Business Contingency Planning & Risk Assessment – Why is it so important?
Surprisingly, something that many business owners don’t have is a contingency plan – a plan can help businesses prepare for unexpected events that could disrupt their business. Different factors could affect how a business operates as well as market changes that could affect revenue and value.
Creating a contingency plan can be daunting as there are a lot of different scenarios that could occur and it can be quite frightening thinking about what might happen. However, being prepared for the unexpected can be the difference between your business surviving and thriving or sinking ship due to the unexpected.
A few different areas that you should think about when creating a contingency plan for your business:
A pandemic is probably the last thing that a business owner would have thought about in the past but as the previous two years have shown, a pandemic can flip a business onto its head. With us not being completely out of the clear with COVID just yet along with the risk of future pandemics, it’s important to learn from the lessons from the Coronavirus pandemic and plan for the future.
Business owners will need to think about how they will be able to continue to work if the country was to go into a lockdown again, how would you be able to operate if staff were unavailable etc.
Planning for a recession is more about forecasting – what could your turnover look like in a mild, medium or deep recession?
It’s a good idea to plan for a few scenarios so you can take steps quickly to early signs of an economic dip. For example, if you need to work with a reduced number of employees, are you still able to operate how you currently are – could you add automation systems or new machinery to speed things along?
People and illness
If a critical member of your team falls ill or needs to take extended leave, your business will still need to run. Planning for the event that one of the directors or head of departments needs to be off, who would be able to cover for them and could you pick off where they left off?
Cross training in a company can mean people’s share skills and can make a business more resilient. Additionally, using a central CRM to monitor work or a shared platform means that everyone can see where everything is up to, what needs doing and what has been done.
What could you do if something was to happen to your supply chain? You may use an external company to deliver your goods or service or what if they’re unable to get a product that creates your product?
To avoid any problems, it is good to have a list of alternative suppliers with their delivery times and costs. Therefore in the event that your primary choice was unable to deliver or faced with problems of their own, you have a list of options available.
Now that we have gone through what might affect your business, what can make your planning as effective as possible?
Always have a buffer
Unfortunately, you can’t plan for everything so it’s a good idea to always have a cashflow buffer in place. A finance facility could be a good option as you’ll be able to access finance to support any cash flow issues that you may have.
It’s good to use a commercial finance broker who will be able to search the market on your behalf, saving you on time but also will be able to find you the best deal that’s available at that moment in time.
Practice makes perfect
It’s all good and well if you put all your plans on paper but if you don’t practice them, how are you meant to know if they work? You can do practice runs of once a year at least to see if your plans would work. If you see areas that could be improved, you’ll be aware of the issues and make those improvements before / if the real thing was to happen.
Seek advice from your team and professionals
When you’re contingency planning, you will know what it takes to run your business day but there might be some areas that you might not be so knowledgeable about. Consequently, it can be good to ask your head of departments for their thoughts and advice and use their input to create your plans as they will have the most knowledge about their teams and department.
Also, you can hire professionals such as financial advisors. They will assess your operations and advise you on dealing with any upcoming problems. A fresh set of eyes can give you new outcomes and solutions and could shine a light on potential risks that you missed.
Know your industry
You’ll need to think about your industry and how it will respond to different factors. For example, during the Coronavirus pandemic, the hospitality industry was badly affected and they need to think about new ways of generating an income which led to many businesses offering delivery.
You will need to think about ‘smaller’ things such as if you have a power shortage, system failures, damage to premises and data leaks etc and how will you be able to respond. You could join trade or industry associations to compare your plans to other business owners and work together on finding a solution.
A contingency plan isn’t something that you create once and then it’s good for the lifetime of your business. As your business grows, breaks into new markets and purchases more assets, you will need to re-evaluate your contingency plans to meet your business requirements.
Amplo Commercial Finance is a Commercial Finance brokerage that arranges finance solutions for large and small assets (large machinery and equipment to security and computer equipment), cash flow finance and business loans for cover anything else that your business may need such as training course, new CRM or software and much more!
If you would like a no-obligation discussion about your finance options, don’t hesitate to get in touch with a member of our team. Call us on 01270 443510 or complete our contact form and we’ll be in touch whenever is best for you.