It's specifics

Date: 2015-10-07; view: 407.

Businesses prepare contingency plans because things do go wrong from time to time. Contingency planning involves:

- Preparing for predictable and quantifiable crises

- Preparing for unexpected and unwelcome events

The aim of contingency planning is to minimise the impact of a foreseeable event and to plan for how the business will resume normal operations after the event.

The key stages in contingency planning are:

- Recognise the need for contingency planning

- Identify possible contingencies (all the possible adverse and crisis scenarios)

- Specify the likely consequences

- Assess of the degree of risk to each eventuality

- Determine risk strategy (to prevent a crisis and deal with one should it occur)

- Prepare plan and identify management responsibilities

- Test the plan (crisis simulation)

Contingency planning work well when the “what if” question is considered carefully. Two techniques really help with addressing “what if”?

Scenario analysis :This involves constructing multiple but equally plausible views of the future

The scenario consists of a “story” from which managers can plan.

Sensitivity analysis : Involves testing the effect of a plan on alternative values of key variables

e.g. the effect of a 25% loss of capacity.