Capital Insights Highlights Succession Challenges in Family Businesses

What's Happening?

The latest issue of Capital Insights, a publication by Capital Club Dubai, focuses on the challenges and opportunities facing family businesses in the Middle East and North Africa (MENA). The issue highlights the impending intergenerational wealth transfer, estimated at $1 trillion, and the lack of formal succession plans among many family-run enterprises. Experts emphasize the need for robust governance to prevent governance breakdowns and value destruction during transitions. The UAE government is actively promoting structured governance through initiatives like the THABAT Venture Building Program and the new Family Business Law.

Why It's Important?

Family businesses are a significant economic force in the MENA region, accounting for over 90% of private sector companies and contributing up to 70% of GDP. The lack of formal succession planning poses a risk not only to individual businesses but also to the broader economy. The push for structured governance is crucial for ensuring the long-term sustainability of these enterprises. The focus on governance also reflects a shift towards professionalizing family businesses, which could lead to more resilient and competitive companies in the global market.

What's Next?

The transition towards structured governance in family businesses is expected to continue, with the UAE government playing a pivotal role in facilitating this change. The implementation of family councils, professional boards, and clear conflict resolution protocols will be key to this transformation. As the next generation of leaders takes over, there will be a focus on balancing tradition with innovation, particularly in areas like digital transformation and ESG commitments. The success of these efforts will depend on the willingness of family businesses to embrace change and invest in their future leaders.