In the UAE, the role and importance of family-owned businesses is even more crucial as they comprise 90 per cent of the private sector, many of them entwined into the very history of this nation.
Growing from early industries such as pearl diving, these businesses later diversified their interests to solidify their positions as leaders – across a broad range of sectors.
The crucial role of family businesses cannot be overstated, and their sustainable survival is paramount for ongoing economic health. However, there are some key challenges common to family businesses that must be understood and meaningfully addressed to achieve this. With transparency and robust governance structures increasingly important in today’s world, many family businesses are finding they need to elevate their processes, practices and policies in line with the ever-developing business landscape.
At the heart of family firms’ success is a sound governance structure that evolves with the changing dynamics of the business. Practicing good governance enables businesses to establish robust policies, laying the foundation to increase transparency across operations and to foster innovation, ultimately leading to opportunities for enhanced growth and improved performance.
Governance is not just a trendy new ‘buzzword’; it is both an absolute necessity and a pressing issue for family businesses – especially when it comes to change. Whether adopting new technologies, driving pioneering practices for business growth, or considering entry into emerging sectors, it’s clear that innovation must become the imperative focus for management teams and boards alike. Adopting a robust governance framework offers a roadmap for businesses to move forward – such as entering new geographies or doing new things, in new sectors, with confidence.
Historically, boards were the cautious voices urging leadership teams to diminish risk. However, in recent years, we have witnessed a shift where board members are increasingly embracing transformational strategies to ensure the long-term wellbeing of their companies. Integrating innovation means learning to embrace risk whilst continuing to mitigate and manage it as much as possible.
In essence, robust risk management and governance frameworks provide the flexibility required to remain agile.
According to PwC’s Family Business Survey, many family businesses have historically under-invested in digital. However, the pandemic has added a new urgency, with almost 75 per cent noting that digital, technology and innovation initiatives are a key priority.
In a region that is slowly emerging from the Covid-19 pandemic, leadership teams need to think strategically about the future of the business through an innovative lens, ensuring future leaders have the resources to lead the business forward. As family businesses embrace the innovation agenda, governance and transparency encourages healthy margins and sustainable operations. It’s no surprise then that, over the last few years, we have seen an increase in firms embracing corporate governance into their formalised operational structures.
As the region embarks on a new phase of growth, and with significant plans underway to diversify the economy, family businesses must embrace effective corporate governance. To retain competitive edge in a market that aims to integrate with the global economy, it is imperative that family firms implement robust governance standards that promote transformation and are aligned with international best practices.
Investing in corporate governance and incorporating it as a key pillar of the company’s ethos will not only help in passing the business to the future generations, but will drive future sustainability, ensuing the business will continue to thrive for decades to come.
John Iossifidis is the group CEO at Al Ghurair Investment