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Family businesses dipped into their cash reserves during 2020, but now, they have a few lessons to absorb Image Credit: Shutterstock

The coronavirus crisis has been a huge stress test for everyone, including family businesses in the Gulf. However, with the vaccine rollout going exceptionally well, there is a lot to be optimistic about as we enter a period of incredible growth.

The combination of the Gulf being very much open for business and the fact that investment is encouraged by the local authorities has generated an enormous amount of confidence. Indeed, Knight Frank’s recent Wealth Report 2020 predicts that the number of ultra-high-net-worth individuals – those valued at $30 million or more – in the Middle East will be 17 per cent higher in 2024 than the figure in 2019, just before coronavirus struck.

These are very exciting times for family businesses – especially those that have learnt how to be more agile and resilient and invested smartly following the pandemic. Those in positions of power at family businesses are urged to take advantage of this opportunity, to prepare for further volatility and uncertainty tomorrow by diversifying investments and digitising.

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It is business-critical to have a proactive banking partner with a long and deep experience of the region. After such a period of considerable and unforeseen disruption, it is vital to seek expert advice and collaborate with wealth management experts and other key players in the region’s network – because if we work together we can reinitiate an upward trajectory.

A two-way play

PriceWaterhouseCooper’s latest Family Business survey hints at the resilience of the region’s family businesses when faced with by far the most disruptive event in recent history. The research shows that before the coronavirus outbreak, hopes had been high: 59 per cent of family businesses were expecting to grow in 2020. Interestingly, over half have since experienced a reduction in sales, compared with the global average of 46 per cent.

Given how hard the coronavirus crisis hit Gulf’s family businesses, there is little wonder many leaders are cautious about the speed of recovery in the short term. According to the PwC report, 59 per cent expect revenue growth this year, whereas the global average is 64 per cent.

Notably, family business leaders in the Middle East are much more optimistic about next year: 89 per cent forecast growth, and 58 per cent say they plan to expand into new markets in the next two years.

That the decline of sales has been higher than the global average has spurred family businesses in the Gulf to rethink and revamp their strategies, driving both digitalisation and diversification. Further, it has accelerated technology-powered innovation and led to business leaders reaching out for guidance and partnership.

During the lull in trading, those in charge have been forced to ask themselves difficult questions about business continuity, how to hedge risk, and determine ways to prepare for other crises in the near and distant future.

Build up that resilience

When faced with such a disruptive event, it is natural to assess plans, consider management, and succession plan. That reflection is essential for any business leader. believe that family businesses will come out of the pandemic with more resilient strategies and grow in the coming years.

Family businesses that have had to dip into their cash reserves to remain in the market during the last year will appreciate the value of having prudent money management more than before. Most realise now that managing savings and hedging the risk is business-critical.

The truth is the stress test is still ongoing. The big problems caused by the virus crisis continue to be felt. If people have learnt anything, it is that we can achieve more – look at how the collaboration of many different teams catalysed the production of vaccines so quickly.

Collectivism and collaboration should be embedded within all progressive family businesses in 2021.