‘Family business model set to ride out economic downturn’ | business | Hindustan Times
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‘Family business model set to ride out economic downturn’

Family business may seem to be the way to go for companies hit by the downturn. According to the Barclays Wealth and the Economist Intelligence Unit’s (EIU), report Family Business: In safe Hands? the family business model is likely to survive the economic downturn and emerge a stronger business model, reports Radhika Pancholi.

business Updated: Mar 08, 2009 21:53 IST
Radhika Pancholi

Family business may seem to be the way to go for companies hit by the downturn. According to the Barclays Wealth and the Economist Intelligence Unit’s (EIU), report Family Business: In safe Hands? the family business model is likely to survive the economic downturn and emerge a stronger business model.

“Family business is very long-term in nature and 90 per cent of our respondents have never thought of exiting their business,” Satya Bansal, Chief Executive, Barclays Wealth, India told Hindustan Times.

According to the survey, 67 per cent of respondents considered ensuring financial security for dependents as an important motivation to create and protect wealth within a family business. Family business members in Asia-Pacific (4 per cent) were least likely to have sold or considered selling compared with 13 per cent in Europe.

“India was covered in the Asia Pacific region and most of the findings that were applicable to the rest of Asia were applicable to India too,” said Bansal adding that Asian families were more committed to growing their business instead of enjoying family wealth.

“Hardly 30 per cent of the respondents said that enjoying family wealth was important to them,” he said.

However, Bansal was quick to point out the challenges that these businesses face, especially in the Asia-Pacific region.

“Succession planning and the governance structure are two key challenges faced by family-run businesses, especially in India,” said Bansal. In India, succession planning was a cultural taboo, to be considered only at a “very late stage”, he said.

“Only 21 per cent respondents from Asia-Pacific view weaker governance as a key disadvantage of the family business model,” he said.

“The concept of family council too is almost alien in India, whereas it is a well-established norm around the world,” said Bansal, pointing out disagreements within the family members could always be solved by such councils instead of dragging an issue to the Boardroom table.