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Business continuity: what if your CEO catches COVID-19?

Ben Rowntree Ben Rowntree

Business continuity has never been more important than it has become over the last year. Ben Rowntree looks at what you can do to preserve your organisation if key people become unable to perform their duties.

Carter & Carter Group PLC was a successful British-based company that provided outsourced training services across the world. Founded by Philip Carter in 1992, the firm began trading at £2.35 per share in 2005 and was valued at £78 million. The share value rose 25% on its first day of trading.

Carter & Carter started out in the automotive industry providing accident repair services to General Motors, Ford, BMW, Mercedes, Nissan, Jaguar, Volvo, Audi, Bently, and Volkswagen. In the mid-2000s, the firm made several key acquisitions and expanded into occupational training, and became a major provider to the Learning and Skills Council and the Department for Work and Pensions.

By its height in 2007, the firm was trading at £12.75 per share and valued at over half a billion pounds. Philip was named Entrepreneur of The Year.

By 2008, shares were suspended at 82p and the firm went into administration in March of that year. What went wrong?

When tragedy strikes at your business continuity

On 2 May 2007, Philip Carter was tragically killed, along with his 17-year-old son, in a helicopter crash about a mile from their home while returning from watching a football match. It was two weeks before Philip's 45th birthday.

While still in shock at the tragedy, Carter & Carter's board had to decide how the group would carry on trading. No business continuity plan had been put in place for unexpected circumstances and the company lost contracts and made large portions of its staff redundant.

Two consecutive profit warnings saw share prices drop 41% and then 80%, respectively, in just a single day. By September, Carter & Carter was valued at just £33 million, and by March, the firm had gone into administration. The company Philip Carter founded was not in a position to go on without him.

Business continuity is a priority this year

Unfortunately, this isn't a unique circumstance. Many businesses in the small and medium-sized enterprise (SME) sector depend on business continuity from just a few key people for their continuing success and often these people are shareholders as well.

The loss of these key people through accident, illness, or death can have a disastrous impact on their legacy beyond their personal tragedy. Without a business continuity plan, firms can fail, owners are forced to sell, and employees’ job security can be put at risk.

The events of the last year have added COVID-19 to the list of illnesses that can cause the unpredictable loss of a vital decision-maker in your business. Business continuity is particularly difficult in a time when many firms are losing revenue and taking on debt to cope.

According to the British Business Bank, nearly half of the UK’s six million SMEs sought external financing in 2020, lifting bank debt to £213 billion. The bank's SME finance report also found that 43% of firms received funds from financial institutions, up from 13% on 2019.

Aegon also recently published their 2020 claims figures. Directly or indirectly due to COVID-19, death-related claims were up 20% on the previous year, making business continuity a major concern for your business.

Protecting your most-precious asset

You’ve insured your buildings, contents, and vehicles in case disaster strikes, but what about the most precious asset of your business: its people? In the present environment, there are five business continuity questions you need to address:

1 Does your business have any unprotected debts or loans?

2 Do you have individuals who have a significant impact on profits?

3 Would you want to retain complete control of the business if a fellow business owner died?

4 If you were to die, would you want your family to receive the value of your share of the business?

5 If a business owner or employee who directly contributes to the profits were to die or become seriously ill, would a cash lump sum help ensure the future success of your business?

It's important to recognise these ‘people risks’, put a figure on them and implement appropriate mitigation. Business continuity protection policies with the correct legal framework can provide a cash injection that can be used to repay debt, purchase shares or equity, and keep liquidity in a business while it restructures.

Ensuring business continuity

Business continuity can never make up for the loss of a human life. But while illness and accident can strike at any time, at least you can ensure the legacy of your people's hard work can live on beyond them by preserving their firm.

I'd advise any business to consult with experts to ensure it has a thorough business continuity framework and any necessary insurance in place before it's too late. This is doubly important given current world events.

Our business continuity team can help you put these plans in place to give you peace of mind that your organisation can continue employing your team, even if it loses a leader.

To learn more about how we're helping firms like yours ensure business continuity, get in touch with Ben Rowntree.

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