what is a contingency 
a contingency is a potential occurrence of a negative event in the future such as an economic recession natural disaster fraudulent activity terrorist attack or a pandemic although contingencies can be prepared for the nature and scope of such negative events are typically unknowable in advance companies and investors plan for various contingencies through analysis and implementing protective measures in finance managers often attempt to identify and plan using predictive models for possible contingencies that they believe may occur financial managers tend to err on the conservative side to mitigate risk assuming slightly worse than expected outcomes a contingency plan might include arranging a company s affairs so that it can weather negative outcomes with the least distress possible 