what is a contengency plan

What is a Contingency Plan?

Learn with Tom Cruise about Contingency Plan

Case breakdown: Movie Mission Impossible: Ghost Protocol

The scene that you saw shows Ethan Hunt (played by Tom Cruise) is climbing down from a building. He has to reach Jane and Brandt who are standing across a window. Time is running out and the rope that he is tied to is shorter than expected.

Ethan thinks on his feet and to gain momentum he runs back and jumps towards the window. Unfortunately, he just misses the window as his face strikes the edge of the window. As Ethan losses control and slips, Brandt reaches his hand out and catches Ethan’s leg and Jane too catches hold of Brandt’s leg to pull him back.

In this blog, Learning Perspectives will explore the meaning of the Contingency plan.

What is a Contingency plan?

Contingent means an occurrence of a negative event that may not be certain. Similar to the scene that we saw, Ethan’s rope isn’t long enough to carry him towards the window is a contingent event. Pandemics, earthquakes, fire, terrorists attack also are considered contingent events. The timing, nature, and extent of such events are unknown.  

A business generally creates a reserve for such contingent events which is called a contingency plan. In 2020 businesses across the world were hit with COVID-19. They had to come up with new plans to formulate. The majority of businesses went online during this time as COVID-19 forced the world population to stay indoors. As this happened, many companies instantly placed a remote working strategy for their employees.

The government of India had announced many relief packages for MSMEs (medium small-scale enterprises) and also reduced TDS. PM-Cares fund was launched which was aimed at strengthening the fight against COVID-19.

How Contingency Fund Works?

Businesses start building contingency reserves which means putting aside some money every month or quarter. This helps the company to build its cash flow and liquidity at the time of emergency. Contingency plans may also include insurance policies that help the company in unforeseen situations. Pandemic wasn’t covered in Insurance policies before coronavirus in 2020. Corona Kavach and Corona Rakshak policies were launched during this time. These policies now provide cashless hospitalization and medical treatment during emergencies.

During COVID-19, many companies had to go out of business as they exhausted even their contingency fund. They were not able to drive any revenue during this time.

Haldiram Case Study:

During COVID, a sweet giant Haldiram faced a cyber attack. The company’s critical data was hacked and ransom was being demanded from them. They demanded a ransom of Rs. 7.5 lakhs to release all the data back to them. Hackers had stolen sensitive information which included sales, payroll, employee details, inventory, purchases, etc.

It was reported that Haldiram’s team had recovered the data internally. This is another example of a contingent event. Companies are now susceptible to cyber-attacks and threats. With these threats, a hacker can disrupt the business quite easily and demand ransom too.

To combat such threats cyber security insurance is in place. Data security is one of the prime responsibilities of companies as they have access to all the important information of the company i.e., private and confidential. These cyber insurance cover:

  • Financial cost coverage
  • Protection against cybercrimes
  • Safeguards for bigger organizations to cripple down by cyber-attack.

Advantages of a Contingency Plan:

The company can keep on operating in case of a contingent event if it has a contingency plan. This plan also helps the company to protect its reputation in the market. Contingency plans reduce the risk of financial loss. A company that maintains better contingency plans receives investing proposals and also better insurance deals.


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