By: Yasmine Omari, Manager, Family Enterprise Consulting, Deloitte, Middle East
While family businesses tend to be a labor of love, carefully nurtured by their founders, many unknowingly expose their businesses to certain risks by virtue of failing to conduct the necessary risk assessments or implement the necessary precautionary measures.
Family business owners are often so intrinsically involved with and connected to the day-to-day operations of their business, that there is the perception that through their knowledge of the business, they are aware of the risks the business is exposed to.
However, often therein lies the issue. Founders are usually engaged with the business on an operational level, that often the bigger picture risks that the family and business may potentially be exposed to are overlooked.
In theory, it may seem straightforward to address business risks but in practice, family businesses face an additional risk angle that requires an added level of care and attention. It is true that risks such as cyber, fraud, corruption etc., can be addressed relatively straightforwardly by appointing a risk manager and/or having a risk management team within the family business, but for the family it is not so straightforward.
Further, the reality when it comes to family matters in a family business is not that the potential risks are overlooked, but the belief that the family will not pose any threats. It is often a matter of ‘it will not happen to us’ or even ‘we have plenty of time to plan for this’.
As with any risk planning, advance planning is of the essence. Often, when there becomes the need for a plan, it is too late to start creating it, and the issue becomes extremely difficult to address in the moment.
Repeatedly we find that certain tensions trigger the planning requirement for a business owning family, by which point relations have been tainted, and the neutral ground for discussion and dialogue no longer exists. For example, when the time for succession becomes imminent, family members become alert to the fact that various matters and policies need to be defined and addressed to secure their stake and position in the family business.
Naturally, individuals have their own interests and if left too late, it can become a tug of war between them – each battling to secure their own personal interests. As such, it is very often extremely difficult; if not too late to do the relevant planning when there is the need.
To ensure the sustainability of the family business, owners should heed the words of Confucius: “A man who does not think and plan long ahead will find trouble right at his door.”
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