3 Strategies for Key Person Risk Mitigation
Almost every company has some level of key person risk (sometimes known as key man risk).
As a business leader, you should be thinking about what you can do to mitigate your company’s key person risk.
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.
If you’re just getting started on mitigating your key person risk, this is a good place to start. You get an insurance policy, and if the worst-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 Emory Healthcare in Atlanta or Inova Health in Northern Virginia/Washington D.C.). Others use concierge medicine practices, such as PartnerMD.
There are several differences between the three, so be sure to find the right fit for your company.
Executive health attacks key person risk mitigation 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.
Utilizing an executive health strategy to manage your key person risk boils down to one thing: are you proactively 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. Every company makes its 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
After COVID-19 came onto the scene, key person risk became a clear and present threat to all businesses. At any time, one of your company's key persons could go out ill.
Now, companies are combining better healthcare with better benefits to improve recruitment and retention. It's an ideal time to explore an executive health program for your business.