CEE Startups Urged to Mitigate Key Person Risk
Founders of startups and scaleups in Central and Eastern Europe (CEE) are urged to assess and mitigate key person risk within their businesses. This involves identifying critical roles, considering external factors, and implementing risk management strategies. Key personnel in CEE include prominent figures like Alfred Stern and Reinhard Florey of Borealis/Borouge Group, Peter Bosek and Stefan Dörfler of Erste Group, and emerging players like Demand AI.
Founders should start by mapping business-critical functions and sorting roles based on replaceability and impact. Within 30 days, they should list their top five most critical roles and run a 'what if they vanished?' scenario. This helps identify personnel who cannot be replaced quickly without serious consequences. Factors outside the company, such as regulatory compliance and market confidence, should also be considered in assessing key person risk.
Risk management strategies include succession planning, cross-functional overlap, contractual measures, investor communication, and key person insurance. Founders should document knowledge for irreplaceable roles, cross-train team members, review shareholder agreements, and review access hygiene within 90 days. Before major business events or funding rounds, they should report on key person risk to their co-founders/board, consider key person insurance, and assemble a continuity pack for the data room.
Key person risk is a significant concern for CEE startups and scaleups. Founders must prioritize identifying and mitigating this risk to ensure business continuity and secure investor confidence. By following the outlined steps and strategies, they can protect their businesses from the potential devastating impact of losing critical personnel.
