PartnerMD welcomes Drs. Lindsay Sherrard and Mandana Shafai.

What is Key Person Risk?

Executive Health

As a business leader, you exert a lot of effort planning. You plan for positive things like financial growth, new products, hiring new employees, and moving into better offices. But you also plan for negative things like employee conflicts, economic downturns, and unexpected emergencies.

Another negative scenario your business should prepare for is key person risk (sometimes known as key man risk). 

As an executive health provider, key person risk is something we help companies with all the time, from providing physician advice for their business decisions during a global pandemic to offering annual executive physicals for their employees most critical to their business continuity and success.

For many of our corporate clients, both big and small, managing key person risk is one of their primary reasons for coming to us. So, what is key person risk exactly? How can you manage it?


Defining Key Person Risk

First, before you define key person risk, you have to define (and identify) your key persons. Key persons most often include:

  • C-Suite executives (chief executive officer, chief financial officer, etc.)
  • Other employees in leadership positions (vice president and director-level employees)
  • Employees that possess an indispensable skillset unique to the company
  • Managing Partners and founders who have an equity stake in running the business
  • Owners of the customer relationships who are responsible for keeping key clients happy
  • Rising stars who are making a name for themselves in the company.

In essence, if your company can’t afford to lose them tomorrow, they must be considered a key person.

Key person risk is the risk to your business operations if one of these critical employees is out for any extended period of time and for any reason.

It might be a months-long absence due to a serious health-related reason. It might be a permanent departure because they were poached by one of your competitors. Regardless, losing them will limit or halt your operations and could negatively impact your company’s bottom line.

Up until February 2020, a key person risk strategy was a nice-to-have feature of business planning. Something on the minds of business leaders everywhere, but seemingly a little too distant to take widespread action on.

However, like many things, COVID-19 altered the definition of key person risk. Instead of a distant, nice-to-have feature of business planning, it’s now a more direct and immediate threat to all businesses.

It’s gone from a strategy to reduce the risk to your business if your CEO has a heart attack in the next 10 years to a strategy to reduce the immediate risk to your business due to COVID-19.

What if a top executive with existing health risks contracts COVID-19 next week and has immediate negative outcomes ending up in the hospital? Or another critical leader is affected for months and years to come with resulting heart complications and what scientists are now calling COVID-19 brain fog?

Key Person Risk Examples

Whether COVID-19 related or something else, the core of key person risk remains the same: can your company lose one of your top employees and not miss a beat?

How key person risk manifests itself in your business operations can vary. It’s about being prepared for events such as:

  • Your CEO passes away from a heart attack, and the company is suddenly left without a chief executive.
  • Your top salesperson is involved in a serious car accident and won’t be able to sell for months.
  • Another executive receives a cancer diagnosis that will put them on leave for months.
  • One of your top business development executives gets a better offer from a competitor.
  • An employee who has a skillset no one else at the company has decides to go out on their own.
  • Two members of your executive team contract COVID-19 because they’ve been working in close quarters.

If your company can relate to any of these scenarios, you should be thinking about putting a plan together for managing key person risk.

3 Strategies for Your Company to Manage Key Person Risk

Once you decide you want your company to work on managing key person risk, it’s time to get down to business. Your company can manage key person risk using three primary strategies.

First is the insurance strategy. This involves protecting your company through insurance policies, whether it’s a life insurance policy taken out on your top employees or a business disability insurance policy.

The second way is through an executive health benefits strategy. This strategy attacks key person risk from two angles – helping your top employees improve and maintain their health, reducing their risk of a serious health issue, and showing them how much they are valued, reducing the risk of them leaving for a competitor.

And finally, the third way is the “culture” strategy. Culture is a classic corporate buzzword. Everyone makes it a priority, and it can make a difference when it comes to managing key person risk.

Learn more about how both methods help manage key person risk.

3 Ways an Executive Health Provider Can Help Manage Key Person Risk

As mentioned before, we help companies manage their key person risk through executive health programs. And most often, we see executive health reducing a company’s key person risk in three ways, two of which have been happening for years and one that has only recently come to be thanks to COVID-19.

  1. Providing the most medically-advanced and personally customized executive physical.
  2. Offering a comprehensive executive health program with 24/7/365 concierge physician care
  3. Providing a physician to serve as a business consultant during COVID-19 for your business.

Learn more about how executive health in particular helps manage key person risk.

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 and use to make decisions right now.

Reduce your key person risk by consulting with a physician