Contingency planning is the development of plans to deal with emergencies, such as a fire that destroys key company records, or a flood that impacts a production facility, or perhaps an earthquake that destroys a key supplier. These plans are specifically targeted at worst-case scenarios for situations that can have a severely negative effect on a business.
A contingency plan is highly tactical in nature, since it contains action items that are intended to mitigate the damage from a specific event. For example, the plan may call for the development of a backup IT center that can be started up on short notice, in the event of damage to a company’s primary IT center. Or, the purchasing department decides to maintain contacts with several backup suppliers, placing modest orders with them, so that they will be available to pick up orders if the primary supplier is put out of action by a natural disaster.
A contingency plan typically includes disaster communication plans, policies, procedures, assigned responsibilities, and a schedule of disaster scenario training.