Thursday 19 April 2018

Bahrain family businesses 'need 15-20pc growth'

MANAMA, September 3, 2014

Family businesses in Bahrain need to grow 15 to 20 per cent a year just to maintain the same level of wealth across generations, according to expert analysis.

KPMG Bahrain audit partner and family business head Harish Gopinath told the Gulf Daily News (GDN), our sister publication, this is an imperative given the current average size and growth rate of families.

Accumulation and preservation of wealth should be one of the major goals of a family business as it would safeguard the lifestyle of generations to come, he said.

"A strong financial background is the cornerstone of preserving the family wealth and it's important that future generations understand how finances work and how to properly manage the business.

"This can be a challenge for younger generations who have grown up with extensive funds but haven't had to manage funds themselves.

"When properly managed, wealth can grow a business and family, providing opportunities that go beyond the immediate," he added.

Although family businesses in the kingdom have grown over the years and are highly-diversified, market competition has exposed strategic and operational challenges in many businesses, he said.

"Many of the large family businesses have reached the stage where it is necessary to have a more structured governance process which is less dependent on the leader.

A majority of family businesses now have second or third generations joining the business and governance structures should be flexible enough to address the diverse interests of more family members and include a well-defined succession plan," he added.

Gopinath said introducing external professional managerial talent where critical competencies are absent within the family can enhance professionalisation and performance in a family businesses.

"Bringing new talent into an organisation can help to fill gaps and increase the skills and capacity of existing staff.

"Owners should consider looking overseas when specific expertise is not available in the local market."

Diversification into several industries and sectors is another challenge for family businesses in Bahrain and the region - making it difficult to have a single unified business strategy in place.

"Increased competition from both regional and worldwide firms across sectors should force family businesses to ensure they have a stringent evaluation process in place, based on unified long-term goals," he said.

Evaluation, according to him, should assess the profitability of all core business divisions and subsidiaries and identify the non-performing businesses.

"Following the review process, it's possible that divestment of businesses that no longer fit into the long-term growth strategy may be the best option.

"Many families may retain an emotional attachment to certain businesses and can find it difficult to let go, despite falling profits and lack of viability," he added. - TradeArabia News Service

Tags: business | grow | family | wealth |

More Finance & Capital Market Stories

calendarCalendar of Events