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Reliant Energy and Duke Energy rely on computer trading centers where trading man-
agers actively buy and sell energy-related commodities. If a terrorist attack or a natural
disaster such as a hurricane were to strike their trading centers, they would essentially be
out of business. Prior to September 11, each firm had relatively vague and superficial cri-
sis plans. But now they and most other companies have much more detailed and com-
prehensive plans in the event of another crisis. Both Reliant and Duke, for example, have
created secondary trading centers at other locations. In the event of a shutdown at their
main trading centers, these firms can quickly transfer virtually all their core trading
activities to their secondary centers within 30 minutes or less.
41
More recently, many
businesses have developed contingency plans for dealing with a potential pandemic
such as the H1N1 virus.
Unfortunately, however, because it is impossible to forecast the future precisely, no
organization can ever be perfectly prepared for all crises. For example, due to 2011’s
disastrous earthquake and tsunami in Japan, many U.S. companies faced shortages of
goods and materials imported from that country. General Motors was the first auto-
maker forced to temporarily shut down one of its truck plants because it could not get
enough Japanese-made parts. Two months after the disaster, Toyota’s facilities in the
United States were operating at less than 30 percent of capacity and did not return to
full production until several months later.
42
The mechanics of contingency planning are shown in Figure 3.6. In relation to an
organization’s other plans, contingency planning comes into play at four action points.
At action point 1, management develops the organization’s basic plans. These may
include strategic, tactical, and operational plans. As part of this development process,
managers usually consider various contingency events. Some management groups even
assign someone the role of devil’s advocate, who asks, “But what if … ?” about each
course of action. A variety of contingencies is usually considered.
At action point 2, the plan that management chooses is put into effect. The most
important contingency events are also defined. Only the events that are likely to occur
and whose effects will have a substantial impact on the organization are used in the
contingency-planning process. Next, at action point 3, the company specifies certain
Ongoing planning process
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