The “Oops” Factor of Risk Management

Contingency planning might be the most important element of risk management. Director magazine several years ago reported that 80% of firms that suffer a major setback to revenue do not survive aEUR" unless they have a contingency plan.
While prevention is great, itaEUR(TM)s not foolproof. SomethingaEUR(TM)s going to go wrong aEUR" it might be a computer glitch or a Katrina, a project hiccup or a major fire, an auto accident or a 9/11 aEUR" and in any of these, you can easily be an aEURoeinnocentaEUR? victim.
This Tip will talk about when contingency plans are needed and what they look like. The next Tip will show how to create effective plans that produce great outcomes.
When do you wish you had one? ~
A contingency plan (CP) should be broad enough to handle different scenarios aEUR" because you donaEUR(TM)t know what will happen. For example, it can be designed to respond to:
  • A customer service breakdown that gets blown out of proportion on Twitter;
  • A hacked computer or other failure aEUR" and loss of sensitive data leading to identity theft;
  • A supplier problem aEUR" perhaps a fire aEUR" preventing you from getting promised deliveries and delaying a customer project and invoking a penalty clause;
  • Loss of a key employee aEUR" accident, disability, hired away by competition aEUR" impacting important relationships or involving critical corporate knowledge.
What others can you think of?
What does it look like? ~
A CP is a step-by-step road map that will be implemented after something has gone wrong aEUR" like one of the examples above. ItaEUR(TM)s detailed, but not complicated.
The plans must be created, stress-tested and practiced beforehand. You canaEUR(TM)t wing it because you really have no experience to guide you. YouaEUR(TM)ll get something else wrong or miss an important step and create additional delays, hassles and misunderstandings. The beauty is that one plan can probably be used aEUR" with some tweaks aEUR" in several different circumstances.
I recommend a series of checklists. Start with a high level overview list then dig down to more and more detail and add some specific forms and attachments.
Next create a aEURoedream teamaEUR? roster even if you donaEUR(TM)t have all the players, and outline roles and responsibilities for a crisis. DonaEUR(TM)t do everything yourself: consider outside resources aEUR" a business colleague, marketing consultant, coach.
List your audiences aEUR" the people, groups or agencies you might have to deal with. Outline different messages that could be important to each group. Think about employees, customers, regulators, and of course the media.
Start your CP draft today: ItaEUR(TM)s never too early, and it is a matter of survival. Let me know if you have any questions.
Charles T. Wilson is a Certified Management Consultant (CMC(R)), confidential advisor, speaker and Principal of RiskSmart Solutions(R). He is a specialist in insurance and risk management and does NOT sell insurance. Clients save time and money with objective advice on getting the right broker and service, the best coverage and price, with the least amount of risk.
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