In common with other areas of business development, Ibis follows a structured format in building contingency plans. Nine separate elements are defined:
Structuring for effective contingency planning;
Analysing risk;
Analysing information systems;
Designing out;
Sharing remaining risk;
Mitigating remaining risk;
Creating the contingency plan;
Activating the contingency plan;
Reviewing the effectiveness of contingency planning.
The main components of each section are summarised below. The range of topics emphasises the importance of the contingency plan in reviewing overall plan development and its chances of success, by identifying those building blocks within the enterprise that will both reduce and manage risk, and ensuring that they are properly integrated into company operations to drive success. Making a contingency plan work is a good example of mosaic management bit by bit the enterprise controls more and more of its external and internal environments and is less likely to need to react violently and chaotically to change.
These main building blocks are used as part of the Ibis training programme on the development and control of the contingency plan.
Structure
Leadership. Quality leadership is essential for effective contingency planning and implementation with a combination of speed, forcefulness and support. Decision making. Quality decision making is important in the design and implementation of contingency plans. Choices on who takes decisions and how they are reached must be reviewed to create a flexible structure that can effectively respond to both opportunities and problems. Formal networks. Informal networks will dramatically reduce the operating efficiency of the enterprise through creating decision making systems that operate subjectively rather than objectively. Formal networks that emphasise decentralised decision making coupled with appropriate authority and responsibility, full access to data, with structured recruitment, appraisal, training, objectively based motivation methods, team building, code of conduct, evenly applied disciplinary code and grievance procedures, bottom up business plan development and review methods and a transparent and accessible information system will substantially improve the ability of the enterprise to manage contingency planning. Focus. The concentration of the enterprise on key products, key customers, key suppliers, key regions will substantially reduce overall risk. Business model. A clear definition of how the business gets sales, maintains profit, rewards investment and builds for the future will also reduce risk. Comprehensive business plan development. A detailed bottom up plan rigorously reviewed will clearly identify the main assumptions and the main risks. Comprehensive business monitoring systems. Detailed and broad monitoring of business operations will provide enhanced control and early information on potential problems/ opportunities. Key performance indicators. Monitoring the enterprise through the use of key performance indicators will identify major areas of problems and opportunities and reduce risk.
Benchmarks. The referral to benchmarks will further focus the enterprise on best practice, and will be a valuable guide to the effective use of contingency plans, identifying what other enterprises have done well and badly. Devil's Disciple. The formal appointment of an individual to identify potential problems within major problems and present their findings provides significant support in both understanding and managing risk.
Formal approval systems. The introduction of formal approval systems within the enterprise will tend to reduce adhoc and poor decision making. SBU. All things being equal, decentralising the enterprise into smaller units will decrease the level of risk and improve the implementation of contingency plans through better understanding of market conditions, and the ability to react more quickly. MBO. All contingency plans are essentially projects; an environment that focuses on developing an understanding of projects will be better at both planning and implementing contingency plans. MBWA. The identification of failure points and necessary changes will come partly from analysis and partly from continual on the ground inspection.
Mentoring. Ensuring that those who have had experience of problems are engaged in future planning and training will substantially improve overall contingency plan effectiveness. Special units. The existence of special units is always likely to create more problems than they solve; simplifying the management structure will produce a more coherent and less risk intense organisation. Knowledge centers. The creation of knowledge centers enables the enterprise to focus individuals with the most understanding and skills in a particular area on the creation and management of the contingency plan. Skills. The focus on skills within the enterprise will improve the management of opportunity and problems. Authority/responsibility. Properly defining authority and responsibility for the creation and management of the various contingency plans is essential and is aided by the development of knowledge centers. Within the knowledge center, individuals with sufficient experience should be delegated to complete the plan with assistance from other members of the team. Diversity. Single backgrounds within the enterprise lead to single mind sets. Diversity within the enterprise will enhance the quality of analysis. Ensuring that diversity is maintained through the use of a diversity index and appropriate recruitment and promotion policies will substantially reduce risk. Team building. Team approaches to the management of operations will again enhance the quality of analysis. Quality circles. The creation and maintenance of quality circles within the enterprise will provide a continual checking mechanism to identify both opportunities and problems.
Risk assessment
Catastrophic risk identification. The development of the contingency plan should initially focus on catastrophic risk components. These include the effects of fire, flood, earthquake, storms, mudslide/ avalanche, excessive rain, snow, heat, cold, chemical leakage, explosion, radiation leakage, employee megalomania, criminality (fraud, theft, violence), major accounting irregularities, mergers and acquisitions, diversification, joint ventures, major litigation, major product/service failure, sales promotion/ advertising implementation (especially re-branding), data loss, memes, kidnapping, major contract failure(s), bad debts, financial guarantees and warranties, employee ill-health, civil unrest, government action, nepotism, excessive administrative overhead, utility loss, other infrastructure failure, telecommunications failure, overtrading, major new entrants, substitutes, major supplier failure, major customer failure, excessive delivery failures, shareholder failure, excessive debt, tax mismanagement, information systems failure, psychopathic behaviour, inflation/ deflation, currency devaluation, communication failure, key employee loss, employee skills (technical, managerial) mismatch to enterprise demands, IPR loss. Risk profile. The level of risk in each area should then be assessed through the creation of a risk profile. Black Swan review. Use of the Devil's Disciple concept to review the reality of the risk environment will provide additional support for risk assessment. Stress. Individuals and organisations under stress are less productive and are prone to the commission of major errors. A review of organisational stress using one of the many heuristic models is an important element in risk identification. Legal review. A complete review of the legal environment will be central to overall risk assessment. Supplier ratio. The structure of the supplier base will be an important component of overall risk assessment. Customer ratio. The structure of the customer base will be an important component of overall risk assessment Region ratio. The structure of regional sales will be an important component of overall risk assessment Product/ service ratio. The structure of the product/ service base will be an important component of overall risk assessment Product age ratio. The age of the overall product/ service base will be an important component of overall risk assessment. Outsourcing. Over dependency on outsourcing may increase risk through vulnerability to the supply chain, quality control, the impact on core competence, technology transfer, and the potential problems of new product/ service development. Branding. The development of a long term branding policy will reduce risk through changes to the value chain and the creation and maintenance of barriers to entry. Useful life index. The assessment of productive capacity and its useful life will be an important component in overall risk assessment. Capital allocation ratio. The balance between capital allocation and earnings will be an important component of overall risk assessment. Funding structure. The structure and balance of funding will be an important component of overall risk assessment. Competitive advantage. The level of existing and future competitive advantage will often be central in risk assessment. Barriers to entry. The effectiveness of barriers to entry will be important in determining competitive positioning. Assumptions. Identifying and listing the assumptions underlying the plan will be vital in identifying key areas of risk and limited information. Portfolio theory applications. Reviewing both strategic choices (such as the balance within the golden circle) and implementation routes against acceptable portfolio risk will provide a clear measure of strategic and implementation choice viability. Critical success factors. Reviewing both strategic choices (such as the balance within the golden circle) and implementation routes against critical success factors will provide a clear measure of strategic and implementation choice viability. Game theory. Forecasting the likely behaviour of individuals or groups will improve the overall understanding of potential risk. Role play. Role play will also provide an often valuable insight into the behaviour of systems, groups and individuals. Simulations. The use of modeling techniques including decision tree analysis will provide an additional analytical framework to reduce risk. Project risk assessment. Establishing a formal project risk management system with a risk register, an analysis of probabilities (in complex projects through such approaches as Monte Carlo), and appointing external supervisors where necessary will improve the potential control over projects and their chances of success. Sensitivity analysis. The potential impact of changes through the use of sensitivity analysis is yet another mechanism for understanding the level of potential risk and their consequences.
Structuring the MIS for contingency planning
Information flow map. Enterprises must balance the needs of access against the potential of information overload; also the need for secure storage against the needs of ensuring data security. Understanding how information currently flows through the organisation and how it should be organised is the first stage in the first stage in MIS structuring. SATURNS. The output of the data system must meet the demands placed upon it. These include for the contingency plan the ability to interrogate the system to understand the real underlying causes of a problem. For example, sales may be in decline. Is this due to an overall market downturn, competitive entry, major customer failure, poor operational implementation, or lack of product/ service competitiveness? Dealing with the wrong problem will often be worse than not dealing with it at all. Creativity. Improving decision making through the development and maintenance of creativity approaches within knowledge centers will reduce risk and improve the understanding of options and the best implementation route. Much of contingency planning involves finding coherent solutions in an often incoherent world. The best solution may not be immediately obvious and the combining and re-combining of data using one or several of the many creativity techniques will often greatly enhance the value of the management information system. Software alignment. The alignment of the enterprise data systems with appropriate knowledge centers/ individuals will further improve the efficiency of information flow and the ability of the relevant groups to mine data and understand the underlying issues. For many contingency plans project management software is central to effective creation and management. AI. The introduction of artificial intelligence systems which monitor operational performance and identify trends which break barrier conditions can substantially improve risk management by early problem/ opportunity identification. Distant data capture. Integrating all operational performance within central systems will again improve risk management by early problem/ opportunity identification. Common language. Within complex enterprises operating across regions and with a variety of different competences, it is important that communication includes the use of a common language which is understood by all key members of the contingency planning and recovery teams. A failure to understand the various stages of the plan and a failure to properly implement them because of communication problems can be a fatal flaw in many contingency plans. Specialist contingency planning and recovery software. The introduction of specialist software to manage contingency planning will assist in the formulation and control of complex operations.
Designing out risk in the contingency plan
Objectives/ balanced scorecard. Creating a clear set of short, medium and long term objectives (including a quantified vision statement) against which all actions are measured will focus the enterprise and reduce risk by not concentrating on a single target. KISS. Keep it short, simple. All policies should be stated in the simplest and clearest language with a limited and focused set of clearly understandable goals, to reduce misunderstanding and confusion within the various operational areas. Forecast case. Within the forecast environment, the choice of lower levels of risk will again maintain a greater level of flexibility towards the achievement of objectives.
Impact analysis. Creating and managing a system in which major changes to the environment are analysed with the development of a proposed action plan will provide the enterprise with greater control. Forecast grid. The choice of a variety of forecasting tools, rather than one, will again reduce the potential for failure within the planning system. Joint planning. A system which incorporates joint planning with major stakeholders (employees, suppliers, customers, government) will reduce uncertainty in the planning horizon. Sales organisation. Ensuring that the sales organisation matches the market reality will reduce risk. The trend towards segmental concentration and market specialisation suggests that a customer based orientation rather than the traditional product/ geographical structures is likely to be the best option. This review of the sales organisation will then influence the way in which the marketing department also focuses its activities. Investment appraisal. A formal investment appraisal system which includes an agreed hurdle rate will further reduce uncertainty in the planning horizon and focus the enterprise on the potential returns from expenditure. For large scale investments the addition of an investment case summary will provide additional support. Activity based costing. Ensuring that costing systems meet the demands of fluctuating volumes will again reduce the potential for failure in rapidly changing environments. Conservative accounting. Creating a reporting system that focuses on financial reality will be important in reducing risk. Particularly important will be the treatment of off balance sheet accounting, mergers and acquisitions, disposals, deferred consideration, extraordinary items, contingent liabilities, transfer pricing, cost capitalisation, brand accounting, depreciation policy, treatment of convertibles and derivatives, pension fund liabilities, and currency mismatching. FCF. A planning system that incorporates free cash flow will ensure that finance is available to deal with both opportunities and problems within the planning horizon. Financial headroom. The maintenance of financial headroom (flexibility of borrowing, equity, cash flow) will improve the ability of the enterprise to deal with both problems and opportunities. Depreciation. Maintaining a formal asset register and depreciation policy towards all assets will reduce risk of over valuing assets within the balance sheet, while providing a mitigation route through an asset credit review. Budgeting. The creation of budgets (ideally providing the flexibility to allow individual units to deal with both opportunities and problems) will provide an important control mechanism. BEV. Focusing the cost management system on lowering the overall break even point within the enterprise will improve cash flow and lower risk. Labour productivity. Driving up labour productivity will again improve returns to the enterprise and lower risk. Value chain. Moving the enterprise up the value chain selling higher added value products or services will drive gross profit margins, which have a direct relationship to the rate of overall business survival. Currency matching. Ensuring that all possible revenues and costs are in the same currency (James' rule) will reduce risks of currency mismatching. Admin strategy and plan. The creation of a bottom up administration strategy and plan will provide a clear focus on risk and where contingency planning is relevant. Finance strategy and plan. The creation of a bottom up finance strategy and plan will provide a clear focus on risk and where contingency planning is relevant Marketing and sales strategy and plan. The creation of a bottom up marketing and sales strategy and plan will provide a clear focus on risk and where contingency planning is relevant Personnel strategy and plan. The creation of a bottom up personnel strategy and plan will provide a clear focus on risk and where contingency planning is relevant IT strategy and plan. The creation of a bottom up IT strategy and plan will provide a clear focus on risk and where contingency planning is relevant New product/service development strategy and plan. The creation of a bottom up new product/ service strategy and plan will provide a clear focus on risk and where contingency planning is relevant. Production/ service delivery strategy and plan. The creation of a production/ service delivery strategy and plan will provide a clear focus on risk and where contingency planning is relevant Premises review. Regular reviews of premise suitability (location, cost, size, working conditions, employee grouping vertical tribes, health impact including SBS) will help in designing out risk and in improving competitive advantage. Premises design for operational efficiency. Regular reviews of premise design will help in designing out risk and improving competitive advantage. Product/ service design. Regular reviews of design components (DFA, DFCA, DFS, DFU, DFD, DFEE) will assist in designing out risk and improving competitive advantage. Fail safe design. One of the most important components of contingency planning. Ensuring that the potential for fail safe systems is maximised (premises, plant, products/ services, operations) will substantially reduce risk. Mission critical standard operating procedures. Introducing and maintaining standard operating procedures in critical areas of the business will do much to ensure that risk is reduced and that opportunities are maximised. Exit planning. Ensuring that enterprise (financial, customer, supplier, employee, shareholder) problems are minimised during a disposal via a structured exit plan will reduce risk. KFR. The enterprise should all work together towards a set of commonly held and understood objectives and assumptions. Measuring the understanding of what individuals within the organisation actually understand will be an important element in reducing risk.
Certification. Certification processes (product, processes) will again improve operational performance. TQM. Creating a formal system within which quality management is achieved and monitored will improve organisational effectiveness.
External validation. For mission critical products and services the inclusion of an independent external validation methodology will reduce the potential for falsification of test results from internal quality management systems. TPM. Creating a formal system within which maintenance is achieved and monitored will improve organisational effectiveness. SCM. Creating a formal system within which the supply chain is established and monitored will improve organisational effectiveness. CRM. Creating a formal system within which customer relations are built and monitored will improve organisational effectiveness. ERP. Creating a formal system within which enterprise resource requirements can be better understood and monitored will improve organisational effectiveness. MRP. Creating a formal system within which materials planning is achieved and monitored will improve organisational effectiveness. E- enablement. Linking suppliers, enterprise and customers together through information systems should reduce costs and improve operating efficiencies. TBC. Following time based competition concepts (especially in speed of response, delivery and new product/ service development) will reduce risk and improve operating efficiencies. Order processing system. A formal order processing system that ensures that products/ services are available on time with appropriate documentation will significantly improve organisational effectiveness. Obsolescence review. A regular review of products/ services, plant, premises, stock, operating procedures and systems will continuously improve operational effectiveness. Cost cutting programme. A continuous review of the enterprise operating environment and the application of cost management techniques will also provide a major source of improved operational effectiveness. Standardisation review. Reviewing products/ services, and operating systems to achieve increased standardisation wherever possible will generally improve operating efficiencies. Advisers. The choice and use of appropriate and independent advisers prior to the choice of particular actions will significantly reduce risk. Trade associations. The membership of trade associations may enhance opportunities and reduce risk through information, support for industry policies, grants, trade opportunities, and potential for networking. Capture theory. Maintaining close links with relevant regulators will provide early warning of potential risk and minimise potential threats. ADR. Incorporating alternative dispute resolution methodology into contracts and operating systems will reduce the potential for long running and expensive litigation. Waste management. Creating a formal system within which waste management is achieved and monitored will improve organisational effectiveness. Financial audit internal/ external. A comprehensive and regular system of both internal and external financial audits when properly conducted will identify and control potential systemic failure. Environmental audit. A comprehensive and regular system of both internal and external environmental audits when properly conducted will identify and control potential systemic failure. Tax management. Creating a formal system within which tax management is achieved and monitored will improve organisational effectiveness. Job rotation. Periods of job rotation as part of succession planning with develop understanding of all aspects of the business and improve internal communication. Job share. The potential for retaining skilled staff through job share programmes is likely to improve long run productivity. Fringe benefits. Certain fringe benefits provide best course solutions to keeping staff, improving communication and motivation. Flexible working. Improving the potential for flexible working will reduce costs and improve motivation.
Meeting management. Creating a formal system within which meeting management is improved and monitored (based around the rule of eight) will improve organisational effectiveness. Time management. Creating a formal system within which optimal time management is achieved and monitored will improve organisational effectiveness. Fraud. Creating a formal system within which the potential for fraud is identified and controls put in place to reduce its potential will be a vital element in risk control. IPR management. Creating a formal system within which IPR management is achieved and monitored will improve organisational effectiveness. Technology transfer. Creating a formal system within which technology transfer is achieved and monitored will improve organisational effectiveness. Shareholder agreement. Clarifying the relationships between major shareholders, particularly in joint ventures, will substantially reduce the potential for conflict. Sales contracts. Formalising sales contracts and including dispute management clauses will substantially strengthen the enterprise position and clarify the relationship between buyer and seller. Competitive bidding. Establishing a mechanism for evaluating the chance of proposal success will reduce the potential for major account failure. Internal competition. Improving the ease with which knowledge centers within the enterprise can gain additional funds for worthwhile investments will substantially improve operational performance and motivation. Corporate governance. Creating a formal system within which effective corporate governance is achieved and monitored will improve organisational effectiveness. Employment contracts. Well structured employment contracts will reduce risk by establishing clear operating criteria for both employee and employer. Pensions. Regular reviews of pension policies will reduce potential long term risk to the funding of the enterprise. Health and safety. Creating a formal system within which health and safety management is achieved and monitored will improve organisational effectiveness.
Health screening. Regular health reviews of mission critical staff will reduce the potential for failure through illness. Due diligence. Due diligence in recruitment, customer and supplier evaluation (vendor ranking), and high risk implementation options (joint ventures, acquisitions, international development) will be important in reducing the potential for catastrophic failure. Industrial relations. Creating a formal system within which industrial relations is established and monitored will improve organisational effectiveness. Code of conduct. A clear statement of expected behaviour and its enforcement at all levels will improve overall performance and shared values. Disciplinary code & grievance procedure. The creation and maintenance of a disciplinary code and grievance procedure is a legal requirement as well as an important check and balance within the enterprise providing that it is objectively implemented. Bonus systems. Creating bonus systems that are enterprise wide, use a variety of targets that link with the overall balanced scorecard, have a high equity component for management, and include a deferred payment method will all reduce risk. Wages ratio. Maintaining a reasonable wages ratio will prevent us and them damage to shared values which will greatly increase overall levels of risk. Communication plan. Creating a formal communication plan with clear deliverable targets to each group of stakeholders will improve operational effectiveness. Training. Formalising training programmes (induction, maintenance, development) will improve skills with the consequent improvement in operational effectiveness. PDP. Focusing on key employees to ensure retention, development and succession planning will reduce potential loss of important skills within the enterprise. Security plan. Creating a formal balanced system within which physical and intellectual security is achieved and monitored will improve organisational effectiveness. Too much and too little security each pose problems, with best practice suggesting that the maximum of access should be achieved within a concentric system for both. The outer ring is accessible to all stakeholders (suppliers, customers, investors), the middle ring all employees, and mission critical plant and data in the inner ring accessible to a limited number of employees. For data this will include material which is maintained off-line. Customer complaints. Creating a formal system within which customer complaints are recorded and monitored will improve organisational effectiveness, and provide early warning signs of potential opportunities or problems. Customer care guidelines. Establishing clear targets for response to customer enquiries is central to retaining customers and achieving word of mouth promotion. Customer/ supplier/ internal service/ employee satisfaction surveys. The regular measurement of performance, both internally and externally will provide information on potential or existing problems/ opportunities. Exit interviews. Formal exit interviews provide a mechanism for in-depth reviews of company policies. Employee suggestion scheme. The introduction and maintenance of an employee suggestion scheme will significantly improve operational performance and identify problems and opportunities at low cost. Whistleblowing policy. Creating a formal whistleblowing policy will provide another mechanism through which problems can be identified and resolved. Trial. A formal testing system for products/ services and for operational changes will substantial reduce implementation risk. External major project supervision. Ensuring that major projects have independent external expert supervision will substantially reduce the potential for failure. Telecommunication plan. Ensuring that communications systems are robust will significantly reduce risk. Covenants. Minimising the impact of covenants on operating decisions and enterprise flexibility will reduce the potential for catastrophic failure. Warranties. The careful design of warranties and guaranties will be important in designing out risk. Recruitment appraisal. Creating a recruitment appraisal system which reviews the rationale for recruitment (new appointment, replacement) will enhance the flexibility of the enterprise and improve cost management. Recruitment. A formal recruitment methodology will reduce the risk of employee failure, and speed up skills acquisition. Nepotism. Nepotism within the enterprise will reduce diversity, encourage informal networks, reduce elements of motivation and often reduce skills. Appraisal. Creating a formal system within which effective appraisal systems are created and maintained will significantly improve organisational effectiveness. Motivational plan. Creating a formal system within which motivation is optimised at lowest possible cost will improve organisational effectiveness. Purchasing policy. Creating a formal system within which purchasing policy is developed and monitored will improve organisational effectiveness. This policy will include the definition of supplier contract policy. Credit management. Creating a formal system within which credit management is achieved and monitored will improve organisational effectiveness Data storage. A formal data storage plan to ensure security of data will be vital as part of designing out one of the major causes of catastrophic failure. Dividend policy. Creating a formal system for managing dividends will reduce potential shareholder conflict. Share buybacks. Minimising share buybacks will reduce enterprise risk.
Sharing risk with stakeholders
Senior staff. Has the enterprise the most effective policies possible
for sharing risk with senior staff?
Supervisory staff. Has the enterprise the most effective policies
possible for sharing risk with supervisory staff?
Other staff. Has the enterprise the most effective policies possible for
sharing risk with other staff?
Major suppliers. Has the enterprise the most effective policies possible
for sharing risk with major suppliers?
Minor suppliers. Has the enterprise the most effective policies possible
for sharing risk with minor suppliers?
Major customers. Has the enterprise the most effective policies possible
for sharing risk with major customers?
Minor customers. Has the enterprise the most effective policies possible
for sharing risk with minor customers?
Shareholders. Has the enterprise the most effective policies possible
for sharing risk with shareholders?
Financial stakeholders. Has the enterprise the most effective policies
possible for sharing risk with financial stakeholders?
Government. Has the enterprise the most effective policies possible for
sharing risk with government at all levels local, national,
transnational?
Mitigating remaining risk
Graduated response. Defining a graduated response to both opportunities
and problems will attempt to reduce the severity and impact.
Hedging. Hedging should substantially reduce risk in volatile cost areas
of the enterprise.
Alternative power. Identifying alternatives to existing systems (UPS,
back up generation) will be an important means of mitigating risk.
Alternative water. Establishing alternatives to existing systems will
mitigate risk.
Alternative location. Identifying alternative locations for the
enterprise will mitigate risk.
Alternative personnel. The use of interim management and other personnel
will provide another means of reducing risk.
Alternative funding. Reviewing alternative funding options to those that
exist will provide a further mechanism to mitigate risk.
Alternative data processing. Reviewing alternative data processing and
storage options to those that exist will provide a further mechanism to mitigate
risk
Alternative storage. Reviewing alternative inventory storage options to
those that exist will provide a further mechanism to mitigate risk
Alternative physical distribution. Reviewing alternative physical
distribution options to those that exist will provide a further mechanism to
mitigate risk
Alternative distribution channels. Reviewing alternative distribution
channel options to those that exist will provide a further mechanism to mitigate
risk
Alternative contract manufacturers/ service providers. Reviewing
alternative funding options to those that exist will provide a further mechanism
to mitigate risk
Virtual office systems. The availability of virtual office systems
enables work to continue without a physical presence as a means of mitigating
risk.
Alternative telecommunications systems. The options of a virtual
switchboard or the use of call centers will mitigate risk.
Insurance. Appropriate insurance policies (customers, personnel,
premises, plant, product, processes will mitigate some of the remaining risk.
ADR. The use of alternative dispute resolution will mitigate the risk of
expensive litigation.
Litigation. Litigation may provide some potential for risk mitigation.
Asset credit review. The asset register will identify the purchase price
of an asset,and its net book value (after depreciation). Reviewing the
difference between the book and market value will identify those assets that
will provide a net return to the enterprise. If such assets are of limited or no
productive value to the enterprise, they will provide an effective mechanism for
mitigating risk.
Creating the contingency plan(s)
Senior management commitment. The creation and maintenance of a set of
contingency plans will always depend on the enthusiasm and involvement of senior
management. If this is lacking, the creation and implementation phases will
fail.
Prioritisation. The focus of plan development should be on high impact/
high probability events, and these should all be included.
Team leader. An individual must be placed in charge of the development
and implementation of the contingency plan.
Team building. The enterprise, in conjunction with the team leader needs
to define other responsibilities and authority for the development and
implementation of contingency plans.
Replacement staff. The enterprise needs to ensure that replacement staff
are available while planning and implementation occur.
Mentoring. The appointment of mentors with previous experience of similar
problems/ opportunities should be identified and incorporated into the team.
Location. The enterprise needs to ensure that contingency staff can be
located together for planning and implementation purposes.
Resources. The enterprise must adequately resource the planning and
implementation of the contingency plan (plant, premises, people, providers).
Scenario building. It is essential to understand both the best and worse
cases that may arise through effective scenario building the greater the
risk, the greater the level of evaluation.
Reviewing the MIS. The ability of the MIS to deliver information on the
various potential outcomes will need to be assessed, and changes introduces if
necessary.
Barrier conditions. The plan should include the definition of barrier
conditions the amount that a factor can change before action should be
taken.
Graduated response. The plan should include various trigger levels
involving different levels of investment as additional barrier conditions are
breached.
Black Swan outline. The contingency plan must include an assessment in
outline of the worst case scenarios and multiple failures and provide a clear
plan of action.
Tasks, timelines, milestones. The definition of the required response to
the various potential outcomes will define the tasks, timelines and milestones
of the required action(s).
Decision grid. In complex contingency plans, there will potentially be
different initiation problems which break the barrier conditions. Creating a
decision grid in which different early stages are identified with associated
tasks, timelines and milestones will be important in integrating the possible
scenarios into the overall contingency plan.
Creating external links. Joint planning with key external providers will
be necessary in many contingency plans.
Critical path. Identifying the necessary sequence of tasks will be
central to the creation of an effective audit trail.
HACCP. Within the range of tasks involved the hazard analysis critical
control points should be identified as part of the plan.
Reporting systems. The plan must include details of how progress will be
monitored and reported, both within the group, to supervisors and externally.
Recovery planning. The contingency plan should include the necessary
recovery steps after the situation has become stabilised.
Reality check. A Devil's Disciple approach to contingency planning,
concentrating on Murphy's Law will provide a valuable perspective on the
viability of the proposed scheme. An additional external review for complex
contingency plans will also improve chances of success.
Links. Relevant links to other documents/ previous reports/ benchmarks
will all deepen understanding of actions and consequences.
Audit trail. The sequence of tasks and milestones must be converted into
an audit trail so that actions can be monitored, team co-ordination optimised,
and implementation reviewed after the completion of the plan.
Data access. The review of the audit trail should also include
accessibility both internally and externally with best practice suggesting that
real time access should be ensured.
Testing. Complex contingency plans must be tested; standard contingency
plans should be tested.
Model answer. The addition of a "model" answer to the audit
trail will further strengthen the quality of the plan implementation.
Communication plan. The contingency plan should include internal and
external communication guidelines
Formalising into SOP. The contingency plan should then be converted to a
formal SOP.
Approval. Senior management should sign off on the SOP after if necessary
further review.
Training. The contingency plan should then be incorporated into standard
training where necessary (induction, maintenance, development).
Formal review period. Major contingency plans must be subject to formal
review (at least every two years) and this timetable should be incorporated into
the plan.
Activating the contingency plan
Identification of broken barrier conditions. The information system
should provide clear indication of when the set barrier conditions have been
breached.
Definition of underlying cause properly understood (distal/ proximal).
The information system should provide a clear indication of where failure is
really occurring and not the surface evidence which will lead to erroneous
choices of action.
Team leader in position. Team leader starts the contingency plan.
Audit trail starts. The audit trail starts as laid down in the plan.
Resource availability. Resources become available as defined in the plan.
Team completion. Internal team completion as defined in the plan.
External team members integrated. External team members integrated as
defined in the plan.
Mentoring/ supervision in place. Mentors and supervisors integrated into
planning and control loops.
Communication plan starts. Communication plan starts as defined in plan.
Critical path/ HACCP managed. Critical path and HACCP points managed and
further corrective action taken if necessary.
Reviewing the contingency plan
Publication in business plan. Identifying the key failure points combined
with barrier conditions will improve the understanding of the enterprise of
major problems and opportunities and also create a platform for a wider
questioning of the underlying assumptions of the existing contingency plan and
whether it is sufficiently comprehensive.
Incorporation in business monitoring system. As a contingency plan is a
project, it should be included in the standard business monitoring system to
identify variances, but also to increase awareness amongst other knowledge
centers of problems or opportunities within the enterprise.
Maintenance training. Contingency planning should be included within the
"general" topics covered within maintenance training to ensure that
staff are all aware of key procedures and expected outcomes.
Random inspection. Random reviews of operating procedures, staff
awareness, and authority and responsibility structures will provide essential
support for key contingency plans.
Impact analysis. The use of an impact analysis system whereby the impact
of changing market drivers and the experience of other enterprises can be
integrated into existing contingency planning procedures will help to ensure
that contingency plans are realistic in the light of changing circumstances.
Mystery shopper. For many contingency plans, the use of mystery shopper
techniques will supplement the role of random internal inspection.
Post event analysis. A post event review is essential to ensure that
successes, failures, and lessons learnt are incorporated into the new
contingency plan.
Exit interviews. The use of exit interviews will enhance post event
analysis by providing a range of perspectives.
Moral hazard. Reviewing the actions of individuals or groups within the
management of the contingency plan and its integration with the disciplinary
system should be considered essential. If individuals or groups learn that poor
behaviour is acceptable and is without sanction, it is almost certain that it
will be repeated.
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