Having a recovery plan
Just about any right-minded individual would hesitate 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, the loss of important documents and so on. But what about the well-being of the head-honcho, the business owner or key workers?
If a business is essentially reliant on the performance or even ‘availability’ of one or more people and those people were suddenly unable to perform or even unavailable, where does this leave the business? Would they have had 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.
How big is the risk?
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 backup office on standby, but never even consider that they may be, just maybe, leaving their most prized assets exposed.
There were 5.7 million small businesses in the UK last year, of which the great majority were likely smaller one or two man bands. These businesses would be extremely reliant on those individuals and removing them from the picture would evidently mean jeopardising the business. Surely this stresses the importance of devising a recovery plan that covers all eventualities?
How to gain protection
A business needs protecting against any risk to the individual being unable to continue to contribute. 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. This would include
- Reviewing the wording of an individual’s Will
- Looking at life assurance and health insurance cover
- Examining whether a Lasting Power of Attorney’s (LPA’s)should be introduced.
- Examining 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.