What is contingency planning and why is contingency planning important?

Thanks for invitation

A contingency plan is a course of action designed to help an organization respond effectively to a significant future event or situation that may or may not happen. A contingency plan is sometimes referred to as "Plan B," because it can be also used as an alternative for action if expected results fail to materialize

Whether you run your small business alone and work out of your basement, or have several employees based at multiple office locations, it’s always important to have contingency plans in place.

Preparing in advance and knowing how you intend to react in the face of a disaster or health emergency provides more than just valuable peace of mind. It could be the path to keeping your business afloat in stormy conditions. Although you never want to have to use your contingency plans, you’ll be thankful for having them in case they are ever needed.

Actually contingency planning is like "Plan B" which might be adopted or not. It is basically made for mitigating risk or disaster in business.

A contingency plan is a plan devised for an outcome other than in the usual (expected) plan. It is often used for risk management when an exceptional risk that, though unlikely, would have catastrophic consequences. Contingency plans are often devised by governments or businesses.

.Contingency planning and risk management are essential components of any business strategy 

Contingency planning and risk management are only as good as the strategies developed to help 

mitigate the potential financial damage to your company

  Incorporating opportunity planning into your contingency plans can allow your company to get ahead of the competition in a variety of areas, including developing new products to meet a need in the market 

A unexpected Destruction from Internal Resources or by the Nature assume as contingents.

So in any business always challenge unexpected Internal Resources or Nature Destruction "like Flood, rain storm  etc" SO, Contingent plan should be there for rescue business.

According to Financial Accounting Standard Board -- FASB ,  SFAS no 5 

a contingency is defined as an existing condition, situation, or set of circumstances involving uncertainty as to possible gain or loss  to an enterprise that will ultimately be resolved when one or more future events occur or fail to occur. Resolution of the uncertainty may confirm the acquisition of an asset or the reduction of a liability or an asset 

I can describe the core element of contingency plan as "option B" or "exit option"

No one can predict the future or how events beyond an organization’s control will affect its ability to continue to operate. But businesses can prepare for events beyond their control. Using a “what if” process, organizations develop contingency plans, sometimes called business continuity plans, to identify unknown scenarios that may affect their operations, such as earthquakes, fires, violence and other situations and how they will respond to each scenario.

Definition: A contingency is anything that occurs outside the range of normal operations that may adversely affect an organization’s ability to operate. Simply stated, contingency planning is about being prepared and is an integral part of regular operations planning. A contingency plan is a blueprint for how to deal with unusual events. Regardless of size, all organizations need contingency plans.

Purpose: The purpose of a contingency plan is to allow an organization to return to its daily operations as quickly as possible after an unforeseen event. The contingency plan protects resources, minimizes customer inconvenience and identifies key staff, assigning specific responsibilities in the context of the recovery. For example, information services departments typically have a disaster recovery plan to protect, restore and use company data, including computer hardware, software and instructional manuals.

Thank you for your kindness invitation.

I'm fully agree with all previous  and expert answers.

Regards

This is a smart .

-A contingency plan is a plan devised for an outcome other than in the usual in the expected plan.

It  is  also a  course of action designed to help organization respond to significant situation or  a future event that may or not may happened.

IT is a conponent of business continuity.  disaster recovery & risk management.

-It can be used a alternative for  action expected results fail to materialize.