In Risk Management, you define actions that prevent risks from occurring, or you use the actions to reduce the impact if the risks occur. However, if the defined actions do not work, or work too little, then you are at the mercy of the impact of the risk. To prevent this from happening, it often makes sense to have a fallback plan. This article shows you what a fallback plan and an emergency plan are and how they are used.
What is a Fallback Plan?
In action planning, you define not only a primary action plan for critical risks, but often also a fallback plan. A Fallback plan is used when a risk has occurred (or is about to occur) and the primary response proves to be inadequate. In action planning, you define not only a primary action plan for critical risks, but often also a fallback plan. This is used when a risk has occurred (or is about to occur) and the primary action plan turns out to be insufficient. A fallback plan is often referred to as a contingency plan or alternative plan, whereby in my opinion the contingency plan is used in a specific situation which I will explain to you later. Here is a simple example of a fallback plan:
Longer periods of constant rain would flood your construction site. That is why you have provided cover tarpaulins as a measure to protect the construction site when it starts to rain more heavily. However, if the wind force is greater than 7, then the tarpaulins are unsuitable and pumps must be used as fallback plan to remove the water.
A Fallback plan is prepared in advance for a situation where the primary plan needs to be abandoned.
When to Use a Contingency Plan?
A contingency plan is used if the risk occurs despite risk reduction measures. Even in the case of risks for which no measures have been defined (accepted risks), a contingency plan can prevent the worst in an emergency.
The airbag, for example, does not prevent an automobile crash. This is done by other assistance systems and by your own attention. But if the risk of a crash actually occurs, an airbag as an emergency measure can prevent more serious injury.
The Contingent Response Strategy
For some risks, it is appropriate for the project team to make a response plan that will only be executed under certain pre-defined conditions (triggers), if it is believed that there will be sufficient warning to implement the plan. Events that trigger the contingency response, such as missed milestones, passed laws or bad weather forecasts, should be defined and tracked. This risk management strategy is often referred to as a contingency plan or fallback plan, but in my view this is not entirely correct.
When Actions Create Secondary Risks
It can also be useful to identify secondary risks. Secondary risks are risks that arise directly from the implementation of the actions taken. You should also define actions for these or at least plan for reserves.
How to Define Reserves for Risks
Actions for the identified risks are usually planned and budgeted like any other activity in the project plan. They are not financed from reserves. There are two types of reserves for projects with the following characteristics:
Management Reserve: for unidentified risks (the unknown unknowns)
Contingency Reserve: for identified risks (the known unknowns) for which no actions have been defined.
The fallback and contingency plans are normally initiated only when a risk is about to occur or has occurred. I’m the opinion that these plans have the characteristics of a contingency. Therefore, if these plans were to be implemented, I would use the contingency reserve.
Only for the unknown risks (the unknown Unknowns), which suddenly affect your project, you cannot define any measures. You could not identify such risks because they were beyond your imagination or experience. You should also plan a reserve for such risks.
Reserves are only intended for unexpected events and not for additional project scope.
The following example in the next section shows a true event of a colleague in San Diego in 2007.
The Great California Wildfire and the Fallback Plan
A colleague of mine runs a small financial brokerage clearing company in San Diego. When he watched the news on television the last 20 years, he always thought tsunamis, earthquakes, terrorist attacks, hurricanes, volcanos happen some place else to somebody else on the other side of the planet. But not this time! In the fall of October 2007, they were impacted by the great California wildfires. The wildfires destroyed at least 1,500 homes and approximately 972,147 acres (about 3,934 km2, or 1,520 mi2) of land was burned.
Nevertheless, he was sensitized to this kind of events after the 9/11 events and had emergency plans in place in private and in his company if something would happen in his area. For example, if the power goes down, what happens not seldom in southern California. They had multiple backup plans in place in any case – but they had no intention of using these at any time.
His backup plan for his business in the city was his own house (the guest cottage) as an alternative office when they had to leave the city office. In this backup-office they had two different internet lines from different providers, multiple computers, fax machines and business supplies. In a worst case, he had an additional backup plan to move the business to his vacation home in Coronado, some miles away from his home on the beach. This alternative office he uses also for his “working vacation” but it is a full functional Office when needed, for him and his staff. It is similarly equipped, like the office in his home.
The worst-case scenario occurred. They had to leave the office in the city and also their home was in danger and they had to be evacuated. The first backup plan was no longer viable, and they needed the second one with the vacation home at the beach.
When they evacuated they had already prepared a “back-out of town” basket (plastic crate) with all important papers: passports, wills, trust, insurance papers, important financial papers, brokerage statements. This filled basket was ready for the last years. When things happen, they happen often very quickly. When you have to evacuate from your house because it my burn down, you ask yourself, what kind of things are important to you.
My colleagues recommendation is: Always have more than one backup plan. Because if you have a Plan B and Plan B doesn’t work, you need a Plan C. Also have a first aid kit, plenty bottled water, canned food and power bars ready. There should also be many lessons learned from the hurricanes Katrina and Rita. Sometimes you get warnings about fires, floods, volcanoes, hurricanes, but you don’t get warned about earthquakes or terrorism.”
What’s Your Fallback Plan?
What about your project? Are there any risks that could cause your project to crash? Do you have a fallback plan or an emergency plan for these risks in addition to primary actions? I wish you good luck and success with your project, but don’t rely on it!
What experience do you have with fallback and emergency plans? Do you agree with my statements or do you have a different opinion? Share your experience with the readers with a comment, so that we can all get to know a different point of view. Thank you!
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