What is Contingency Analysis?

A contingency analysis is a process that allows individuals and businesses to project possible scenarios that are the most productive and efficient manner. Typically, the process involves identifying a specific potential event, then considering the various ways that the event could unfold. Doing so makes it possible to anticipate how to handle each of those variations on the scenario and come up with solutions that are practical and likely to manage the situation to best effect.

Sometimes known as an if-then analysis, the contingency analysis is an approach that can be used by individuals, businesses and even governments. By considering a possible event and anticipating the many different ways that event could unfold, it is possible to come up with a workable backup plan for each of those contingencies. This type of exercise is often considered an important component in the risk management process, since it provides the entity with a specific way to deal with whatever comes along. Companies in particular benefit from engaging in contingency analysis, since it helps to position the company for handling just about any situation that might threaten the continuing operation of the business.

In order to engage in contingency analysis, it is first necessary to identify a specific event that could conceivably happen. For example, an answering service may be concerned about how to provide services to clientele after a natural disaster that limits telephone communications. By identifying the scenario, the company can then consider alternative ways to manage the issue, such as working with a carrier to reroute inbound numbers to destinations outside the area affected by the disaster, or possibly making use of Voice over Internet Protocol solutions to remain accessible to anyone attempting to reach a client of the service.

Even individuals engage in contingency analysis. This includes anticipating the possibility events occurring that would interfere with utilities to the home. In this scenario, the focus would often be on making emergency provisions that would help ensure the household had enough food, batteries, candles, and means of heating and cooling the space to ride out the event. As with any type of contingency analysis, the process would also include the development of emergency procedures that make it possible to respond to the event in a logical and orderly manner, which helps to increase the chances of weathering the event and continuing to function more or less at a normal pace.