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How to plan for contingencies in business?

Begin by outlining arrangements you've made (or intend to make) to ensure you, your family, your employees, and your business will be able to adapt to potential changes. These arrangements could include:

  • Personal insurance like disability and life insurance
  • A will
  • Business insurance, such as commercial property, interruption, and general liability insurance
  • Credit insurance
  • Employee insurance, such as worker's compensation insurance

Most businesses are required by law to carry workers' compensation insurance coverage. This protects you and your business against staff lawsuits related to work injuries and illnesses, and provides benefits to injured employees.

To find out more, visit the website of your provincial workers' compensation board or commission.


Planning for the loss of management experience

Succession plans also need to provide for changes to management (or ownership) of your business in the event you or other key members of your team unexpectedly decide to leave the business or are unable to work.

Losing one key staff member can potentially undermine your small business. You’ll need to protect yourself and your business’ future by drawing up a contingency plan in case of disability, death, or a resignation.

A thorough plan will help reduce uncertainty about your business' prospects by reducing the risk of team failure.

Consider what unexpected challenges might lay ahead

After thinking about contingencies for potential internal issues, contemplate the external challenges your business might face. These obstacles could include:

  • Competitors – what if a major new competitor moves next door?
  • Suppliers – what if a key supplier fails to deliver?
  • Customers – are you dependent on one or two large customers? Do any of your customers account for a significant portion of your total sales? What if one of your best customers leaves, or something happens that significantly affects the demand for your products or services?
  • Labour – what if you can't find staff with the skills required, or if there's a strike?
  • Industry trends and factors – what if there are regulatory shifts. For example, a new local government gets elected. There could also be economic shifts such as interest rates being raised, or environmental developments like when a weather-related disaster strikes.

It’s important to plan for all conceivable challenges that might affect your business sometime down the line. Being prepared will give you the tools to deal with a potential crisis and allow you to keep your business up and running while normality returns.


When a disaster hits

It goes without saying that if your business is located in an area that is at risk of natural disasters such as earthquakes, hurricanes, flooding, or tornadoes, it’s wise to include these worst-case scenarios as part of your contingency planning.

Consider scenarios where your staff may not be able to come into the office. Are they able to switch to your ‘Plan B’ and work effectively from home?

Some possible solutions might be to scatter critical functions across multiple locations, if feasible. For example, your web programming team can probably be set up to work remotely.

At the end of the day, it’s worth your while sitting down and discussing with your staff all the possible worst case scenarios that could happen, so you’re prepared for the unexpected by creating a disaster recovery plan that is tested and updated periodically.