this information every year.

The dilemma for many businesses is how much inventory to carry. You don’t want to get caught short when it’s time for deliveries, and you don’t want too much of your money tied up unnecessarily in inventory that will go unused for some time.

That said, a certain reserve of inventory to help you continue to supply your customers is a smart move if you want to minimize the disruption of an equipment failure.

You need to analyze your order and delivery schedules and identify an optimum amount of spare inventory to keep on hand to fulfill orders in case of an equipment failure.

If applicable  make sure to keep in mind how perishable your inventory may.

• Search forums
• National and International Business System Standards
• IATF 16949 - Automotive Quality Systems Standard

Contingency Plans for Equipment Failure as a Separate Document

• Thread starter Myriam
• Start date Jun 21, 2007
• Jun 21, 2007

Hello, We are just in the middle of a surveillance audit (TS16949) and one NC is concerning contingency plans. (6.3.2) Since the NC is not in writing yet I do not know the exact content, but auditor indicates we should have these plans especially for equipment failure, which is correct. But we do not have these plans as a separate document. We handle this another way, for each production line we have in case of an emergency another simular line and there is no (automotive) grade which is limitted to only one line. This is all recorded in our order-handling-recipe data base. I think this should be sufficient and there is no need for a separate document which describes this. Do you think this is correct? regards, Myriam  

Howard Atkins

Forum administrator.

6.3.2 Contingency plans The organization shall prepare contingency plans to satisfy customer requirements in the event of an emergency such as utility interruptions, labour shortages, key equipment failure and field returns. Click to expand...

pinpin - 2009

• Oct 10, 2007

Howard Atkins said: The requirement is my emphasis It is reasonable to ask if these have been prepared. Documented evidence is not the only evidence that the auditor can take into account. Show that you have prepared. There is no requirement for a document that says "This is the contingency plan......" Good luck does not come into it. Understand the standard All the best and keep us informed Howard Click to expand...

• Oct 11, 2007

3.3 audit evidence records, statements of fact or other information, which are relevant to the audit criteria (3.2) and verifiable NOTE Audit evidence may be qualitative or quantitative. Click to expand...

Howard Atkins said: Please remind them of the definition in ISO 19011 Click to expand...

pinpin said: Dear Howard, You are right! Thank you for enlightened me! Click to expand...

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