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Succession planning is a priority for family businesses in south-east Asia

More than two-thirds of family businesses in south-east Asia have implemented formal succession plans, as senior executives believe they are important for attracting investment, new research claims.

More than two-thirds of family businesses in south-east Asia have implemented formal succession plans, as senior executives believe they are important for attracting investment, new research claims.

Building Legacies: Family Business Succession in Southeast Asia, published by The Economist Intelligence Unit (TEUI) this month, found that 67% of family businesses had implemented such succession plans, while 74% of executives said they are integral for growth.

Report author Kevin Plumberg, TEIU’s senior editor for Asia, said that family-owned businesses with succession plans are more likely to gain investment, as consumers believe they are trustworthy.

“Family businesses are the backbone of south-east Asia’s economy,” Plumberg said. “It’s a sign of their maturity that they are making leadership succession planning a part of their long-term business strategies.”

The report, commissioned by Malaysia's Labuan International Business and Financial Centre, sampled 250 majority family-owned businesses from Indonesia, Malaysia, the Philippines, Singapore and Thailand.

Despite the majority of family businesses saying they have a formal succession plan, only around half of senior executives expect the ownership structure to remain the same in 10 years time, the report claims.

One in eight family businesses (12%) expect they will require external advisers to help mediate family conflicts related to company ownership in the next five years. This figure is expected to double to 35% by 2024.

A 2014 global family business survey from consultancy PwC, however, found that 80% of family businesses across the globe do not have robust succession plans whatsoever.

“The bigger the family is, the harder it is to get everyone to come to a unanimous agreement, so you have to leave it largely to the board,” said Richard Eu, CEO of Chinese medicine company Eu Yan Sang, a participant in the study.

Family-run firms account for more than 60% of all listed companies in south-east Asia, where they frequently outperform non-family controlled companies.


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