I recently watched a friend prepare for an ocean-going sailing trip. With three others he intended to captain a 35-foot sailboat from New York to Bermuda, an approximately 1,500 mile, roundtrip voyage.

While none of the crew had ever before made this exact voyage, each was a seasoned sailor with complementary skills. Further, they packed the vessel with spare parts, three global positioning systems, a satellite telephone, weather radio, first aid kit, an assortment of tools, extra batteries, fire extinguishers, signal flares and flags, emergency lights, extra sails, a life raft, two-way radio, foul-weather gear, heavy-duty life vests and enough food to feed a small army. Most importantly, if the captain became incapacitated each of the crew members was capable of piloting the boat. Consequently, their confidence level was high.

While there is a lot of risk in business, one that’s rarely discussed is that of “succession” or Key-Man Risk.

While businesspeople tend to know the value of “not keeping all of their eggs in one basket,” how many firms are largely managed by one person? It is hard to learn if a firm has a practical succession plan in place. Moody’s Investor Services cited that loss of “star managers” can underscore the impact that a key individual or group can have on a firm’s business franchise, its reputation and eventually, its financial performance. It added that as part of its ratings it would incorporate qualitative factors related to how firms manage “key-person risk.”

If you have a succession plan but it has not been updated or even examined for some time, it may be a good idea to dust it off and see if it is still relevant. If not, here are a few simple steps you can take to start forming one.

A Succession Plan Blueprint

• Star Search: Perform an unvarnished review of talent across all departments with the idea of selecting promising leadership candidates. Check resumes for educational and professional accomplishments that may indicate ambition and an interest in growing in one’s field. A qualified leader-trainee could come from virtually any area within the company.
• A report from executive search and consulting firm Heidrick & Struggles recommends identifying “skill and leadership gaps” and provides tactics for addressing them via coaching, cross-training, geographic rotations, or special project challenges. The idea is to groom future leaders for greater positions by presenting them with challenges outside of their regular areas.
• In annual reviews be on the lookout for those who have demonstrated an ability to meet challenges outside their “comfort zone,” build teams and creatively solve problems.
• Regularly maintain and update your list of potential leaders, especially if you expect changes in your business. Does your bullpen have qualified individuals who can step forward should a key employee or partner suddenly resign or be forced to exit due to a health or personal issue?
• Can your potential future leaders effectively communicate? Some potential leaders may be highly intelligent and hardworking but if they cannot communicate to fellow employees, clients, vendors and shareholders, they may not be the right choice for a top spot.
• Do you have relationships with trade associations and/or industry consultants who may be able to recommend top candidates should you not have suitable ones in-house?
• Are your company’s retention plans adequate to make it worthwhile for key talent to stay with your firm or are competitors offering more enticing compensation packages?

Lastly, do what you say you are going to do. Simply telling people they are considered future leaders can be risky if they do not see meaningful roles developing. Talented individuals will not wait indefinitely for their chance to lead and if they do head towards the exit it may be wise to have a back-up list of qualified candidates to assure that your ship does not stay long without a capable captain at its helm.

Originally posted at ForbesBooks.