Risk – Family Business Dynamics

Disagreements within a family can be more emotional
than disagreements between colleagues. If these
disputes are not handled properly, they can often spill
over into the operations of the business.

Family businesses often forget to put in place a formal
succession and governance plan because they believe
that everything will work out in the end. The lack of
an established governance model and succession plan
can stunt business growth, especially in the case of a
death, divorce or marriage in the family.

If your business does not change and grow in relation to
the changing marketplace in which it operates, it will not
be able to adapt and succeed.

Having poor financial management strategies in place can
be detrimental to both the company as well as the family. Areas such as cash flow management can be a downfall if the boundaries between the families personal bank and the organization’s finances are blurred.

Given the speed of change in the IT world today, not
having the right technology, implemented correctly and
managed on a regular basis can lead to catastrophic
outcomes including reputational damage, legal exposure
and market value loss.

The increasing sophistication of fraud, cyber threats,
organized crime and more complex legislation and
regulations with increasing extra-territorial reach have made
this area an increasingly important concern. It is critical to
establish internal controls and cyber defense systems to
monitor and help to mitigate potential fraud from occurring.

Understanding the complexities and changing tax regulations
for a national or internal business can be overwhelming.
But not seeking sound advice and having an effective tax
management strategy in place can lead to serious legal issues.

Recruiting and retaining talented staff can be one of the
greatest challenges of a family business. A great team can
help to grow a business exponentially and in tern the loss of
staff, or ill-equipped members can have the same opposing
reaction.
Many risk factors are out of a family’s control, but there is one
way that family businesses can avoid several of these risks —
communication. Effective communication is one of the single
biggest challenges in managing the family component.
Having a communication strategy is not often equated with
risk management, yet it is a risk factor over which the family
business owner has total control.