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Echhade and Kanoo at the event

Conflict resolution in Mena family businesses 'vital'

MANAMA, April 14, 2015

Potential feuds and disputes between family members can result in the disruption or collapse of a business, an expert has warned.

According to Saudi Arabia-based EY Mena Family Business Centre of Excellence leader Loutfi Echhade, conflict and issues over succession are two of the biggest threats to the stability of family businesses in the Middle East, said a report in the Gulf Daily News (GDN), our sister publication.

He said the family business model was particularly significant for the region, as more than 90pc of businesses in the Middle East and North Africa (Mena) region were family-owned.

During a presentation to the Bahrain Family Business Association, Mr Echhade said conflicts arise between younger family members' generally more forward-thinking approach to running a business and the more traditional style of their elders.

"This is particularly evident if the younger generation has been to universities abroad and learned new ways of doing business," he said.

Addressing members of the association led by Khalid Kanoo, the EY expert said compared to their counterparts in the western world, Middle East family businesses were relatively young.

About 65 per cent of Mena family businesses are in first and second generation.

"Families in the region have enjoyed limited external competition and protected markets, which helped them to build large, diversified companies operating in multiple sectors," he said.

"Many are facing succession issues now for the first time, which could be a threat to the continuity of the business," he warned.

Other key issues facing Mena family businesses are that fewer than 20 per cent of them have formed rules such as family constitution (charter) and 27 per cent are in the process of doing so, he said.

Also, fewer than 30 per cent have a family council and less than 15 per cent have a family office, he added.

Only 37 per cent disclose financial and non-financial information to business partners and only 12 per cent disclose non-financial information such as environmental, social or governance information, said Echhade.

However, nearly a quarter (24 per cent) of regional family businesses intend to raise external capital to grow.

On what Bahrain's family firms needed to do to make the family business model more robust, Echhade said the "success mantra" of thriving family businesses across the world includes prudence in investing capital, retention of companies through bull and bear markets, long-term development of talent, focus on core business, maintenance of strong and enduring values and emphasis on long-term performance over quarterly gains. - TradeArabia News Service




Tags: Mena | business | family | feud |

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