How to Make a Contingency Plan in 6 Steps
Sometimes things are simply outside of our control. We all know it, and the most effective thing we can do is to go into situations with our eyes open, aware of the risks, with an excellent contingency plan to bail us out.
The best Project Managers don’t expect everything to neatly follow ‘Plan A’ to the letter. Instead, they embrace the fact that they need to be an expert in contingency planning. It’s true that nobody particularly wants to spend time imagining the various and creative ways in which their projects could end up tanking. But putting the effort into a thorough contingency plan will remove much of the risk that your project will go south as soon as an issue arises.
- What is a Contingency Plan in Project Management?
- Contingency Plan Examples
- What’s the Difference Between a Contingency Plan and Mitigation Strategy?
- 6 Steps to Create a Contingency Plan
What is a Contingency Plan in Project Management?
You can think of a contingency plan as the ‘Plan B’ that will prevent your project from grinding to a halt when something goes wrong. But contingency planning isn’t just for major disasters. In the world of project management, it’s far more common that your project will be beset by lots of little risks which compound into bigger delays and more overspending than you would have originally anticipated.
You should build contingency plans for small risks as well as big risks. Indeed, the more important considerations are how likely the risk is likely to become reality, and how ‘mission critical’ the impact would be. If this sounds confusing, have no fear. We will dive into this later.
Contingency Plan Examples
These are some examples of what contingency plans could look like in project management, to counter specific risks. Note that these plans are designed to counter unavoidable risks, both big and small, that could lead to major negative impacts on the projects:
What’s the Difference Between a Contingency Plan and Mitigation Strategy?
Both contingency planning and mitigation strategies sit under the umbrella of risk management, but there is a big difference that separates them. When you come up with a strategy to mitigate a potential risk, you are reducing the chance of the risk becoming reality at all. For instance, you mitigate the chance of your stakeholders being dissatisfied with elements of your project by implementing a stakeholder management plan.
But many factors can’t be controlled for in this way. A classic example to illustrate this sort of unknown factor is the weather. You can’t mitigate the chance of it raining: it either will rain, or it won’t. All you can do is come up with a Plan B in case it does rain. And this is the major difference between a contingency plan and a mitigation strategy: a contingency plan is for factors that you can’t control.
The sorts of uncontrollable factors that a Project Manager might encounter include anything from staff sicknesses, right up to catastrophic disruption in supply chains from outside, unexpected factors (I’m sure none of us will ever forget the bizarre image of the container ship the Ever Given stuck sideways in the Suez Canal...). The next 6 steps will guide you to build a contingency plan for any risk you may encounter while managing projects.
6 Steps to Create a Contingency Plan
1. Identify the Risks
To kick off your project contingency planning process, use your experience and contextual knowledge to pinpoint what risk factors are at play. You might be able to draw from other, similar projects that your organization has completed - though don’t assume you can copy an existing contingency plan verbatim. You need to consider if there is anything particular about this project that introduces new risks or makes existing risks more likely.
But, equally, it is impossible to identify absolutely every risk factor that could arise. The end goal of your contingency planning is to create a plan that is fit for purpose. You might identify some risks with a vanishingly small likelihood of occurring, but it wouldn’t be an effective use of time to plan for these. List the risks that are feasible and reasonably probable, then move on to analyzing these risks more closely.
2. Analyze Their Severity
Once you’ve identified the risks you need to plan for, you can decide which risks are the biggest concerns for your project. Creating a contingency plan for absolutely every possibility simply wouldn’t be an effective use of time and resources. You need to use your judgment to determine where the priority lies.
An Impact-Probability Matrix can help you to identify which risks should be the focus of your planning. Take our model below as an example. Plot out the risks you have identified onto the matrix, first by judging how likely the risk is to become a reality, from ‘very likely’ to ‘very unlikely’. Then, assess what level of impact you would expect the result to be: would it have a ‘negligible’ impact on your project, a ‘severe’ impact, or would the impact be somewhere in between?
You should certainly put plans in place for anything that you’ve identified as ‘high’, ‘medium-high’, or ‘medium’ risk. But you might decide that ‘medium-low’ and ‘low’ risks require minimal planning or none at all. Either way, this exercise helps you whittle down the list of risks you are planning for, and helps you to see where you need to put the bulk of your efforts in the next step.
3. Come Up with Your Actions
Now you know what you need to plan for, it’s time to draw on creativity, ingenuity, and experience. How are you going to counter these curveballs if and when they come along?
For most problems that you’re going to face, there will be more than one possible way to solve them. Some solutions may not be immediately obvious, but each approach will have its own pros and cons. It’s a great idea to bring a select number of other people into this process, so that you can benefit from any ideas and experiences that they have had which may be relevant.
These people don’t necessarily have to be project stakeholders. In fact, someone without a stake in the project could be an ideal sounding board, or the perfect person to sense-check your plan before you try and get it approved. Their distance from the project could free them up to highlight issues that you hadn’t considered, or even give you ideas to add to your plan. Tim Koller, author and Partner at McKinsey, recommends taking this approach and being open to challenge during the contingency planning process. “Who challenges [your plans] will vary depending on the project’s nature. It could be a more senior executive or somebody not involved in the project, like an engineer from a different part of the company...or a retired executive.”
4. Get the Plan Approved
Once you’re happy that you have a solid contingency plan, there will most likely be an approval process - whether that remains internal, or whether the plan is also presented to external stakeholders.
Ideally, you want your contingency plan in place at the same time as the overall project plan is being signed off. Indeed, you may need to submit your contingency plan at the same time as the project plan. This is really the best approach: if your project plan is approved without a contingency plan, the project is in dangerous waters. Best practices are recommended for a reason; kicking off your project without having a contingency plan ready definitely isn’t an example of best practice. We wouldn't suggest it!
5. Communicate the Plan
A plan that stays on paper alone isn’t going to get you anywhere. Communicating your plan clearly is going to be key to its success. Your team needs to know exactly what is expected of them to action a contingency plan.
If the plan depends on your team to make some preparations, make sure that these tasks are allocated, prioritized…and actually completed. It’s no use issuing a plan that requires some actions to be taken, only for disaster to strike and for you to find out too late that the actions were never taken. Forecast’s interface makes it incredibly clear for project team members to see what tasks they need to prioritize, and equally easy for you, as the Project Manager, to see when these crucial tasks have been completed.
6. Review, Review, Review!
By this point, you know that if the worst happens, you’re ready to meet it head-on with an effective contingency plan. But it’s no use sitting back and feeling smug that you’ve covered all your bases. The best-laid plans can easily lose relevance if your project changes.
Adapting your project plan to meet changing demands and scope is just one part of your role as a Project Manager. Updating your contingency plans is a step that needs to be an ongoing part of this process.
You may also need to update your contingency plans as new information comes to light. Of course, in an ideal world you’d have all the information you needed straight off the bat - but how often does that happen? Remember, the golden rule is that your contingency plan has to always be fit for purpose, no matter what stage your project is at. Build scheduled contingency plan reviews into your project plan to make sure that these vital check-ins don’t get missed out.
Don’t Start Your Project Without a Plan B!
In the world of project management, it simply isn’t worth ‘hoping for the best’ and keeping your fingers crossed that nothing will go wrong. By implementing a well-thought-through contingency plan, you safeguard your project from complete disaster (and save yourself a lot of stress).
At Forecast, we believe in surfacing best practices and providing avenues for organizations to embed these practices seamlessly into their project operations. Why not start a free trial of Forecast today to explore our platform, and see how we can streamline collaboration between all members of your project-based business? A contingency plan will only work if everyone is on the same page. Forecast gives you one source of truth for your project work, meaning that everyone is crystal clear about what they need to do - whatever is on the horizon!
