The importance of business continuity planning

The importance of business continuity planning

  In today’s challenging economic environment business leaders and owners need to recognise the importance of business continuity planning that accounts for every eventuality. Since so many businesses- particularly in the SMME sector- rely on the skills, knowledge and relationships of a few key employees, insurance cover for the key personnel is a vital ingredient in the continuity planning mix. What is key-man cover? It refers to an insurance policy taken out by an employer on the life of an employee who is a key individual within the organisation.  This cover can be taken out on the life of a dynamic employee who is integral to the company’s success, or the entrepreneur whose skills are irreplaceable in their own business. What does it cover? This type of cover provides compensation for financial losses arising from the death or extended incapacity of the insured staff member.  It compensates with a fixed monetary sum that can be used to stabilise the business, including the costs incurred in recruiting a suitable replacement and training if required. Why should a key-person be covered? It can be detrimental to a business to lose effective, qualified people.  Key-man cover provides an invaluable safety net for the company and is particularly important for owner-managed businesses whose sustainability rests in the hands of one or two individuals. Losing a key individual can: Directly impact the profitability of the company, Lead to difficulty in raising finance, Result in costly recruitment and training of a replacement, Unsettle creditors who may want immediate settlement as a result of the death of the key person, Threaten client relationships How much cover...