Aw, contingency planning! It’s no fun planning for what is defined as “a future event or circumstance, which is possible but cannot be predicted with certainty.” For starters, sounds pretty wishy-washy for those entrepreneurial folks that are used to dealing in the hard facts and data. Not to mention, it can be a bit of “downer.” Yet, it is as necessary to the success and sustainability of your smartly-run business as it is surrounding oneself with advisors in respective niche areas (like the team at OFWF!).
A (tasty) yet memorable note on business contingencies
Are you familiar with the Waffle House index? While we in America’s Heartland may not be graced with the chain’s presence, it is a fixture of Southern society. It is better known for “hearty” portion sizes than a Michelin-rated dining experience. It’s also known for often extreme reliability. No stranger to tropical storms, hurricanes, floods, tornados and all sorts of weather phenomena, the “Houses” are renowned for opening quickly in the aftermath of these and other events, even if they are only able to serve a stripped-down menu.
So, why are we talking about this Southern staple? Waffle House provides an exceptional barometer as to just how severe a weather event and its aftermath may be; for instance, if one’s local Waffle House is closed, that’s not a good sign. Former FEMA leadership have even coined an “index” with varied threat levels depending on the state of the chain’s stores. “Red” is a shuttered space. That’s bad. “Yellow” is the limited menu. Not the “norm,” but not the “worst.” And “green” is “business as usual,” complete with full menu of grease-drenched fare.
Courtesy of Waffle House, we’ve already highlighted one of the first contingencies that people think when they hear the word: Mother Nature. Specifically, we’re talking about those natural threats that are prescient to each location that you may have, given the geographic area and based, at least somewhat, on precedent respective to each store, office or branch. More broadly, this notion reinforces the importance of considering risks that are respective to one’s organization, as well as each imprint that organization may have. What is risky for one team may not represent a vulnerability for other teams.
It makes sense, then, to start the process by assessing those respective risks. Pretend that you have a “crystal ball” to anticipate some of the most likely events that could bring one’s business to its knees.
· Bring everybody to the table. All stakeholders and relevant parties should have input into identifying these risks. In fact, it may very well be the front-line or entry-level workers that have the best idea as to the critical risk exposures that could result in dreaded downtime. Do not devalue them due to a lack of seniority, in favor of higher-ups that may be out of touch, working from their back offices, with those critical elements of day-to-day operations.
· Get it in “writing.” Flesh out those specific threats. Largely, they come down to the aforementioned “natural” element, as well as the “human” element and technology factors.
· In addition to soliciting input from a wide range of team members, be sure to lean into extensions of your team, such as the expertise of our team. Other “advisory” members such as insurance or risk management professionals and attorneys will no doubt need to have a “say” in these discussions, too. After all, this is what we do as consultants and partners with our client-organizations.
· Get organized! Use quantitative and qualitative insights to then prioritize the threats once you have narrowed them down. The final order of this list will no doubt be driven by the potential, estimated impact of each threat on your business, or the impact of each “disruptor.”
Just a few of the common disruptors that affect many different types of organizations, sectors and industries include (in no particular order):
· Damage to physical investments, from fires to hailstorms
· Breakdowns of “mission-critical” equipment
· Outages (utilities such as electricity)
· Data breaches and other cybersecurity issues
· Particularly timely in the COVID era: Supply chain interruptions
· Messy personnel issues, including potential workplace violence situations
Likewise, we’ve listed a few of the potential impacts to evaluate, as it relates to each of the disruptors that your team identifies (again, in no particular order):
· Sales losses
· Surging costs; for instance, for overtime and outsourcing
· Fines and penalties related to compliance issues
· Loss of contracts
· Angry or unsatisfied customers
· Poor customer retention
· Delayed expansion
· Stalled growth
· Negative publicity that damages your brand
· Low employee morale, poor engagement
The above lists provide a framework for you to draft a response to each threat. Our savvy clients know that it’s a good idea to consider both near-term actions and longer-term strategies. For example, when listing “fire,” an immediate action may be to assess the existing sprinkler system. Make upgrades or install a new system or additional equipment. “Post-event” action items include reporting the incident to appropriate insurer contacts, and also identifying and setting plans in motion for alternate locations, or (if applicable to your business), work-from-home arrangements may be deployed.
Speaking of equipment investments, to the very real concern of critical technologies breaking down, near-term actions might include exploring insurance that covers such incidents, as well as identifying back-up equipment, rentals, parts and repair providers in the local area. That way, you can deftly deploy the longer-term/post-incident response: Contacting the identified, on call repairperson or the appropriate rental if the equipment can’t be repaired straightaway.
Finally, as with employee benefits, what good are contingency plans if they are not communicated to the right people? Many organizations make the mistake of creating these glorious plans and then they sit on a shelf, where they collect dust. One, these are living, breathing documents that need to be regularly reviewed and updated. Two, while planning, the parties that should be aware of such contingencies must be notified. These may very well be the same employees that were consulted for feedback on risks. Assure all of these plans are stored securely in the “cloud” and offsite locations in the event that one of these contingencies arises. And, it’s a fact of life that one’s business will encounter firsthand what was evaluated and theorized, and is an “item” on your list. As with taxes, it is a matter of “when” and not “if.”
With so much riding on contingency planning, trust the experts at OFWF. We are privileged to be area organizations’ partners in the financial health and sustainability of their business assets.