FAMILY enterprises have long been the bedrock of economies. The 2023 EY and University of St Gallen Family Business Index highlighted the strength of the top 500 family enterprises globally. Together, they generated US$8.02 trillion in revenue and employ 24.5 million people across 47 jurisdictions.

Many of these families are more than 50 years old and have weathered market volatility over generations, underscoring the extent to which family enterprises are able to maintain their success – and succession – over time.

Such achievements are not left to chance. Often, a set of shared values and commitment to the family form the foundation of their resilience and adaptability. Importantly, leading family enterprises are focused on creating sustainable value for stakeholders, and to that end, being prepared for risks in all forms to stay resilient for the long term.

Companies today are confronted with an expansive, complex and interconnected risk universe. Amid the usual suspects of financial, cybersecurity, reputation, compliance and competitive threats, companies are also facing increased pressure to deal with risks relating to global geopolitics and supply chain, inflation, workforce and talents.

These uncertainties can put the brakes on growth as companies struggle to see where the next opportunity or disruption will emerge.

Global geopolitical and supply chain risks

Global geopolitical tensions, which have led to trade disputes and regulatory restrictions as countries seek to safeguard their national interests, are having rippling effects on supply chains.

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Disruptions in supply chain have proven to impact manufacturing capacities and delivery lead times. Excessive reliance on a single supplier or location can also backfire with expensive downtime. Leading companies are reimagining and redesigning their supply chains, such that these are shorter and more localised. Such pivots challenge the conventional principles upon which many companies have built their operating models.

To strengthen supply chain resilience, companies will need to diversify their sources of supply and accommodate excess capacity and volume redundancy, and shift towards multiple planning centres and omnichannel interactions with customers.

These will no doubt bring new operational requirements and challenges. Further, companies will be compelled to factor sustainability considerations in their supply chain designs in response to increased focus on climate concerns by consumers, investors and regulators.

Inflation risk and the end of cheap money

Singapore’s inflation rate has generally been low, averaging 1.8 per cent between 1981 and 2021. However, this changed in 2022, when inflation rose to over 4.0 per cent before hitting the peak of 5.5 per cent in January this year.

While inflationary pressure has eased somewhat, companies must continue to stay vigilant to the risks.

Notably, high inflation ended the era of “cheap money” with interest rates at a level not seen for some time. The cost of borrowing has therefore become much more expensive.

For businesses, this means seeking out alternative sources of financing to support their growth plans.

Many businesses have compelling ideas but lack the financial resources to turn them into reality.

Government support through grants, loans and other fiscal incentives, such as the Enterprise Development Grant, Market Readiness Assistant Grant as well as the Productivity Solutions Grant can be useful but likely insufficient to fuel transformative growth.

Private or public fund injection are plausible avenues for fund-raising. Most family enterprises may not be comfortable with the idea of going public or accepting private equity offers, given concerns over maintaining legacy, privacy and control.

There are however merits to such equity options, including enhanced professionalisation of management, more rigorous governance, expanded options for succession planning through attracting external C-level talents, and access to new in-demand capabilities and expanded network of business relationships.

Workforce and skills risks

An EY survey found that attracting and retaining talent are top workforce concerns for employers. Yet, research has shown that family enterprises fare better than their peers in retaining employees. It is not uncommon to see long-serving staff who have been with family enterprises for decades or even entire careers. The harmonisation of family and enterprise values in the organisational culture could be one of the reasons why employees feel a stronger sense of belonging or being part of the “family”, and are often willing to ride through tough times with the company.

Such ability to retain employees is an advantage but the company must be mindful of the need for continual talent development and skills renewal as the business and strategy evolves.

For instance, with disruptions such as the accelerating pace of technological change, heightened scrutiny on environmental, social and governance concerns, and the convergence of sectors and ecosystems, companies will require talents with new relevant skill sets that are fit for purpose, and redeploy resources where roles have become obsolete.

Family enterprises need to regularly review their workforce mix and take a proactive approach to workforce upskilling and reskilling as well as talent acquisition. Managing the workforce in family enterprise can be a delicate issue, and at the core is effective change management guided by the values of the family and enterprise.

Successful family enterprises are often able to turn the tables on adversity more quickly due to their shared commitment to long-term value creation. Ultimately, it is about constantly scouting growth opportunities while astutely navigating the evolving risks, balancing responsible business ownership with healthy family dynamics, and drawing strength from the entrepreneurial spirit and values that the family enterprise was founded upon.

The writer is EY Asean private leader and assurance partner, Ernst & Young LLP.

The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.