More than two-thirds of family businesses in the US have failed to implement formal risk management procedures, despite the majority recognising that threat identification is a top priority, new research has revealed.
Family Enterprise Risk Index 2015, published by strategic risk and insurance advisor Crystal & Company, found that 66% of respondents believed that risk management was a top strategic objective, but found only 30% had implemented formal processes.
Linda Bourn, executive managing director of Crystal & Company's family enterprise risk practice, said: "The Family Enterprise Risk Index tells us that the majority of family enterprises are struggling to address risk at an enterprise-wide level.
"The findings also suggest family enterprise executives are not currently including the risks to the family itself in their planning process, which is a missed opportunity to protect the family's wealth."
The report, written in conjunction with consultancy firm Family Office Metrics, surveyed 159 senior managers from family-owned businesses, family offices, family trusts and family foundations.
It found that nearly 95% of participants were aware of risks to family members, such as family conflict, family members seeking liquidation, or slowing asset growth, but noted that only 66% had implemented a relevant plan.
Paul McKibbin, managing director of Family Office Metrics, said: "Having quantitative data to allow family enterprises to benchmark their risk management approach against their peers is not something that is easy to find in this industry, which is why we carried out the study.”
McKibbin said that most family enterprises are employing common practices but not best practices, with the top performers putting controls in place for determining and managing fiduciary risk and integrating family members in the planning process.
Crystal & Company is a third-generation family business focussed on providing strategic risk and insurance advice.