Slowing growth with Brexit as the obstacle, loose succession planning and the rise of cybercrime are the challenges keeping Irish family business leaders awake at night, according to research.
However, Ireland performed slightly better than global counterparts on particular areas of diversity. A quarter (25%) of Irish family business board members were female compared to 21% global and 28% of Irish family management teams were women, PwC’s 2019 Irish Family Business Survey discovered.
The UK’s looming departure from the European Union was deemed the single biggest challenge holding up future growth for 58% of Irish families surveyed, who were much more concerned by Brexit than families in the rest of the world (11%). At the same time, PwC highlighted that Irish families could do more to diversify their businesses compared to global counterparts—nearly half (46%) operated in only one sector and in one country (global: 30%) and just 29% said they would be selling their goods and services in new countries in two years’ time (global: 38%).
“We urge those family businesses trading with or through the UK to intensify their Brexit plans,” Owen McFeely, director of PwC entrepreneurial and private business practice, said.
“The survey highlights that Irish family businesses have some way to go compared to global counterparts to diversify their businesses. In light of Brexit, seeking scale in international markets needs to be considered.”
Most of the key findings from PwC’s survey chimed with other worldwide surveys including the Campden Wealth Global Family Office Report 2018 (GFOR18).
Families in Ireland and around the world needed to devote more time and effort into formalising their succession plans, both papers said. More than half (53%) planned to pass on management and/or ownership to the next generation, but a third (34%) had not engaged next gens in preparing for those changes. At the same time, less than one fifth (18%) had a robust, formalised and communicated succession plan in place.
The GFOR18 revealed that next gen family members were taking a more active role within the family office, indicating the big handover was beginning to take place. Among the next generation of family members, 29% family offices now held management or executive roles, while 23% sat on the board. However, half of all family offices did not have a succession plan in place. There had only been a one percentage point increase in succession plans since Campden Wealth warned of the problem in 2017.
More than half (54%) of Irish families surveyed by PwC said they felt vulnerable to a cyber-attack, compared to 40% globally. In 2017, Campden Wealth reported in its Private and Confidential: The Cybersecurity Report that 32% of family offices have experienced one or more cyber-attacks, with a significant proportion resulting in some of loss, such as a loss in revenue or private and confidential information. At the same time, only about half (52%) of family offices had a cybersecurity plan in place, leaving a large swathe of the sector vulnerable.
While internal resources and bank lending were still the most popular sources of funding for Irish family businesses, more than one third (36%) told PwC they would consider private equity to help fund the business, compared to the global response of 39%. Private equity had buoyed investments in the global family office space for years, representing a 22% share of the average portfolio in, up 3.8 percentage points from 2017, the GFOR18 reported.