Every event comes with an element of risk and some events are of course riskier than others. So how do you ensure that you have the right event contingency in your event budget? This simple process will go along way to ensuring you have accounted for the right level of risk.
How to quickly calculate the right event contingency
Running events is a risky business. There are so many things that can affect your event. It is actually a surprise that any event professional is brave enough to run an event at all!
One of the most challenging events I was involved in was affected by a flood. Our Events Team woke up one morning to find that our residential conference, which would take place in a few days time in Brighton, had over 50% of our rooms underwater. We had to work so hard to make that event happen: on the first morning it really did seem like we would have to cancel the event.
I am sure most experienced event planners have a similar story, and we would all agree, sometimes there is nothing we can really do to eliminate all of the risks: what will happen will happen.
Of course the best way to limit the effect of the risk is to insure your event against as many of the variables as possible. It’s so rare than something would be so big as to cancel your event, which makes insurance, in general, not too expensive. So it is really a must for any sizeable event.
It is also worth saying that, the better your event planning, the less likely you are to encounter something you hadn’t thought of!
But on to the crux of this post, event contingency.
In this post I want to look at the idea of an event contingency. An event contingency is: the amount that you put in your budget to cover any “un-budgeted” or unforeseen costs.
It’s a classic risk minimisation strategy and it should underpin every event.
This is a process I have been using for almost 15 years. It has underpinned all of the 700 or so events I have managed and still helps me support my clients’ events.
The first thing to do is to judge the overall riskiness of the event you are running. And to do that you can use this very simple table:
Why don’t you print this out now and mark where your next sits?
Your personal risk approach
You have to view your event contingency as a cost and allocate it, like any other cost, to your budget. It is best to allocate it as a percentage of your overall costs rather than a set figure.
Depending on where your event sits on this table your % of event contingency will differ. The riskier your event, the higher the percentage. These are the figures I use:
Low Risk: 2.5% of your overall budget is set as your event contingency
Medium Risk: 5%
High risk: Between 7.5% – 10%
I would class myself as someone who is fairly comfortable with the idea of running a risky event, so these figures reflect my personal risk analysis but I hope it provides a good benchmark.
For an event professional with a lower tolerance for risk, I would suggest starting at 5% and rising to 12.5% for the riskier events.
The benefits of setting the right event contingency
With a contingency in place you are able to properly reflect the risk / reward approach to your event.
For example, if you are entering a new market and your potential profit is very low (including of course the “cost” of your event contingency) you may rightly decide that the risk is too high.
If however the profit still looks appealing, you can go for it, safe in the knowledge that you have costed in your risk.
Including a strong rationale for how you have calculated risk is a great approach if you are dealing with any “risk averse” stakeholders.
While running events at a few risk averse associations, I used this chart to demonstrate that I was aware of the risk of my new events and I had accounted for them.
I am pretty sure that this helped me persuade my bosses to let me run some new formats or as they would have said “riskier events”
There is only so much an event planner can do to reduce risk but including an event contingency is one of the best ways to do it. Gallus Events wouldn’t organise an event without one!
Event essentials like budgeting are included in our Introduction To Event Management Online Training Course. Places still available.