Contingency plans

Revision as of 13:42, 20 February 2021

Abstract

What will happen if "Plan A" does not work?  Uncertainty is a part of projects and cannot be avoided. There are things that we know can go wrong and things that we do not know about.  The main part of the uncertainty is the anticipation of risks, both desired and undesired.  The classic risk management process is risk identification, assessment, treatment, and control.  Contingency plans are about how to deal with the risk, threats or, events.

"The purpose of treat risk is to develop options and determine actions to enhance opportunities and reduce threat to project objectives. Risk treatment includes measures to avoid the risk, to mitigate the risk, to deflect the risk or to develop contingency plans to be used if the risk occurs".  ^[1]

Contingency plans are your "Plan B" and ask the questions "What if....?" ^[2]. The risk could be anything from major crises, natural disasters to more common problems. Then there is the question of who creates these plans? Is it the top management, owner, or even the summer intern? There is not just one way to create a contingency plan, and therefore not just one role in a company that creates such plans. The overall responsibility and management are assigned to the most relevant person and that person is responsible for consulting and informing.  Steps to take in the creation of such a plan may vary from business to business and from project to project. According to the ISO 21500 Standard, the primary inputs are risk register and project plans and the primary outputs are risk responses and change requests. 

What is a Contingency Plan?

A contingency plan is about controlling possible risks that may occur before or during a project. In other words, creating a "Plan B".

Contingency plans are crucial for all projects, no matter the size and duration. There are a lot of things that can go wrong in projects and many aspects to look into. Not being prepared when and if they occur can be the undoing of projects and sometimes businesses. Even though contingency plans are created, there is no guarantee that the project is prepared for everything that might go wrong. That depends on how well the brainstorming session goes and how good of a team the project has. How detailed the risk assessments should be, depends on the project manager and his team. Ideally, not only should the plan cover significant issues, but it should also have a plan for more common errors that could occur. That way they are handled more efficiently ^[3]. However, contingency plans do not only have to cover negative events, but they can also cover positive events. For example, what if the project receives more funding than planned? ^[2]

Creating a contingency plan does not only make you a smart project manager but it also makes you more proactive rather than reactive. Then it is good to know and understand the basic steps on how to create such a plan.

How To Create a Contingency Plan

The steps in creating a contingency plan differ from department to department and from project to project. However, they all have a similar base and will help with handling risk management. The steps below are a combination of the great sources found under "References".

Figure 1: Contingency Plan Template ^[3]

1. Identify Business Operation

• What is the plan for? What will be identified? Is it the whole project or some part of it?
• Example: The supply chain of the project is a key factor therefore a detailed contingency plan is created for that part.
• Example: The whole project is broken down into small sections and that way you have a contingency plan for the whole project.

2. Identify Risks, Threats or Events

• What can go wrong? What are your week links? What other scenarios do you need to be prepared for?
• Example: Deadline not met, system failure, weather, more funding, sick employees, and so on.

3. What Will Cause the Risk or Threat to Happen?

• What triggers the scenario? What exactly will be the cause for the plan to be put into action?
• Example: You know the project will not meet the deadline do you activate the plan then or do you wait until the deadline has passed to activate it?

4. What Is the Reaction?

• Identify a strategy that will be executed in response to the event. What is the reaction if this event were to occur?

5. Who Is Responsible For Activating the Plan?

• If an event occurs, who is it that will set the plan to action and control it?
• TIP: Try not to put a name in the contingency plan rather a job title or department. As we know people come and go within companies and projects.

Additional Step

As mentioned the contingency plans are never identical, some are more detailed than others, some have a wider spread, all that depends on the project and project managers.

Often there is a limited time that can be set aside for creating a contingency plan and sometimes there are too many things that have been identified as risks/events. When that happens it is good to add a step to the contingency plan. That is once the risks have been identified next step is to analyze the impact and likelihood of that event from happening and therefore give them a Potential Problem number (PP number). Many scales can be used to evaluate the impact and likelihood, however, the most common way is to enumerate them from 1-5. ^[3]

Likelihood: Rare(1) - Unlikely(2) - Possible(3) - Likely(4) - Almost(5)

Impact: Marginal(1) - Minor(2) - Moderate(3) - Major(4) - Severe(5)

• Example: If the event has moderate impact and likely likelihood of happening, the PP number becomes: 3*4 = 12 ^[4]

After creating PP numbers for the events you sort them from largest to smallest and continue the steps of creating a contingency plan. That is trigger, action, and person responsible.

Figure 2: Potential Problem Numbers ^[5]

In some cases, there is no need to assign PP numbers, perhaps, due to few scenarios or small projects. However, it can still be useful to visualize what events can have the most impact if they occur and how likely they are to happen. One way is to create a Likelihood vs. Impact matrix, with Likelihood on the y-axes and Impact on the x-axes, see Figure 3.

Figure 3: Likelihood vs. Impact^[6]

Once the Plan Has Been Created

What happens after the plan has been created? It is very common that the plan never gets used. Why is that? There are many factors that can contribute to that, the people don't get informed, the plan is never updated, the plan is too complicated, not accessible or it gets forgotten. Here are some points that might help prevent that ^[3]:

Involve the Right People

In order for people to use the plan, they need to know about it. Involve the team from the beginning, that way everyone feels included and informed. It often happens that managers forget to inform the lower level of employees and just inform when it is time to do things. That creates low motivation and people are less likely to participate. So involve them from the beginning and get them to contribute to the plan, that way you get a wider perspective and might even get a result you did not even consider. When new employees join the team or company make sure they get access to the plan and familiarise themselves with it.

Update the Plan

For longer projects, it is necessary to update and maintain the plan regularly. In the world today things change quickly and therefore actions might need some update. A plan that was created for example two years ago might not even be relevant anymore. The risk and events that were identified might not even be relevant anymore or the team found a new scenario that needs a response plan. When the project start, set a maintenance time to check up on the plan, perhaps every 6 months? A shorter time or longer? All depend on the complexity of the project and project time frame. If a plan gets updated make sure to distinguish the new plan from the old one, so there will not be a mix-up.

TIP: It is good to have the project manager keeping an overview of the whole project, but let the person/department responsible keep a closer eye on their event/s. That way no event is overlooked.

Make it Understandable

Most companies and industries have their lingo. Try not to use words or abbreviations not everyone is familiar with in the contingency plan, it has to be easy and understandable for everyone. Keep it simple. When new people enter the project they should be able to read the plan without any trouble.

Store it Securely

Keep the contingency plan in a secure place and baked up. Having the plan available both online and offline is always a plus, you never know in what scenario you might need it and how the situation will be. The plan has to be accessible to all employees and stakeholders.

Useful Tools

How do you set up your contingency plan? There are many different ways to construct a good contingency plan. A common way is to use Excel or similar software.

Excel

Figure 1, demonstrates a basic way to set up contingency plans in Excel. There each risk or event is added, along with what triggers it, the action plan, and who is responsible. If the project requires a PP number, the format is set up very similarly. However, it is sorted from the highest PP number to the lowest, and an additional column is added displaying the PP number, see Figure 4.

Figure 4: Contingency PP Plan Template

Diagrams

For better category visualization setting it up like Figure 5 shows is often used.

Figure 5: Basic Cotingecy Plan based on "category" ^[6]

Gantt Charts

Gantt Charts have sometimes been used in regards to contingency plans. Gantt Charts are useful for contingency plans when the project has major deadlines and milestones to pass. Often contingency plans need to be set up in regards to each deadline and that is where Gantt Charts come in handy. They have great visualization as they show waterfall timelines and visible deadlines. There you can sort the tasks either based on deadline and milestones or even department if that is something suitable for your project.

Asana

Models and forms to use: Asana - asana.com

Dash Boards

Having a dashboard can give the team a good visualization of what tasks are begin worked at in the project and what scenarios of the contingency plans are almost over. That is basically a live update on the continge plan it self.

Regerences

1. ↑ Danish Standards Foundation. (2012). DS/ISO 21500. Danish Standards Foundation. 26.
2. ↑ ^{2.0 2.1} Kris Huges (2018). How to Make a Contingency Plan. https://www.projectmanager.com/blog/contingency-plan. Visited: 09/02/2021.
3. ↑ ^{3.0 3.1 3.2 3.3} The Mind Tool Content Team (2016). Contingency Planning.https://www.mindtools.com/pages/article/newLDR_51.htm. Visited: 09/02/2021.
4. ↑ Joe Tidd and John Bessant (2019). Potential problem analysis. http://www.innovation-portal.info/wp-content/uploads/Potential-problem-analysis.pdf. Visited: 19/02/2021.
5. ↑ Blake Bassett (2020). When You Don’t Know What to Do, Solve a Problem. https://medium.com/swlh/when-you-dont-know-what-to-do-solve-a-problem-3f9116d8b161. Visited: 17/02/2021.
6. ↑ ^{6.0 6.1} Amanda Athuraliya (2020). The Easy Guide to Creating a Business Contingency Plan. https://creately.com/blog/business/business-contingency-plan-templates/. Visited: 19/02/2021.