If you are just planning to start a new venture or have already started one, then you should definitely know about a financial contingency plan for a business. There are various situations that arise when entrepreneurs face problems due to finances. It is very crucial that he examines all the risks beforehand that can cause financial problems or may need finances to cater to the business objectives. Financial contingency planning is planning for effective risk management. This enables the entrepreneurs to plan for the time of crisis and various negative events like economic recession, natural events. You should know how to develop a financial contingency plan for your company as an entrepreneur, or a student who is eager to establish a business in the future. We have provided here a step-by-step guide to help you with developing an efficient financial contingency plan.

• Determine risks: The first step is to examine all the risks that apply to your business. Other risks are the same for every company, for example, financial troubles, natural disasters, while some risks may be exclusive to your company. So, make a list of all the risks you think your business can face in the future. It should be a Risk Matrix where you list all the risks, their influences and priority level.
• Understand reasons for risks: The second step is to understand which these risks have developed. It is vital for you to sort the causes so that you can take strategies to reduce them and eliminate them in the future.
• Monitor indicators: The third step is to track the indicators and monitor them on a daily basis so that you are sure that the risks would not develop. This should be a regular process.
• Develop strategies: After you have known the risks relevant to your business, understand the reasons and also tracked the indicators well, focus on developing strategies to cope with them.
• Analyse the financial position of your business: examine the financial position of your business effectively. It should include the analysis of the cost, cash inflow and outflow and positioning of the business.
• Determine your funding sources: Every business has several funding sources. In some, these sources can be from the personal savings of the entrepreneur and in some, it's because of the investors from outside. Hence, examine the sources for funding so that you can know which sources will be available to you in case of contingency. For instance, if you have business insurance then you should know and understand it well beforehand. If you are taking loans for financial contingencies, then you should examine the financial instructions that you will consider for getting credits.
• Develop plans to reallocate resources: Once you are aware of risk, strategies, sources of financing, it is essential that you make plans for resource allocation. You should include all these things when developing a plan.