The Coronavirus pandemic has seen many business owners either revisit an existing succession plan or start thinking about creating one. The virus has shown that no one is immune from suffering an unexpected illness, accident, or other misfortune. Furthermore, the pandemic has shown how precious life and family are. Many who have worked extremely hard may be considering a strategy for stepping back to enjoy more free time.
Whatever your motivations and ambitions, a robust succession plan will help your business continue to grow and thrive, ensuring you and your family enjoy a good income in your retirement. In addition, planning for unexpected events guarantees that your organisation can continue to operate if you or other senior managers are unable to attend to business affairs for a lengthy period.
Also, there are other benefits to succession planning that are not always immediately apparent but can make a tremendous difference in terms of protecting your business.
Below are three unexpected but important ways succession planning can benefit your business during and after the Covid-19 pandemic.
Assure investors, consumers, and suppliers
Investors and lenders want assurance that your organisation has robust strategies in place for ensuring operations can continue if unexpected challenges erupt. The current Coronavirus pandemic is only one example of unforeseen problems in business. Natural disasters, either locally or on an international level which affects your supply chain, sickness can result in key personnel being sick, and sudden a financial crisis can affect cashflow. Business contingency plans and risk assessments play a part in managing unexpected events. However, being able to demonstrate a detailed succession plan will also provide reassurance of business stability and good organisation to long-term investors, consumers, and suppliers.
A succession plan also provides an opportunity for you to create caretaker roles to ensure critical skills are covered should someone become ill or suddenly resign. Ideally, your organisation should have a full succession plan for each senior management position, which includes both an emergency and a long-term strategy.
The process of creating a succession plan is also useful in making the organisational structure and skillsets of those in your company visible and fully transparent. Taking positive action in this way will make it easier to navigate the coming financial uncertainty resulting from the pandemic.
Ensure security of income and the survival of a family business
According to a Deloitte’s research paper, over a third (34.1%) of family businesses in the Middle East do not have a formal succession plan in place. This especially applies to smaller, less diversified families, many of whom responded that they would decide who would lead the family doing forward when “the time was right”.
Even for small family businesses, a formal succession plan prevents upset and arguments about who will take responsibility for certain aspects of the organisation. Also, it will ensure the long-term survival of your legacy. Furthermore, by setting up a trust and/or making provisions in your Will, you can establish the payment of an income for you or your spouse and children.
Establishing a succession plan does not mean you have to forgo your right to work in or make decisions concerning the business you have built up. Over 50% of first-generation family members remain involved in the family business, including at Board level. However, most choose to take a back seat when it comes to the day-to-day operations, either because the organisation has grown too large for this to be practical, or they wish to enjoy some well-deserved free time.
A clear, concise, dynamic succession plan ensures you can remain involved at a high level, enjoy a solid income, and remove yourself from the everyday stress of running the operation.
Help you to arrange your personal financial affairs
Business succession plans seldom exist in isolation. Most are supported by Wills, trusts, foundations, a Power of Attorney, and off-shore corporations. Before the Covid-19 pandemic, many people had not updated these tools for some time. Talking to a lawyer about long- and short-term succession planning for your business provides an opportunity to look at other mechanisms which put your affairs in order. For example, if you die without a Will in the UAE, your bank accounts will be immediately frozen, and your assets distributed following Sharia law principles. For many families, this would be a disaster. For non-Muslim expatriates, creating a DIFC Will provides certainty that their property and assets will be distributed as per their wishes.
In summary
As with everything, the Covid-19 pandemic gives us opportunities and challenges. The sudden focus on illness and death, although tragic in many cases, has provided a stark reminder that our circumstances can change in an instant. Therefore, to ensure peace and prosperity for ourselves, family, and business, it is imperative to start creating a succession plan.
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