Experiencing prostate cancer has a significant impact on a man's personal, work and family life.…
The Evolving Financial Effects of Prostate Cancer Surgery and How to Manage This Risk
In my last Smallville article, The effects of prostate cancer surgery and its disturbing new link to business risk, I presented the facts and studies showing how prostate cancer surgery is having an effect on businesses.
In this article, I wish to discuss the commercial realities of prostate cancer surgery, the motivation injury and the risks this increasingly common health event presents to businesses.
Protecting capital investment and men’s health.
With advances in early detection of prostate cancers and society’s changing expectations to working longer, Professional Investors are now having to consider how this new statistical reality affects their investment capital protection process.
A common solution.
Both individual men and investors are now using crisis insurance policies as part of their risk reduction strategy and long-term health protection planning.
Crisis insurance can pay a lump sum upon a cancer diagnosis:
- Individuals can utilise this type of insurance policy to provide potential future personal liquidity for major medical treatments (if ever needed).
- Investors can utilise this type of insurance policy to further reduce their exposure to capital risk, from the known statistically higher risks affecting business owners; such as prostate cancer.
Shareholders agreements and the deficiency in the detail.
Shareholders agreements are designed to protect invested capital from known major risks. These documents typically require insurance to be in place to safeguard against the ‘unexpected death or long-term disability’ of a director (or key person).
For example, if a $500 000 capital investment is made into a new business venture, it’s usual for a $500 000 insurance policy to be put in place protecting the shareholders from capital loss that would result from the unexpected death or extended disability of the director or (key person) in the venture.
The agreement wording is usually along the lines of, “…death or extended incapacity of the persons referred to in this agreement …”
Protecting the lowest risk and ignoring the highest.
But as these agreements are often drafted by lawyers who are not financial advisers, they’re often unfamiliar with the changing data around statistical risks to business. The unintended result can be accidentally drafting a shareholder’s agreement that only requires protection from the statistically lowest risk events (like unexpected death or long-term disability) and not the high-risk event (a health crisis event) like prostate cancer.
So, what are the odds?
Below are the three main statistical probabilities we all face before age 65?
- 1 in 20 is at risk of long-term disability.
- 1 in 10 is at risk of an unexpected death.
- 1 in 3 is at risk of suffering a medical crisis.
Clearly, the highest risk we all face is the 1 in 3 chance of suffering a medical crisis event; for males, this is often prostate cancer.
How both an investor and a business owner can reduce their risk.
To protect a shareholder’s invested capital, the shareholder’s agreement needs to address the core statistically known risks of unexpected death, disability and medical crisis events.
Addressing the highest risks to capital investment may require an addition to the wording of a shareholder’s agreement to be clear it’s requiring protection against, “…death, significant medial trauma or extended incapacity of the persons referred to in this agreement …”
Where to from here?
For businesses with a higher proportion of males in key-person positions and interdependent teams, new conversations will need to be learnt around issues of disclosure, support and flexibility, rehabilitation and even re-negotiating a change in work practices.
The risk of diminished work capacity is a new field of risk management with significant relevance for investors and those working in high performing interconnected knowledge-based teams. As cancer diagnosis rates are occurring earlier and men’s working lives are getting longer, better managing these risks can have a positive impact upon the people who run our businesses and the risk management needs of their investors.
“The opinions expressed by Smallville Contributors are their own, not those of www.smallville.com.au"
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