Don’t Underestimate the Importance of Contingency Planning

David Anderson is principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation, fraud deterrence, litigation support and expert witness testimony services in Philadelphia and the Delaware Valley.

Many businesses have no disaster or contingency plans in place.  Others have only disaster plans to address such natural disasters as hurricanes, tornadoes, fires, or earthquakes.  As United Airlines learned this past week, not having comprehensive crisis and contingency plans in place can cost millions of dollars in damages and lost market value (by the end of last week – Friday, April 14, United’s market value had dropped by more than $750 million).

In past blog articles, I have addressed the importance of disaster planning.  However, natural disasters are only part of the potential catastrophes that can impact on a business; such catastrophes can be just as damaging as natural disasters.

A well-prepared, up-to-date business contingency plan addresses a wide range of potential catastrophes, and can help a business avoid the significant financial and public relations damages that can result from such issues. Effective contingency planning begins with brainstorming among employees, management and stakeholders at all levels.  Such brainstorming is designed to identify all potential calamities that can affect a business.  Participants in these brainstorming sessions are asked to imagine any scenario that can adversely affect a business, including:

  • Death, disability or departure of key employees
  • Attacks by hackers and/or viruses
  • Major product failures (think Takata airbags or Chipolte food)
  • Criminal or negligent activity by employees (think Volkswagen)
  • Public scandal involving key employees
  • Theft of customers or proprietary information by former employees
  • Hostile takeover attempts
  • Major infrastructure damage or failure (think the recent I-85 fire and collapse in Atlanta)
  • Major changes in government or regulatory policy (think the Philadelphia soda tax)
  • Major changes in technology (think dial telephones or taxicabs)
  • Loss of a major lawsuit
  • Death or injury of a customer or customers
  • Workplace violence

In the initial brainstorming, no scenario should be immediately rejected to keep a positive focus on the process. This means initially accepting such bizarre scenarios as alien invasions, asteroids hitting the Earth, nuclear war, zombie apocalypse, etc. which can be later culled from the planning process.

Following the brainstorming, teams of relevant employees, management and stakeholders should be created to address, validate responses to, and test plans for each of the scenarios.   Contingency plans are rolled out and all relevant parties are educated as to their roles in such plans.

An effective contingency plan, of course, is a living document.  Instead of merely placing such plans on the shelf to be later “dusted off” when a catastrophe occurs, companies need to regularly review and update the plans for such events as new technology, new government administrations, significant changes in political control of legislative bodies, acquisitions of other businesses, new products and new markets, etc.

While there is a material investment in time and cost to develop such contingency plans, the potential return on investment from savings can be significant.

Imagine the costs that could have been avoided if United Airlines had invested in addressing such an incident as occurred this past week.

If you require the services of a forensic accountant, a Certified Fraud Examiner, or any other financial expert to help with disaster planning or other accounting services in Philadelphia and the Delaware Valley, please contact the Philadelphia forensic accounting firm of David Anderson & Associates by calling David Anderson at 267-207-3597 or emailing him at

About David Anderson & Associates

David Anderson & Associates is a Philadelphia forensic accounting firm that provides a full range of forensic accounting services in Philadelphia and the Delaware Valley.  The experienced professionals at David Anderson & Associates provide forensic accounting, business valuation, fraud investigation, litigation support, economic damage analysis, business consulting and outsourced CFO services.  Company principal David Anderson has more than 30 years of experience in financial and operational leadership positions and is a Certified Public Accountant, a Certified Fraud Examiner and a Certified Valuation Analyst.