Financial Contingency Planning



Financial Contingency Planning

Introduction

The funds for financial contingency is referred to the certain amount of money that an organization must keep apart from other business funds in order to deal with a situation of financial crises that adversely affects company's operations such as natural disasters or failure of business plan/project. These funds are aimed at protecting business from uncertainties and losses. A financial contingency fund can be raised by using a wide range of sources of funds in order to obtain temporary assistance and arrange funds to finance assets. It could be done both at state and local level in form of taxation from government, not for profit organizations, and grants from private Institutions. Similarly a contingency plan is a plan used in the event of worst case scenario. It is also known as disaster recovery plan and this plan supports a business to respond to a unexpected event. This plan is usually prepared by the risk management department of an organization. The contingency plan is also utilized if the desired plan fails to work in case, therefore, the contingency plan is utilized as Plan B (Burtonshaw-Gunn, S. A., 2009).

Discussion

Temporary Assistance

There are numerous types of contingency funds available for businesses and organizations to continue its operations in financial crises or unexpected outcomes. Out of these funds include, funds offered by government. These funds are set aside by government out of its budget annually for this purpose particularly. The government is liable for provision of temporary assistance to economy. This source of funding is also referred to as welfare funds. These funds can be obtained by businesses in uncertain events. Government or state owned agencies are considered as the biggest and cheapest source of obtaining the temporary assistance. The provision of temporary assistance is dependent upon three constraints i.e. time, which refers to the availability of funds, purpose; which refers to the state legislations and regulations pertaining to disbursement of funds as temporary assistance to businesses, and lastly amount; which refers to the certain capped amount as per mentioned laws for specific purposes and situations (Defense Procurement and Acquisition Policy, 2012).

Public Private Partnership

Another adequate source of finding a contingency plan is to enter into a business setting of public private partnership or PPP, which could be a government institution or private institution. It is operated on the basis of partnership in between government and private sector organization. It is also known as P3 system. The private sector involved in the PPP settings is suppose to bear the cost of project but the involvement of government make it more of a safe and secure investment by offering assistance in form of subsidies and grants, which can be used in the event of contingencies as well and normal operations. It is an ideal situation for private investors as it involves minimal risk. In this particular setting of an Institution, government could be used as a source of arranging allowances that could be used for unforeseen events or continuous changes in the business ...