Family businesses and COVID-19

Effective governance – both family and corporate – is of critical importance at any time. But it’s even more vital during a crisis when the trust, transparency and clear expectations it creates can be a real differentiator, helping you manage current and future challenges in the right way.

That said, a crisis such as today’s creates governance risks that go beyond the usual challenges. So, you should keep directors' duties front of mind to avoid wrongful trading risks. Be ready to seek external expertise if you’re uncertain. To learn more, read our COVID-19 microsite and COVID-19 client navigator.

Our recommendations:

• Your family council is the beating heart of your business: are there any other family members who should join who could bring unique, crisis-relevant skills and experience?
• Assess whether your board of directors are fully equipped to manage the crisis and related risks. And ask yourself whether anyone else should step in who could contribute further expertise.
• Establish a cross-functional steering committee led by a C-suite member. It should include senior representation from business divisions and functions such as human resources, finance, legal, IT, operations, risk, business continuity, procurement, sales and health and safety.
• Consider using PwC's COVID-19 Navigator to assess where you are on your path toward COVID-19 preparedness and response.
  

Succession is critical to the success and continuity of any family business. While it’s usually a relatively drawn-out process, a crisis like today’s demands some quick and effective decisions. These include establishing emergency plans – both for the business and the family – and clear leadership transitions, especially since older generations are more vulnerable to the virus.

This is also the time to turn to your next generation for leadership. The younger generation has a huge role to play both in the business and the family. In our latest Global NextGen Survey, they told us they’re ready to make their mark, especially around digital transformation – but that they don’t yet feel they have the licence to operate. Now is the time to bridge the generation gap, hand over that licence – and let them help drive your business through the crisis.

Our recommendations:

• Put clear plans in place for any losses in the family, including reviewing wills and setting out clear leadership/role transitions both at family and business level.
• Give your next generation the opportunity to prove themselves by applying their digital savvy. This can make the difference between falling behind and staying ahead, as remote working and digital solutions become even more important. 
• Involve your next generation in using social media effectively, ensuring you have a clear and confident voice out there with all stakeholders.

As a family business owner, you may find the COVID-19 crisis requires you to change your strategy for protecting your personal wealth. You should make a full assessment of the impact on your estate and tax planning, as well as your private investments in the various asset classes. Also, many countries are putting emergency tax provisions in place, and it’s important to establish how you will be affected. PwC is monitoring the changing tax landscape in real time here. You may also want to reconsider your charitable giving/philanthropic activities.

Our recommendations:

• Consider whether your business will need additional capital, and how you might use your private wealth to help.
• In terms of philanthropic giving, you might wish to change your current approach to address more pressing issues generated by the crisis. When assessing where you can help, start with your immediate community.
• Understand the tax measures being introduced in response to COVID-19 and their effect on your personal tax position and liquidity. Then consider how to allocate your assets most effectively.
• Assess how prepared your shareholders are to support the business’s ongoing liquidity requirements.
• Communicate with your other beneficiaries to ensure they are clear about what are plans in place, and on any sacrifices they may have to make, like accepting the reduction or suspension of dividends/returns.