A new report from the STEP Project Global Consortium and KPMG Private Enterprise highlights how a long-term outlook has allowed the UAE’s family-owned businesses to stay resilient during the Covid-19 pandemic and play a key role in the nation’s economic recovery. Mastering a comeback: How family businesses are triumphing over Covid-19 includes insights from nearly 2,500 family businesses and more than 500 non-family businesses around the world, including the UAE. The publication highlights the key strategies used by family firms in tackling the immediate impact of Covid-19 on businesses, as well as the wider macro-economy.
Anurag Bajpai, Partner, Private Enterprise and Family Business Leader at KPMG Lower Gulf, said: “Family firms in the UAE are embedded in the country’s social and economic fabric and are committed to sustaining entrepreneurship. These businesses have exhibited resilience during the pandemic, manifested in strategic actions to embrace all stakeholders during a challenging time. Family businesses have responded swiftly to changing economic realities in order to sustain operations, maintain jobs and preserve long-term economic, social and emotional investments.”
According to the report, multiple generations are currently active in one-third (33%) of the UAE’s family businesses, compared with 16% globally. The transgenerational nature of UAE family businesses gives them their characteristic tenacity. The family’s involvement not only addresses economic goals, it also tackles family-oriented issues, such as sustaining the legacy. This combination has affected the ways in which families have reacted and responded to the impact of Covid-19.
Family businesses in the UAE have experienced the shock of an economic slowdown that lasted for several months and introduced high levels of uncertainty. According to the publication, 83% of the UAE’s family businesses saw revenues decline on account of Covid-19, against a global average of 69%.
However, the UAE’s family businesses did better than their regional peers in saving jobs. Employee headcount in the UAE was reduced by 8.2% due to pandemic, compared with an average of 20.1% across the Middle East and Africa region. The strategy implemented most widely by UAE family businesses was freezing all hiring. While one-third (32%) of businesses trimmed staff costs, other micro strategies to reduce the financial impact of Covid-19 included office cost optimization, vendor contract renegotiation and deferment or reduction in executive pay.
As they are committed to sustaining entrepreneurship across the generations, a deep sense of resilience is embedded in the DNA of family businesses. The report highlights how an unprecedented event, such as Covid-19, has laid the foundation for longer-term growth prospects among family businesses in the UAE.
Fulfilling social responsibilities and taking care of all stakeholders, including employees, customers, suppliers and local communities, is one of the three core strategies adopted by family-owned businesses worldwide to navigate the pandemic. In addition, exercising patient capital and implementing business transformation have also been key.
Rodrigo Basco, Associate Professor and Sheikh Saoud bin Khalid bin Khalid Al-Qassimi Chair in Family Business at the American University of Sharjah, said: “The Covid-19 pandemic has triggered family firms’ instincts for resiliency, prompting them to transform themselves at both the organizational and strategic level. To absorb external shocks brought about by the pandemic, some adjusted their family and business governance structures by incorporating externals boards or bringing in a new generation of family members to formulate recovery plans. This was complemented by a shift in their strategic behavior, as they implemented entrepreneurial actions. Family firms’ organizational and strategic responses to protect their long-term survival were aligned with their actions to support the UAE government and leadership, as well as addressing the needs of local communities.
Learn more by accessing the full report here.