Page 23 - Internal Auditor Middle East - December 2017

Challenges

By: Hossam Amin Fahmy Edited By: Assem Al Naser
Future and Challenges

of Family Businesses

Family Businesses have been the
traditional way of doing private projects
in most countries of the world; and have
acquired a great consideration in recent
years as one of the means and forms of
doing private projects. There are several
reasons to attract attention to Family
Businesses, including the following:
• The role of socialist systems in political
and economic life has diminished in
most countries of the world. These
systems were not only non-conducive
to the growth of private investment,
especially Family Businesses, but it has
also led to the nationalization of some
of these projects in several countries in
the world.
• Reducing the role of the public sector
in economic life and the growth of the
privatization trend led in turn to the
entry of multinational companies and
some Family Businesses to acquire the
public sector companies offered for
sale.
• As the country believes in the role
played by the Family Businesses in the • Family members effectively contribute Characteristics of Family Businesses,
economic and social development and to the company’s capital. many of which constitute challenges:
to find a balance between the foreign
companies and the national companies, • Family members have the majority 1) The strong overlap between the affairs
these countries give incentives to the vote in the Board of Directors or the of the family and the company and
private companies, including, but not General Meeting. the absence of separation between
limited to, financing small projects • Family members have authority or ownership and management unlike
in many developing countries. This influence on the strategic trend of the other companies. This role in turn
encouraged many individuals and company. exposes the Family Businesses to
families to establish projects. • All or some of the family members circumstances that may affect them,
Before going into the discussion, we would actively participate in management. to the extent that the decisions of
management, who are also owners, are
like to agree on the definition of Family • More than one generation involved in not fully subject to the achievement
Business. Family Business is a company company management. of economic objectives, for example
in which family members have effective • Family members’ desire or intent to marriage, divorce, death, or graduation
control over its strategic direction. The continue as a family business. of a family member and his desire to
Family Business significantly contributes to In this article, we will not only discuss the work in the company.
the income, wealth, name and goodwill of specific concept of the family represented 2) Family Businesses focus more on long-
the family. A company can be classified as in the father, mother and children, but also term sustainability than short-term
a Family Business, if it meets all or part of extends to its broad concept to the brother, profits. Most of Family Businesses are
the following requirements: sister, cousins, and their spouses ... etc. managed to maintain, develop and

DECEMBER 2017 INTERNAL AUDITOR - MIDDLE EAST 21