Even if things are running smoothly for your business right now, there’s always a risk that you will experience a problem that puts significant strain on your company or even prevents you from operating altogether. This is why it’s so important to have a comprehensive, effective contingency plan in place.

Why it pays to have a ‘plan B’

A well-thought-out contingency plan should cover a wide range of potential threats to your business, including the failure of essential equipment. When equipment such as commercial boilers, heating systems or air conditioning systems fails, the consequences for your bottom line can be disastrous. A large hotel, for instance, could lose tens of thousands of pounds over a 24-hour period as a result of boiler problems. Highlighting this risk, a boiler failure at a Malmaison hotel meant the company was losing £60,000 a night. In an industrial setting, a lack of crucial equipment could result in major productivity losses, while if a plant room that serves multiple flats fails, the contractual demands of occupants may not be met.

It’s not just the financial and technical ramifications that you need to bear in mind. For many organisations, the failure of crucial equipment can harm the wellbeing of employees or members of the public. For example, in environments such as hospitals, care homes and schools, the welfare of various parties can be jeopardised if essential equipment ceases to work and there is no contingency plan in place.

By creating suitable backup plans, such as preparing for the installation of a temporary boiler or industrial chiller in case of an emergency, you can ensure that any disruption to your organisation is minimised – and you can help to keep people safe.

Although equipment failure is just one aspect of contingency planning, it is a very important element and one that highlights why it’s critical for businesses to engage in this type of risk mitigation.

How to create your contingency plan

Creating a contingency plan can seem daunting, but as long as you’re methodical, the process may be more straightforward than you think.

Your first step should be to create a list of all the possible risks your business faces, no matter how unlikely some of them may seem. For each risk, outline the probability of it occurring and the potential impact if it did occur. Make sure you have a clear understanding of the operations that are critical to the running of your company. This will help you to prioritise risks appropriately. 

Taking the example of essential equipment again, think about the lifespan of appliances and systems. In contrast to domestic boilers, which typically last only around 10-12 years, plant rooms can remain operational for 20-30 years – but however long you expect equipment to last, you’ll need to be prepared to organise planned maintenance work when required. This can help to avert serious technical problems further down the line. Depending on how urgent they are, planned works could be scheduled for anything from zero to three months’ time, or as much as two years in advance. Sometimes, maintenance isn’t planned in time, and in these scenarios, emergency repairs and replacements may be required. This could involve temporary boilers or other pieces of equipment being hired within a 24-hour period. You should have provisions in place in case you need to make these last-minute arrangements.

You should also set out who or what will be affected in each emergency scenario and how, and list all the individuals and organisations you will need to contact in the event of a serious incident. This could include any of the following:

  • Workers
  • Customers
  • Suppliers
  • Insurers
  • Banks
  • Plumbers or electricians
  • Temporary equipment suppliers

It’s important to identify the risks that are insurable and make sure you have suitable financial protection, and you should put in place appropriate call-out arrangements for essential equipment – such as heating, ventilation and air conditioning systems. Bear in mind that you will probably need to make individual recovery plans to cover specific business-critical risks, such as power failures or IT system outages.

Communicate your plan, test it and keep it up to date

Once you’ve completed your contingency plan and you’re happy that it covers all relevant risks, it’s important to communicate it clearly to your employees so that they are familiar with the details and know what their specific roles will be. Ensure that you provide any new employees with your contingency plan when they join your business too.

You should also test your plan as much as possible. Doing this may expose problems that need to be resolved, meaning it will help you to fine tune your emergency procedures. Simulating emergency scenarios will also give your managers and workers a chance to execute their individual roles, meaning that if a crisis does unfold, they will be able to act in a calm, effective and efficient manner. After running tests, ask your employees for feedback. This information gathering can be an important part of the process of refinement.

Because the risks facing your business evolve on a continual basis, a contingency plan isn’t something static that you can create and then simply forget about until and unless you need it. In order to ensure your risk management strategy stays up to date, you will need to review it on a regular basis. When you do this, make sure you take all the relevant operational, technological and personnel changes into account.

More information and advice

For more information about contingency planning and the types of risks that organisations can face, check out our eBook ‘The ultimate guide to contingency planning for your business’ below or view the eBook below.

Have your own suggestions or experiences you’d like to share? Join the conversation on social using the hashtag #ContingencyAdvice.