A contingency is an unforeseen incident that could happen in the future. Natural calamities, terrorist attacks, and fraudulent conduct are among the situations that investors and entrepreneurs identify and build contingency plans for. A contingent liability is a prospective debt or obligation that may arise as a result of a future bad event.
Companies must make advanced preparations in order to effectively endure negative contingencies, and careful planning can help to minimize losses and damage. Companies with good contingency planning are more likely to continue operating after a disaster.
After a natural disaster, a scandal, or a man-made incident, contingency plans usually include processes for returning a firm to normal operations, and they almost always sketch out a public relations response to limit any harm to the company’s reputation. Cash reserves or insurance policies to cover losses are frequently included in contingency plans to ensure a company’s robust liquidity.
Also, See: Contingency Plan
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