The two scenarios which are difficult to predict are: Loss of Human Capital due to Illness or due to Death.
Now, we don’t really like to think or talk about these scenarios, BUT they are as true as the sunrise and sunset everyday.
Understand the fact that an individual who is performing a particular task, if is not in their position would hurt the profitability and shareholder value. This individual may be possessing a particular skill set or may be the face of the enterprise. This individual in the world of risk management is called “A Key Person”.
Loss of a Key Person may cause disruptions and loss of profit or loss of brand value in the eyes of suppliers or financial institutions. Replacing such an individual may be very expensive, so the world of Risk Management has created two initiatives to address this issue. Step 1: Putting together a succession plan in the event of a sudden tragedy; Step 2: Insuring the individual to provide the corporate with liquidity to implement the succession plan as well as fulfil its moral and legal obligation to the family of the individual.
Every board member and every “C” Category officer (CEO,CFO,COO,CTO,CIO,etc.) would agree that replacing a Key Person is the most difficult and expensive exercise, yet most firms have not yet discussed this with a Specialised Financial Planner or Succession Planner.
If you know of a firm or a person who you believe should be aware of this information please share this with them.
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