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Project management

What is a contingency plan, and why every project needs one

DJ Waldow 8 min read
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The vast majority of failed projects and bankrupt companies had a plan and followed it. So why do these projects and companies end up failing?

As it turns out, things don’t often follow a script to a tee in the real world. Instead, unexpected things happen that companies don’t plan for, and many fail to adapt in time.

A few years ago, people would have brushed off companies that prepared for global pandemics and government lockdowns. But it all paid off for them in this time of crisis.

The key: having a sound contingency plan.

Simply put, a contingency is all about expecting the unexpected and preparing to deal with worst-case scenarios ahead of time.

This article will cover what a  contingency plan is, why it’s essential, and provide step-by-step instructions for creating one immediately.

What is a contingency plan?

A contingency plan is a plan for a “what if” scenario that could ruin your project or business.

A simple example of a contingency plan is to back up all website data in case a website gets hacked. If this scenario happens, it’s easy to restore the data after regaining access and changing passwords.

Not prepared? The team might have to recreate the entire website from memory or build a website from scratch. That’s a significant expense and can mean several extra days (or weeks!) of downtime.

A contingency plan deals with eventualities like the above. But, it’s about managing and lowering risk and setting up for speedy disaster recovery.

Contingency plan example in monday UI

Running a small business without a digital component? Unfortunately, there are still plenty of things that could go wrong.


  • Most of your staff could get sick on the same day
  • Your supplier could have a delayed shipment
  • Your organization could file for bankruptcy

There’s no limit to how much bad luck you could have. But with the proper preparation, you can still come out on top.

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What is the purpose of contingency planning?

The purpose of contingency planning is to ensure your business operates as smoothly as possible, despite mistakes and unexpected events.

But what’s the big deal?

On average, 32% of customers will walk away from a brand they love after a single bad experience.

Think about what that means.

The far majority could not.

If you’re providing a service that your customers expect 24/7 access to, it’s a constant risk.

When T-Mobile experienced a service outage in June 2020, at its peak, 113,980 customers reported the issue in a 15-minute period.

Graph of T-mobile outage in June 2020

(Image Source)

The outage went on to last for several hours. If even 1/3 of those who reported — not experienced — the issue went on to switch brands, that’s millions of dollars in lost revenue.

That’s what you’re working to prevent at all costs.

Most causes of project failure can be kept at bay with good project planning.

Even couples planning a picnic have a backup plan if the weather forecast is iffy. As a business, you can’t afford to be less prepared than picnic goers!

How to write a contingency plan for your business in 4 simple steps

Have we convinced you that not having a contingency plan is a horrible idea yet?


Let’s cover the basic contingency planning process and detail how to get yours up and running.

1. Map out essential processes.

What processes are essential to your business and safely delivering your product or service to customers?

If you’re a manufacturing company that ships directly to consumers, a simplified process list might look something like this:

  • Getting raw materials from suppliers
  • Manufacturing process
  • Freight and shipping
  • Packaging and warehousing
  • Last-mile delivery

Looking at this list, you can see how vulnerable it is to natural disasters or even minor human errors.

Pro tip: Using a digital workspace platform like, you can plot out every step of your workflow.

Design workflow in monday UI

Create an overview of every crucial process in your organization.

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2. Create a list of risks for each process.

Once the process list is created, consider what might disrupt business continuity.

What can go wrong with each of these critical processes?

Let’s look at an example of what could go wrong with “last-mile delivery” …

  • The driver can deliver single or multiple packages to the wrong address.
  • The package can be damaged during delivery.
  • The package could get lost at a distribution center.
  • A truck full of packages could be involved in an accident.
  • A flood could cripple the road system in a specific area.
  • The driver could get delayed because a moose wants to lick salt splatter off the car (seriously, it’s a thing).

And that’s only a preliminary list. Once you start thinking about it, you’ll realize how many things you rely on to avoid going wrong, even for fundamental processes.

Every business process is vulnerable to some sort of emergency or human error and requires a solid risk management process.

3. Evaluate the potential impact and likelihood of each risk.

Once the risks are identified, it’s essential to determine how they could impact your business.

Are they likely to happen? How large will the impact on your business if they do occur?

Most companies use “qualitative risk assessment” to do this.

PMI uses the following risk exposure assessment table — also called the probability impact matrix — to evaluate … the probability and impact of potential risks.

Risk impact probability table from PMI

(Image Source)

First, rate the severity of the impact on a scale from 1–100. Then, multiply with a percentage based on how likely it is to occur.

4. Calculate costs and contingency reserves, and identify issues to mitigate.

The quantitative risk assessment approach is less common — but more practical — to assess the potential cost of each risk.

How much would each risk potentially cost your business? To get a better overview, add these 4 columns to the risk register template:

  • Full potential loss from the event
  • Expected loss from the event
  • Cost of response (post-event)
  • Cost of mitigation (pre-event)

Quantitative risk register example in monday UI

This means you can make an educated decision when budgeting contingency reserves into project plans and yearly budgets.

During the risk analysis, estimate the potential costs of the adverse event.

EXAMPLE: if your online store goes down, multiply the average online sales revenue per hour with expected downtime. Make one pessimistic and one realistic estimate.

Your hosting service may also have a flat fee for restoring sites, which would be your response cost.

If these costs are unreasonably high and the event is likely, estimate the costs of a mitigation effort. In this case, it could be a firewall and extra procedures, like 2-factor authentication, an important security system, for all employees.

Budget in those costs.

An accurate budget is the first part of emergency response and prevention. Without enough cash, your team won’t be able to put any response plans into action.

5. Create a response plan for prioritized events.

Create a response plan for events by exploring the following questions:

  • What can be done ahead of time to minimize any adverse effects on the event? For example, backing up data, carrying extra stock, or having more employees on call.
  • What can be done immediately after the event to minimize the impact? For example, ordering more from a secondary supplier, rerouting another vehicle, or bringing in on-call staff.

The specifics depend on your company’s unique processes and situation.

Take your contingency plan to the next level with

Having your business contingency plan on paper is an excellent place to start. But it won’t translate to how your entire company will tackle a crisis.

That’s where comes in. Our flexible digital workspace provides everything necessary to ensure contingency plans get followed.

Outline entire contingency workflows in boards before events happen.

Make sure that no employee is left clueless during a crisis. Add contingency workflows directly into the workflow tables.

Contingency workflow in monday UI

Add expandable workflows to any table to ensure everyone follows the same approach.

With this in place, even your newest employees won’t need to bother senior team members and management for guidance whenever something doesn’t go according to plan.

Use integrations to notify someone of an event automatically.

With’s powerful integrations and automations, response times to unfavorable events can be accelerated.

For example, you can immediately create and assign a work item whenever a customer submits a bug report. Zendesk integrations

This approach helps avoid another potential problem: customer service failing to report bug reports to your development team.

Monitor project status at all times in dashboards to avoid bottlenecks and domino effects.

The best time to start acting is before a catastrophic event that puts your entire project or business at risk.

To do that, your management team needs a clear understanding of the project’s status at all times.

With, easily create custom dashboards focusing on the most critical metrics. custom dashboard creation tutorial

Use the 30,000-foot view every manager dreams of to avoid predictable project delays and failures, and check that project controls are working properly.

Contingency plans are a must-have.

When starting a project or business, most people plan according to the status quo. Unfortunately, that’s a best-case scenario and not helpful in the real world.

A contingency plan helps you prepare for worst-case scenarios and keep your project afloat when everything goes wrong.

DJ is a freelance writer specializing in all things words. He's a father of 4 (including twins), husband to one, and an alum of the University of Michigan. DJ is a self-proclaimed giphy master and #HashtagAddict.

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