In the third session, titled (Challenges of Family Businesses), the consultant at (Pwc), Amin Al-Nasser, reviewed the results of an opinion poll conducted by the company on the challenges of family businesses and showed that family businesses face several challenges, most notably: weak founding spirit when the founders are absent, and weak The competitiveness of incentive systems compared to the labor market, the overlapping of the family dimension with the investment dimension, as well as the weak degree of transparency and governance.
Nasser said that it is necessary to know the challenges facing family businesses and search for appropriate solutions for them, and about the most prominent concern among family business owners, pointing out that the survey showed about 66% of the participating family businesses agree that skills and capabilities should be evaluated, and about 53 % of them confirm that succession is the main issue, and about 44% say that professionalism is a challenge, and 72% intend to tackle this challenge over the next two years.
The survey showed that 88% of large family businesses plan for executives to improve profits and stay competitive, despite the changing economic environment, which is the number one challenge for 78% of those surveyed.
Nasser pointed out that each family needs to have a clear vision and strategic plans that go according to it to achieve success, and for everyone to be committed to that, pointing out that conflicts in families always exist, but the secret lies in managing this conflict not only for the continuation of work but for the survival of family and its solidarity.
Sources of conflicts and their management
In the last session, which was entitled (Sources of Conflicts and Their Management in Saudi Family Establishments), during which KPMG reviewed the most common mistakes that lead to disputes in commercial families, including the decision to appoint the eldest son without documenting the decisions taken, and the formal and informal integration of the owners. The undisclosed confidence that the eldest son would have complete and indisputable control, the mixing of company assets and personal assets in ownership documents, in addition to not updating the articles of association in limited liability companies, as well as hiring family members without developing a specific form for appropriate evaluation, as well as mechanisms for dividing Inheritance between heirs without the assistance of a lawyer.
The paper suggested some appropriate solutions to the challenges, including: If none of the methods succeed in resolving the conflict between family members, it is useful to look for the intervention of a third party, and the external parties can be neutral family members who are accepted by those in a state of conflict. , non-family trusted advisors, professional mediators, family business advisors, or arbitration centers.
Governance and alternative financing solutions
Asharqia Chamber and the National Center for Family Enterprises had anticipated the opening of the forum with two workshops, which witnessed a remarkable presence of specialists and interested persons. In the first workshop held entitled: Alternative Financing Solutions for Family Businesses, the founding partner of Dinar Investment Company, Dr. Omar Al-Manea, said that the financial sector development program within the Kingdom’s Vision 2030 AD revolves around its role in developing a diversified and effective financial sector, to support the development of the national economy and diversify sources of income. And stimulating savings, financing, and investment, through the development and deepening of financial sector institutions, and the development of the Saudi financial market to form an advanced financial market, in a manner that does not conflict with the strategic objectives to maintain the stability and strength of the financial sector.
Al-Manea explained that the program aims to increase the number of financial technology companies from 10 companies in 2018 AD to 230 companies in 2025 AD, as the number of financial technology companies reached 147 companies in the first half of 2022 AD.
Regarding the various means of financing, Al-Manea indicated that it is important for the financing applicant to choose the appropriate financing mechanism based on several factors, the most important of which is the company’s maturity stage with a focus on searching for refinancing, pointing to the promising role of debt markets, which is represented in the issuance of Sukuk, which is the optimal financing option. For medium and small companies, as it does not reduce the ownership shares of financing applicants, as is the case if the financing applicant tends to raise capital, and is distinguished by its ability to extinguish the Sukuk by issuing a new Sukuk without exhausting the company’s cash flows.
While the second workshop was reviewed, entitled (Governance in Family Businesses), in which a member of the Board of Directors at BDI, Bassam Asiri, the consultant Adeeb Rashid, and the managing partner at the Business Family House for Management Consulting, Dr. And legal advice, Dr. Adly Hammad, that governance should start from the owners first of all, so that their relationship is separated between them, and then the corporate governance comes, stressing the importance of separating management from ownership.
The speakers pointed out the need for the owners to have a culture of dealing with the differences that may arise at any time between the owners, pointing to the importance of identifying obstacles and challenges to achieve the continuity of the family business, stressing that governance sets principles and standards for dealing with owners and their relationship with the board of directors and employees and emphasizes the principle of justice Roles, the importance of the family charter and its role in drawing the road map for the family, and they agreed on the importance of training and developing the next generation by subjecting it to several specialized training courses, especially in issues of governance and succession, so that they can later lead the company and contribute positively and effectively to the continuity of its business.