4. Retain and Incentivise
Beyond remuneration, providing your keyman/ shareholder with a strategic benefit such as a life insurance plan will help incentivize them to stay with the business for the long haul. The golden handcuffs, so to speak, is an effective way to mitigate departure risks.
For instance, business ABC is in the technology business of providing alternative credit scoring to financial institutions. One of the directors has priopritory knowledge about the algorithm and it is important for the business to retain him. In buying a life insurance policy for him, as the cash value accumulates over time, the policy ownership can be transferred from the company to him upon gratuity. The longer they stay with the company, the greater the value of the policy. Killing two birds with one stone, the benefits of a life insurance plan does not only provide your key executives with immediate protection, the cash value of the policy can be an effective component for retention.
In your opinion, what is the ideal percentage of the annual profit which should be invested for risk management purposes?