Especially following the unpredictability that accompanied COVID-19, it’s more apparent now than ever that a company should invest resources into forming a business continuity plan. Not only can a pandemic create disruptions in your operations, but if your business loses one or more key employees or undergoes a transition of ownership, your continued success relies on having the appropriate blueprints at the ready. To maintain your momentum, it’s important you create the opportunity to design a dependable business continuity plan to fill the gap left by key persons.
There’s no one-size-fits-all when it comes to continuity plans, as all businesses are different. You’ll need to identify and examine the key roles in your organization and how the departure of a valued employee will impact the company. Some of the key elements to consider before creating your business continuity plan include:
Once you’ve pinpointed the gaps in your succession plan, ensure there are adequate replacements for your key persons and back up sensitive information relevant to the role to prevent any unrecoverable losses.
A first-to-die policy is a joint life insurance policy perfect for small companies with a limited budget. For instance, for a small software company made up of three partners, a first-to-die policy will cover any of the three partners. That means regardless of which of the partners passes, the policy will pay dividends to the remaining two. It’s a cheaper option than taking out three separate policies.
A buy/sell agreement – also known as a buyout agreement – is a legal document intended to define what happens to a business partner’s shares if they die or are forced or choose to leave the business. It’s an important part of a business’s continuity plan in the event of a transfer of ownership of the company. A buy/sell agreement can come in two forms: a cross-purchase plan or a stock redemption plan.
A stock redemption plan – also known as an entity purchase – is yet another form of life insurance. For this agreement, a life insurance policy is taken out on behalf of the business. This policy insures the company owner or owners, and if an owner passes, the insurance provides funds to the other partners to purchase the interest from the estate or heirs of the deceased person. As a result, the heirs have a guaranteed buyer for the business interest, and the owners have the purchasing power to reclaim the shares without the need for a forced sale or the involvement of a new third-party owner.
If a key employee saves sensitive digital information locally and unexpectedly become unreachable, it can be extremely difficult or impossible to recover that information, resulting in a major impact on a business’s operations. By backing all of your business via cloud-based storage, not only will you have access to the important materials specific to the key role, but it will be immensely helpful in the event of a natural disaster. Also, cloud storage tends to be more secure than files, images, and videos stored on personal devices. Another great way to ensure you're protected from the repercussions of data theft or loss is to also invest in cyber insurance.
Outlining a dependable business continuity plan is a complicated process, but you must be proactive when preparing for the unexpected. To ensure your business can quickly recover from the loss of a key person or maintain
momentum during a transition of ownership, it’s not only important to have a plan in place but also to have the right insurance. World Insurance can ensure you’re outfitted with tailored commercial insurance policies.
This article is not intended to be exhaustive, nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.