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Business families in the UAE have preferred a cautious approach in responding to COVID-19 to preserve the economic, emotional and social investments in their firms, a new global study and benchmarking report by STEP Project Global Consortium and KPMG has revealed. Dr. Rodrigo Basco, Sheikh Saoud bin Khalid bin Khalid Al-Qassimi Chair in Family Business at American University of Sharjah (AUS), led the international research team that reviewed the impact of COVID-19 on family businesses.
The international project analyzed data from almost 2,500 family-owned firms from 75 countries in Europe, North America, South America and the Caribbean, Asia Pacific, and the Middle East and Africa. It reveals that the COVID-19 pandemic has negatively impacted the revenue of 69 percent of all surveyed firms.
Despite the economic changes, UAE family businesses have shown “transgenerational intention,” embracing key stakeholders while engineering a plan for the future. This was seen in their immediate reaction to try to first protect their employees before looking for alternative cost-cutting options that could help stabilize the economic and financial effect on their businesses.
Dr. Rodrigo Basco said, “Ultimately what we were looking at is the resilience of family businesses in this extremely rare situation of a global pandemic. How are they responding? What strategies and mechanisms are they putting in place to ensure their long-term success and survival for future generations?”
From a strategic point of view, the responses of the family businesses to the COVID-19 pandemic show that family businesses took one of three main strategic approaches to the pandemic: social responsibility, business transformation or the exercising of patience.
The report suggests that taking the latter approach may give family businesses in the UAE a future competitive advantage by being able to seize opportunities that others in the industry may not have had the foresight or resources to capture. Dr. Basco noted that family firms in the UAE relied on family social capital to navigate the impact of the COVID-19 pandemic.
“What we found was that, because of the embeddedness of family firms in the UAE’s social and economic environment, their commitment to sustaining entrepreneurship across generations has triggered their resilient instincts. This resilience has been transferred into strategic actions that companies have taken to embrace all of their stakeholders during the pandemic,” said Dr. Basco.
In considering what UAE business families have learned from the COVID-19 crisis, Dr. Basco said this has been an opportunity for family businesses to remember and practice good old-fashioned family values.
“Family businesses have learned about the importance of having a cohesive family to reduce unproductive conflicts, as well as the need to have professional corporate governance to overcome crisis and speed up recovery. Furthermore, they have learned the advantages of incorporating the next generation of family members with new and innovative ideas, and the value of embracing their local communities to weathering the crisis storm,” he said.
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.”
Dr. Narjess Boubakri, Dean of the School of Business Administration at AUS, reinforced the importance of the Sheikh Saoud bin Khalid bin Khalid Al-Qassimi Chair in Family Business at AUS.
“It is not only research we are conducting: it is both impactful and relevant research, contributing to the social mission of the university to provide new perspectives on relevant questions and innovative approaches to contemporary challenges,” she said.
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