Contingency Planning - Project Management

Have you ever worked on a project where one of the project team members was so critical to the project that if they left the company the project would fail? More than likely, you or one of your managers took steps to protect the project and the organization should this occur. For example, you may have required this employee to document their knowledge and train one or two others so that the other employees understood and knew what the critical employee knew. This is an example of contingency planning

contingency planning

A process of planning for known risks to help ensure project success if a risk event occurs.

Contingency planning is similar to risk avoidance and mitigation in that you outline alternatives to deal with the risk events should they occur. Contingency plans can be developed for individual risks or for groups of risks. In our annual employee meeting project, we defined some risks that have a medium probability and low impact. These risks may not need detailed plans of their own, but they can be incorporated into a contingency plan that briefly details each of these risks and the strategies to deal with their impacts.

Contingency planning should occur after you've identified the risks and performed risk analysis to determine the extent of their impacts. These plans should be filed in the project notebook and available at all times for reference when a risk event occurs.

Note:The contingency reserve is a cushion of funds to help absorb the impact of risks on the project scope, schedule, cost, and quality.

Most project managers also account for contingencies in the project budget.Contingency allowances or reserves are built into the budget and the funds set aside for the specific purpose of dealing with risks as they occur. These funds are typically for the risk events you've identified with medium or low impacts and probabilities. Risk plans and strategies that were developed for individual risks should also be accounted for in the project budget.

Residual and Secondary Risks

There are two types of risks that may occur on the project that the contingency plan should take into consideration. They are residual risks and secondary risks.

Residual risks are the leftover impacts or minor risks that remain after the primary risk event has occurred and responses have been implemented. If you've used the mitigation risk strategy when defining your risk response plan, the impacts of the risk event are reduced but some minor leftover effects may still occur. The contingency reserves are set up for situations like this.

Secondary risk is risk that occurs as the result of implementing a risk response plan. The example given earlier of hiring four-wheel-drive vehicles to transport employees to the meeting but then the drivers declaring a strike the morning of the employee meeting is an example of a secondary risk

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