Business Contingency Plan: Your 2026 Guide To a Powerful & Essential Tool

Companies of all sizes need a business contingency plan. You never know what might trigger a domino effect to create challenges for your organization. For example, in March 2025, a fire at a nearby substation shut down Heathrow and canceled more than 1,300 flights. Europe’s busiest airport went dark because of one seemingly inconsequential link.

A rare software bug triggered an outage of Amazon Web Services in October 2025, cascading disruptions to sites and online services around the world. Reports indicate the event impacted more than 2,000 large organizations and 70,000 total businesses, including services like Snapchat, Venmo, and major banks.

A recent global survey found that 82% of companies now see their supply chains directly affected by new tariffs, with 20% to 40% of their operations impacted. 

And while the average global cost of a data breach has dropped 9% this year, it still sits at a staggering $4.4 million. 

Put all of this together and you quickly see that businesses are dealing with more moving parts than ever—and those parts fail more often than anyone likes. 

Ahead, learn how to create a contingency plan that works for the world you’re running a business in today. 

What is a business contingency plan?

A business contingency plan is a documented strategy for protecting your assets, revenue, and stakeholders when things don’t go as expected. The plan prepares your company for unforeseen risks and gives you a clear path for responding to unexpected events or disruptions; anything from a supplier failure to a cyber incident to a sudden systems outage. 

Instead of scrambling, your team already knows what to do and how to keep the business moving. 

These are the core components of a business contingency plan:

• Risk identification. The specific events or issues that could disrupt operations.
• Actionable steps. What your team should do the moment a disruption occurs.
• Resource allocation. The people, equipment, tools, and budget required to execute the plan.
• Communication protocols. How and when to notify internal teams, customers, partners, and vendors.
• Trigger points. The exact conditions that activate the plan so decisions aren’t left to guesswork.

Business contingency plan vs. risk management

Risk management is the strategic assessment process which helps you spot potential threats, estimate their impact, and decide which ones deserve attention. 

A business contingency plan, on the other hand, is the actionable response component, which kicks in after a disruption occurs and guides your team through the immediate steps needed to protect revenue and assets.

Why your business needs a contingency plan

Disruptions rarely stay contained anymore, which means a delay or breakdown in one part of the business can ripple into several others quickly. A contingency plan helps absorb these shocks before they reverberate through your entire operation.

• You reduce the impact of disruptions. More than 60% of organizations rated their resilience practices as “Basic” or “Ad Hoc” in MESH’s 2025 Supply Chain Resilience Report.
• You operate closer to the small group of genuinely resilient businesses. Only 6% of companies reached a “Leading” resilience level in more than one area. Planning puts you closer to the minority that can keep moving when conditions change.
• You catch technology-related risks before they cascade. Forty-one percent of MESH respondents said new technologies increased their exposure to risk due to misalignment, undertrained teams, or integration gaps. A contingency plan helps you catch these weak points before they cause downtime.

Contingency plan examples

Say part of your team is based in the Midwest. A tornado makes landfall near the area where three employees live, knocking out power and Internet access. They’re safe, but they won’t be able to work for at least 24 to 48 hours.

A strong contingency plan outlines exactly what happens next:

1. Immediate check-ins. A designated response lead uses the company’s emergency communication channel (e.g., Slack safety check, SMS fallback, or an automated call tree) to confirm the impacted employees’ status.
2. System reassignment. Critical workflows owned by the impacted employees such as order fulfillment approvals, inventory updates, live customer-support queues, or vendor communication, are reassigned in your operations system.
3. Cross-trained backups step in. The employees covering these responsibilities have been cross-trained in advance. They already know how to access the affected systems,
   how to follow the documented SOPs, how to handle exceptions (e.g., back orders, refund approvals), and where escalation goes if they hit a roadblock.
4. Customer-facing communication (if needed). If the outage affects fulfillment speed, customer support posts a brief update to the help center and adjusts response-time expectations. VIP accounts or wholesale buyers receive a direct, personalized update via email or phone.
5. Internal updates. Leadership sends a short status note to the broader team documenting: who is offline, which tasks have been reassigned, expected duration of the disruption, and where to find the active contingency workflow.
6. Return to normal operations. When the affected staff regain power and connectivity, operations transition back. The contingency plan includes a quick handover checklist so nothing gets lost during the switch.

5 steps for creating a contingency plan

Here’s a step-by-step guide for developing a contingency plan:

1. Assemble the planning team and brainstorm key risks

Start with a small group of people who know how your business runs. That usually includes folks from IT, operations, HR, procurement, sales, and support: the teams who see the day-to-day friction points long before they become real problems.

From there, focus on getting buy-in—leadership needs to agree on priorities, managers need to confirm what’s realistic, legal and compliance will flag anything with regulatory implications, and frontline employees can point out workflow breaks that only show up when things get busy. 

A quick, open conversation about what could go wrong is enough to get this moving. The goal at this stage is building a shared understanding of where the business feels vulnerable.

2. Perform a business impact analysis (BIA)

A BIA helps you understand which parts of the business you absolutely can’t afford to lose and which risks deserve your attention first. 

Start by mapping your core functions: things like order processing, inventory visibility, payments, customer service, and staff availability—and ask what would happen if each one went down. 

How quickly would revenue take a hit? How long could you operate without that system? Would the issue spill into other teams?

To make this easier, many companies use a simple likelihood versus impact chart. You plot each risk on a grid: how likely it is to happen and how disruptive it would be if it did. Seeing everything laid out visually makes the priorities obvious. High-impact, high-likelihood risks go to the top of the list, while low-impact items may not need more than a basic contingency note.

Once mapped, sort your risks into high, medium, or low priority. This keeps the planning stage manageable and helps you avoid spending time on scenarios that won’t meaningfully affect the business. 

3. Develop response and recovery strategies

Next, it’s time to outline how the business will respond if any of those scenarios occur. This is where you define who does what, which resources are needed, and how the company moves from disruption back to normal operations.

Start by clarifying the basics:

• Personnel requirements. Who needs to be involved during a disruption? Who leads, who supports, and who steps in if someone is unavailable?
• Equipment and system needs. Which tools, backups, or devices are essential to keep the business running (e.g., laptops, hotspot kits, backup POS hardware, alternate fulfillment systems)?
• Budget allocation. Some responses require spending—temporary labor, expedited shipping, emergency equipment, or system redundancy; setting rough budgets ahead of time prevents slowdowns later.

Then, map out your response types as clear, skimmable actions:

• Emergency response procedures (employee safety checks, facility closures, evacuation protocols)
• Data backup and restoration steps
• Alternate supplier or logistics options
• Remote-work arrangements for teams affected by outages or travel disruptions
• Natural disaster recovery response for region-specific risks (storms, fires, floods)
• Supply-chain crisis management, including rerouting orders or reallocating inventory
  
  

Finally, define your trigger points: the objective signals that tell your team it’s time to activate the plan. For example, it could be a system outage that lasts more than a set number of minutes or a regional weather alert reaching a defined severity level.

⚠️Note: Recent criminal hacks on Marks & Spencer, The Co-op, and Jaguar Land Rover forced stores to deal with empty shelves and even halted production lines because their IT systems went down without warning. The UK’s National Cyber Security Centre says this is exactly why every business needs a plan for operating without technology, even if only for a few hours. That includes very simple steps:

• Keeping an offline or paper copy of your contingency plan
• Outlining how teams will communicate without email or messaging apps
• Documenting the manual workarounds needed to keep orders, payments, or production moving

The agency calls this approach “resilience engineering”: assume your systems will fail and make sure the business can keep working anyway.

4. Test the plans and train staffers

Conduct plan testing through simulation exercises to assess your contingency plan’s strengths and weaknesses and to determine if there is any need for changes, or even a backup plan or Plan B. If the plan is revised, inform key staff and train them in the new protocols. 

This could include natural disaster and fire drills, mandatory employee training on cybersecurity best practices and crisis response, or cross-training some staffers to perform other duties if needed. 

Waffle House restaurants have a reputation for effective handling of disasters, leading to a former FEMA administrator Craig Fugate coining the term “the Waffle House Index.” After observing the $2.8 billion worth of damage from a massive tornado in Joplin, Missouri in 2011, Fugate noted both Waffle House restaurants in the area remained open. 

Business contingency plans include a limited menu and temporary storage options for times of food shortages and power outages. “Waffle House jump teams” are specially -trained to quickly reopen restaurants following disasters. Since then, the three-color index has become an informal indicator of a storm’s severity and impact on the community.

5. Regularly review new risks and update plans as needed

Set a clear review schedule so updates become routine rather than reactive.

Most companies use a quarterly check-in to scan for new risks and a deeper annual review to refresh the full plan. You should also trigger an immediate update after any major incident, even if it wasn’t internally caused, to capture lessons while they’re fresh.

A good review process includes:

• Re-evaluating your risk list. Have probability or impact levels changed? Did a new dependency emerge?
• Checking operational changes. New hires, new tools, new suppliers, or new locations may introduce vulnerabilities you haven’t planned for.
• Testing key workflows. Run short tabletop exercises or simulated incidents to make sure teams understand their roles.
• Confirming resource availability. Are backup devices still functional? Are alternate suppliers still viable? Does the budget need adjustment?
• Updating communication details. People change roles, numbers change, and teams grow—outdated contact trees are a common failure point.
• Documenting improvements. Incorporate lessons from internal issues or industry incidents so the plan gets sharper over time.

6 types of contingency plans

Contingency plans are unique to each business, but there are several major types of contingency plans, including:

1. Information systems

This is a primary plan for many companies because most organizations depend on computers, data storage, and the internet for daily operations. Risks include system outages, cyberattacks, and data breaches. The contingency plan may cover data backups and recovery, system redundancies, and hacking response procedures.

2. Disasters

Disaster-related contingency plans cover everything from small, inconvenient incidents to large-scale events that can halt operations entirely. A lower-impact scenario might be something like a burst pipe that forces your team out of the office for a few days. On the other end of the spectrum, a hurricane, wildfire, or major flood could shut down a warehouse, destroy inventory, or leave an entire region without power.

The response scales with the severity of the event. So, smaller incidents may only require temporary relocation or a quick IT restoration, while larger disasters often demand a broader playbook: confirming employee safety, shifting critical business functions to alternate sites, and activating remote-work protocols.

3. Financial

This part of the contingency plan addresses financial events that may be internal to the company or macro external factors. Risks include inevitable periodic economic downturns, which can hurt customer spending power and demand for your products. Other risks may be internal and potentially more damaging, like employee theft of funds or inventory. 

A strong financial contingency plan outlines how the business will stay liquid and operational during these periods. Many companies aim to keep three to six months of operating expenses in cash or easily accessible reserves, depending on their size and cash flow predictability. Others secure a pre-approved line of credit so they can stabilize cash flow without scrambling for financing under pressure.

Plans may also include:

• Short-term cost controls that can be activated quickly
• Alternative revenue streams or promotional levers to boost cash inflow
• Scenario planning for different levels of demand drop
• Inventory adjustments to avoid tying up cash in slow-moving stock
• Fraud-prevention protocols to reduce internal financial risks

4. Crisis communications

This portion revolves around clear internal and external crisis communications. Risks include a lack of internal alignment on messaging, confusion among employees about the company’s response or their part in it, and negative external attention or press coverage that harms your brand or reputation. 

This plan should include processes for clear communication channels to staffers and external stakeholders, training and briefing of designated spokespeople, and establishing a chain of command to manage messaging and keep important parties up to date on the crisis as it evolves.

5. Health/pandemic

A post-pandemic study by a risk management firm found that 53% of employees said their company was not prepared for COVID-19 at all.

A contingency plan for health-related events should go beyond general safety statements and outline the exact steps the business will take to protect employees and maintain operations. These measures often include:

• Clear safety protocols. Mask requirements when relevant, ventilation guidelines, wellness checks, or symptom reporting processes.
• Workplace access rules. Who can enter a facility, how visitor policies change during outbreaks, and how to handle exposure notifications.
• Remote-work readiness. Ensuring employees have the equipment, VPN access, software tools, and support they need to work from home without disruption.
• Shift and staffing adjustments. Staggered shifts, reduced in-person headcount, or backup staffing plans if multiple employees fall ill at the same time.
• Communication guidelines. How updates are delivered to employees, customers, suppliers, and partners; especially if policies change quickly.
• Business continuity planning for essential functions. Identifying which roles must remain on-site and what additional safety or automation steps support them.

6. Supply chain

Your company’s ability to produce products and services may depend on access to materials or suppliers. If so, risks include disruptions like raw materials shortages, supplier failures, and trade restrictions. Mitigation plans may involve securing backup suppliers, tracking logistics challenges in the market, and maintaining an emergency supply of inventory or materials.

Common contingency planning mistakes

Here are the slip-ups that show up again and again in contingency planning processes:

• Not getting the right people on board. A plan made in a vacuum usually stays in a vacuum. If leadership, IT, ops, finance, and frontline teams aren’t involved, the plan won’t reflect how the business works—and more importantly, no one will follow it when things get stressful.
• Treating the plan like homework you finish once. Businesses, tools, suppliers—they all change. If the plan doesn’t change with you, you might as well be preparing your 2026 team for 2023 problems.
• Never testing the plan. Quick drills and tabletop walk-throughs help surface the awkward bits like unclear roles, missing steps, or unrealistic timelines, long before a real disruption exposes them.
• Forgetting to define “when we actually use this.” Teams freeze when they aren’t sure if an incident is serious enough to activate the plan. Simple trigger points, like a system outage lasting X minutes, remove that hesitation.