3 Strategies for Your Company to Manage Key Person Risk
Almost every company has some level of key person risk (sometimes known as key man risk). And during COVID-19, the definition of key person risk changed, so if you didn’t have it before, you almost certainly do now. This means, as a business leader, you should be thinking about what you can do right now to manage your company’s key person risk.
As an executive health provider, we’ve helped companies across a wide range of industries manage and reduce their key person risk through executive health programs. Through this experience and our conversations with business executives, benefits consultants, and more, we’ve gained an understanding of three basic strategies you might use to manage your key person risk.
Your company might use all three. You might use just one or two. The right solution depends on your particular situation. But at the least, we can offer an introduction to all three.
1. The insurance strategy.
This is where business consultants like benefits advisors come into play. Reducing your key person risk using this strategy involves protecting your company through insurance policies, whether it’s a life insurance policy taken out on your top employees or business disability insurance. Most of these policies will provide a payout after several months or even a year of a key person being out of commission.
If you’re just getting started on reducing your key person risk, this is a good place to start. You get an insurance policy, and if the worse-case scenario happens, your company is at least financially secure on some level.
2. The executive health strategy.
Executive health is often included as part of a company’s benefits package, particularly for top-level employees. Some companies use major hospitals like the Mayo Clinic or their regional health system (like an Emory Healthcare or Inova Health). Others use boutique concierge medical practices, such as PartnerMD. There are several differences among the three, so be sure to find the right fit for your company.
Executive health attacks key person risk from two angles:
- Helps your most critical employees improve and maintain their health, reducing their risk of serious health issues.
- Shows your eligible employees how much they are valued, attracting them to work for your company and reducing the risk of them leaving for another opportunity.
Some executive health providers offer just an executive physical. Others offer enhanced primary care as well. And during COVID-19, some are offering business consulting services so companies are making medically informed decisions about the health and safety of their employees.
Utilizing an executive health strategy to manage your key person risk boils down to one thing: are you being proactive in doing everything possible to make sure you don’t ever need to use that key person risk insurance policy?
3. The “culture” strategy.
Ah, the classic corporate buzzword. No, not synergy. Culture. Every company makes their culture a priority, and when it comes to key person risk, it is vital.
If you’re worried about losing a top employee to another company, you need a culture that makes them want to stay. Foster an environment that makes them feel valued. Part of that might be offering premium benefits like executive health. For some, it might just be about the health insurance, 401(k), and PTO aspects. Focus on implementing policies and a culture that keeps your employees healthy and happy.
Then, to even further protect yourself, you need to ensure that your top employees are training and developing their understudies. Doing so means your company will create a “next person up” approach, so that if a top executive or salesperson goes out, someone else is ready to step up and pick up where they left off (as best as possible).
How PartnerMD Can Help You Manage Your Key Person Risk During COVID-19
During COVID-19, key person risk is a clear and present threat to all businesses. Any day, one or more of your key persons could test positive and throw your company into a state of uncertainty.
So while in normal times we help businesses manage key person risk through executive physicals and concierge care, right now we’re focusing on how to help businesses manage issues specific to COVID-19.
That’s why we’re offering a free, one-hour consultation with one of our physicians, so your business can get the latest COVID-19 information translated into language you can understand use to make decisions related to key person risk right now.