Now that the risk has been quantified, there needs to be a risk control indemnity plan. Just as a company would do for its non-air breathing assets, it's time to make an assessment and devise a risk management plan. Some basic elements of the plan include:

Determine the risk – insurance companies can help with mortality modeling
Determine the potential loss – assess what it will cost the firm if the employee is lost:

Lost sales and/or profits
Cost of replacing the key person
Loans that may be called

Determine ways to protect the firm from the loss

Create a management succession plan
Document and protect what the employee contributes and knows

Determine ways to indemnify the firm

Purchase "key person" life insurance on the employee's life
If the employee is uninsurable or near retirement, set up a sinking fund to level out the effects of cash flow

It may sound brutally cold to put numbers to a sentient being, but the simple fact is a business can suffer more financially from losing a key employee than from the loss of virtually anything else in its arsenal of assets. If you care about your business and the people who own, work for, and invest in the business, maybe you should protect the firm from the financial loss of those assets who can drive themselves home at night.

Instant Insights /

Do your key assets go home at night?

More From HR Executive

Related Stories

Recommended For You