Contingency planning limits business valuation success. Actions have to be timely, coordinated, and effective, when plans made on paper, go wrong at ground zero.

Business valuation can become quite useless if an organization does not detect signals of danger early enough to contain damage. The risk management approach promotes a culture which safeguards precious capital resources.

Business valuation becomes bureaucratic and ritualistic if you insist on contingency planning for every risk. There is nothing much you can do in an earthquake, or if sharp showers delay a shipment. Contingency planning for uncontrollable disasters, or for trivia, only serves to divert attention from serious and likely risks. It is a leadership prerogative to select strategic risks for detailed consideration in a business planning exercise.

Product liabilities, regulatory changes, competitive moves, cost over runs and project delays are generally the most destructive when it comes to business valuation. They are worth providing for in detail. A leader must communicate the reason for contingency planning, lest a business valuation task force gets lost in a negative mind set, and lose morale. Contingency planning should not get equated with opposition to a project.

Waves of proposals and pressures of current operations keep much of business valuation work on paper. It is tempting to put a plan of corrective actions on paper, and let it gather dust there! Take steps to ensure that contingency actions are set in motion in reality, so that business valuation objectives can be met even when circumstances change.