The risk is a property of the concentration, which means it can be reduced without changing anything about the person.
Why it matters when the plan changes
Key person risk is named in insurance terms and managed as though the only response were to insure or retain; even the standard framing describes the response as financing a replacement and covering the gap, which prices the loss rather than reducing it. Both treat the concentration as fixed. The alternative responses, distributing the relationship, documenting the decision, or giving a second person real exposure to it, change the exposure itself and are almost always cheaper, because a boundary role is rarely rebuilt after the fact.
The tension is that concentration is often what makes the person effective. Someone bridging two units is doing work that most colleagues cannot substitute for; research on cross-unit reliance found only a small minority of managers say they can depend on colleagues in other functions consistently, which is exactly the terrain a bridging role occupies. Reducing the risk usually costs some of the speed it was buying, and that trade is worth stating rather than discovering.
In practice
A carve-out depends on one commercial director who holds the four largest customer relationships personally. Retention is discussed and agreed. Nobody asks whether a second person could hold any of the four. Eighteen months later the retention ends, and the exposure is exactly what it was on day one.
Evidence
Key person exposure is recognised as a category of loss with defined consequences, including the cost of replacing the person and covering the gap.
Key person insurance, Wikipedia (2026)Reliance runs far weaker across units than inside a line, so a person who bridges two units is holding the least substitutable part of the structure.
Donald Sull, Rebecca Homkes and Charles Sull, Why Strategy Execution Unravels and What to Do About It, Harvard Business Review (2015)
What it cannot tell you
Key person risk identifies where a plan is concentrated but says nothing about whether that concentration is worth solving. A highly concentrated role can be entirely stable if nothing else changes; the term gives no guidance on timing, on the cost of reducing the exposure, or on whether the trade against speed is worth making in a given case.
Questions
No. A person can be entirely capable and still represent a concentration risk, and frequently it is their capability that produced the concentration. The risk is about how much of the plan runs through one place, which is a question about the structure rather than about them.
By insurance and retention, both of which price the exposure rather than reduce it, a logic set out in Key person insurance, Wikipedia (2026), which frames the loss in terms of replacement and recruitment cost. The responses that actually reduce it are distributing the relationship and recording the context.
In people who bridge two parts of the organisation, because those connections are the least substitutable. Research reported in Harvard Business Review (2015) by Sull, Homkes and Sull found only nine per cent of managers say they can rely on colleagues in other functions and units all the time.
Partly, and rarely completely. The concentration usually buys speed, because one person holding the whole picture makes decisions faster than two people coordinating. Reducing the exposure costs some of that, and the honest version of the trade is stated rather than assumed away.
Before commitment, and again whenever the plan changes what the person is being asked to carry. A change of ownership or a new operating model can turn a comfortable concentration into a critical one without anyone's role changing on paper.