Dubai - MENA Herald: With family businesses generating over 85 per cent of non-oil GDP in the Middle East, they represent a huge opportunity to become more actively involved in addressing the major challenges of this region, according to Badr Jafar, CEO, Crescent Enterprises and Founder of The Pearl Initiative, who was speaking at the inaugural Financial Times (FT) Dubai Family Business Summit at the at St. Regis Hotel.
Speaking on the topics of corporate governance, philanthropy and entrepreneurship in an interview-style keynote session with Hugo Greenhalgh, Editor of the FT Wealth magazine, Badr Jafar cautioned regional family businesses of the impending risk of destruction of value when US$1 trillion of family assets will pass from the second generation to the third – from the siblings’ company to the cousins’ consortium – over the next decade and in the absence of appropriate governance structures.
He noted that family businesses should strive to build a strong foundation of governance that can enable them, given their size, scale, and breadth, to become real solution providers in an age that is beset with a multitude of socio-economic and environmental crises.
Illustrating his point, Jafar quoted global statistics indicating that up to 15 percent of family businesses perish when they pass on from the first to the second generation, while a staggering 60 percent of family-owned enterprises fail to withstand the succession challenges between the second and third generation.
In addition, he pointed out that real transformation and acceptance of good governance can only happen when family businesses recognize the business case for sustainability practices. Jafar highlighted the role of The Pearl Initiative, which he founded in collaboration with other private business owners, as a ‘by business, for business’ non-profit organisation that seeks to create a governance framework for Gulf businesses, based on the unique needs, culture and environment of this region.
Speaking on the topic of philanthropy, Jafar highlighted the growing opportunity for businesses and individuals to be at forefront of generating positive impact through strategic philanthropy. He pointed out that the historic distrust within civil society towards philanthropic activities has led to many of these charitable transactions to take place out of sight, leading to suboptimal transparency and accountability in this sector. Quoting estimates from the Islamic Development Bank that anywhere between US$200 billion to US$1 trillion is distributed in Zakat and Sadaqa every year across Islamic economies, Jafar noted that the enormous donations are being generated without appropriate governance models in place to maximise their impact.
Badr Jafar added that with the UAE marking the Year of Giving in 2017, this is an ideal time to spread awareness and a culture of strategic impact-driven giving across the business and family office community.
The two-day Financial Times Dubai Family Business Summit discussed the challenges and opportunities facing family businesses today. The summit featured a series of keynote addresses, interactive debates and educational workshops. Other key speakers included Khalaf Al Habtoor, Chairman of Al Habtoor Group and Fadi Ghandour, Executive Chairman, Wamda Capital and Founder of Aramex.
