Contingency (business planning)
A contingency in business planning is a possible circumstance or event for which plans may need to allow. Identifying it helps management consider alternative actions, resources and triggers. It does not mean that every possible event warrants a detailed plan, and it should not be confused with the specific recognition and disclosure meaning of a contingent liability in accounting.
Worked example
A retailer plans an alternative delivery arrangement if its main distribution route becomes unavailable, specifying when the alternative will be activated and who can authorise it.
Common mistake
Assuming a contingency has definitely occurred or treating any possible adverse event as an accounting liability.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | SBL | Supporting | September 2026–June 2027 |