It is perfectly possible to successfully cross a busy road blindfolded.
However is it not safe to do so, nor is it sensible. Luck will determine whether you make it to the other side, unharmed.
Just about any right-minded individual would baulk at the idea of being asked to cross a road blindfolded, quite rightly calculating that it is a rotten risk/reward scenario.
Yet many people, sensible about risk management in their daily lives, seem to deviate from their otherwise common sense approach when it comes to considering the risks facing their business.
The conventional disaster recovery plan will consider what to do if the office burns down, how to deal with an IT wipe out, what happens if all the main documents are lost and so on. Many businesses will have such a plan in place.
The biggest risk for many business however will be around the ongoing well-being of an individual kingpin, the business owner, the main sales person, the individual backing the business or the key worker. The question that needs to be addressed here is what happens if X is suddenly taken out of the business? X being one or more of those people who, for whatever reason, are critical to the business.
A disaster recovery plan is based, as its name suggests, on the simple premise that the business has in place plans to cope with a disaster.
If such a business were essentially reliant on the performance or even ‘availability’ of one or more people and those people were suddenly unable to perform or even unavailable, does that business have a recovery plan in place for that eventuality?
In far too many cases the answer is no. In that respect, the business and its owners are blindly crossing a road.
It’s not as if the risks we are considering here are a long shot. How many people do you know in business who have had the misfortune of their office burning down? Compare this to the number of people you know who have had a serious illness, or become incapacitated.
Many business people who happily insure their homes and cars, have recovery plans for an IT meltdown and have a back-up office on standby, never even consider that they may be, just maybe, leaving their most prized assets exposed.
Recently revealed statistics show that the UK now has more than 5 million small businesses, of which the great majority are smaller one or two man bands, clearly businesses that will be super-reliant on those individuals for their performance, success and sustainability.
That business would likely be wiped out if the individual was wiped out, or seriously jeopardised if the individual was unavailable to work for any length of time. They could be compromised if the individual suddenly was unable, for whatever reason, to sign documents.
And it is not just the obvious risks of death or illness which need to be addressed. For example, what happens to the business if the key individual is incapacitated and cannot make decisions?
A business needs protecting against any risk to the individual being unable to continue to contribute and this could take many forms, all of which should be stress tested and considered.
It is when a business does this that it can start to develop the protection planning equivalent to the more conventional disaster recovery plan. Such protection planning would include reviewing the wording of an individual’s Will, looking at life assurance and health insurance cover, examining whether Lasting Power of Attorney’s (LPA’s) should be introduced and whether there is a need for trusts.
Individually or combined these solutions could be introduced or amended to instigate a comprehensive plan which would cover all eventualities, protecting not just the business but the individual owner’s or worker’s family, who may be just as reliant on the business as the participant.
That cover could (should) include how the business will operate in each possible scenario, with particular regard to the business constitution (different solutions might be needed for a partnership as opposed to a limited company, for example) and the wider position of the individual(s) involved.
Penguin Wealth are here to help any business or business owner with protection planning, we will be able to undertake a review with you to assess what the risks are, how they can be managed, how each one can be mitigated and to help you build robust solutions.