Balancing business risk and family security

All businesses face risk, but when it is your family firm the consequences of something going wrong can be personal as well as commercial. It is important to ensure you have processes in place to manage risk.

Risk isn’t just financial loss

When you own and run your own family business there tends to be a number of family members involved in the ownership and control of the business. You need to consider how this impacts the way the business manages risk. There are many different risk factors to consider, including financial, performance, reputation, safety and relationship. Relationship risk tends to need more of a consideration in a family business. It will include the potential for solidifying or weakening trust between non-family employees, customers, suppliers and other stakeholders, as well as strengthening and weakening trust within the family – and the impact of that trust on legacy.

Danger and opportunity

When talking about ‘risk’ we tend to think of danger, but risk also offers opportunity and it is important to really understand the difference. Talking about risk in a family business, including the different levels of risk each family member is prepared to take, can be an emotional subject. That is why it is important to have proper procedures in place to ensure risk is managed effectively.

Experienced family business advisers

The most important thing is to ensure risk management is part of the overall business plan, and that there is a framework for identifying and discussing risk within the business. There should also be a formula for measuring risks so they can be identified and addressed if things change. Not only do we live and breathe family business at Unividual, which is run by two generations of the Baxter family, but our financial planners have worked with many different family-run businesses over the last 20 years. Each business is unique and has different circumstances and structures, and at Unividual we have the empathy and ability to listen, understand and mediate for each unique company. This gives our advisers the experience to navigate complicated and intricate areas that link up with each family member’s business and personal finances.

Keeping it all in the family?

Sometimes families think keeping the business in the family is less risky. Bringing a non-family member onto the board or as a shareholder could be a positive move.

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