Emergency succession plan

An emergency succession plan answers one question: if the leader is unable to work tomorrow, who runs the company on Monday? It is separate from the long-term succession plan, which deals with a planned handover over months or years.

A useful emergency plan is short and practical. It typically names a temporary leader, often an interim CEO, lists who has authority to sign, bank and make decisions, records where key documents and passwords are kept, and says who informs employees, customers, lenders and the family. The legal parts, such as powers of attorney and signing authority, should be set up with the family’s lawyer.

Family businesses are often more exposed than other companies because so much depends on one person. The founder may hold the main customer relationships, the bank’s confidence and knowledge that is written down nowhere. This is what advisors call key-person risk. Some families also hold key-person insurance to give the company financial room during a sudden transition.

Emergency plan or succession plan?

The emergency plan is not about choosing the long-term successor. The person who steps in temporarily may be a trusted executive rather than the family member being prepared to lead. Confusing the two can force a successor into the top role before they are ready, or make a temporary arrangement feel permanent.

Why it matters for the successor

A sudden crisis is the hardest test of a successor’s authority. A successor who has already led board meetings, owned real decisions and built relationships with the senior team is in a far stronger position if they have to step up early. When the founder falls ill suddenly looks at what that situation asks of the family and the successor.