RECAP: 2018 FOX Fall Enterprise Forum

Managing the Unexpected Using an Opportunity and Risk Framework

 

Presenter:
Sara Hamilton, Founder and CEO, Family Office Exchange

Session Description: 

Provided a first look at the new FOX research on managing opportunities and risks in the family enterprise. This research focused on a process for the family to address future uncertainties, recognizing both known and unknown risks a family may face in the 21st century. Families who can embrace change, seek opportunity, and manage uncertainty will create the most resilient enterprises of the future. The FOX model addressed the family view, the business view, the financial view, and the philanthropic view of the family enterprise, and provided practical tools for building thoughtful strategic plans for the future.

 

"We believe that major disruptions in the normal course of business are heading our way, and the best preparation will be to establish and practice a process before the disruptions disturb the status quo, developing a “muscle memory” response for how to deal with the unexpected."
- Sara Hamilton
Key Takeaways: 
  1. Enterprise families see opportunity and risk in very different and intuitive ways. Most wealth owners can tell us what keeps them up at night, but they need help from capable advisors to decide what to do about their concerns. Conversely, family office executives and advisors are better at identifying certain forms of risk than family members are, but they need support from the family to prioritize and address the risks. Tangible risks are easier to plan for than the intangible ones, such as a lack of family engagement or a feeling of not belonging.
  2. A risk monitoring process is not yet a formal part of most family governance systems yet having an approach to managing the unexpected will be important in the decade ahead. 
  3. Our ability to find opportunity amidst disruption compels us to rethink our views about how we analyze the driving forces and how we make our strategic choices. It calls for courage to embrace change and explore where new opportunities can be found. It requires that owners and executives be open-minded and adaptive. 
  4. FOX’s Opportunity Roadmap identifies elements that are common to many of our members, regardless of country or culture. There are 25 building blocks a family might evaluate and select the key components they require to survive and thrive.
  5. The inverse of opportunity is the risk. These 25 building blocks identify areas that are currently unaddressed or under-planned in most families. Office executives and advisors can discuss this roadmap together to identify top priorities for the family governing board to address.
  6. There are five key steps in the Opportunity/ Risk Oversight process:
    • Assessment of owner attitudes about risk-taking and risk management at the board level or leader’s council meeting
    • Identifying opportunities and risks using the Roadmap
    • Formalizing a committee to address the identified issues for the enterprise, typically composed of family members, family office executives, and qualified external risk specialists in different disciplines.
    • Quantifying the Opportunity and Risk impact of each element and allocating capital accordingly.
    • Designing a reporting process for monitoring the strategies selected and reporting on a regular basis to the board about these issues.
       

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(FOX Members only)