How should a family evaluate key-person risk inside a multifamily office?
Start by listing every decision, relationship, system, and process that depends on one person. Rate the effect of that person’s sudden absence. Then test the backup plan, document missing knowledge, and assign qualified backups. Review the results with the family office owners or governing body at least annually and after major staffing changes.
Map the dependency
List the people who control important decisions or hold unique knowledge. Include the chief executive, investment lead, chief operating officer, technology lead, family relationship manager, and outside specialists. For each person, record the decisions they can make, the accounts and systems they access, the relationships they manage, and the documents they maintain.
Look for concentration. Can one person approve payments, change banking instructions, select managers, or communicate the family’s wishes without a second review? Can another employee complete the work using current records? The answers show where the office depends on personal memory or trust.
Test continuity and succession
Ask what happens if the person is unavailable for one day, one month, or permanently. Identify who can act immediately, who needs authority, and which vendors, banks, custodians, and family members must be notified. NASAA describes a business continuity and succession plan as covering situations where a key person cannot perform assigned functions. NASAA
Write down interim authority, approval limits, contact information, and access procedures. Keep them current. Run a tabletop exercise using a realistic absence. Record delays, confusion, and missing records. FINRA guidance identifies key-person events as a succession-planning consideration for firms. FINRA
Most dangerous number in business is one. So if you only have one way of attracting investors, if you only have one way of creating content, if you only have one person on your team is raising all the capital, then it can be a little bit painful and dangerous.
Reduce single-person exposure
Require important processes to have an owner and a trained backup. Store procedures, investment rationales, service-provider contacts, and family preferences in a controlled repository. Use dual approval for material payments and changes to standing instructions. Review access when roles change or employment ends.
Set a written succession standard for each senior role. It can name an interim leader, internal candidates, and outside support. Review compensation, retention, and development plans without assuming that any individual will stay forever.
Bring the findings to the family’s governing body. Track open gaps, responsible owners, and target dates. Reassess after a new mandate, acquisition, technology change, or senior hire.
Related guides
- Family Governance With a Multifamily Office
- Access to Alternatives Through an MFO: A Practical Guide for Families
- Cross-Border Families and Multifamily Offices: A Practical Guide