Family firms are the engine of our global economy. Many of the largest multinational corporations began as family firms, and about 90 per cent of the world's businesses can be defined as such.
In the Arabian Gulf region, 80 per cent of GDP outside the oil sector is generated by family businesses, highlighting their utmost importance to the health of the region.
Most Gulf family firms have developed some form of governance procedures, but very few have a formalised structure robust enough to weather change, including generational transitions. Every family business is unique, and so it is important that governance frameworks are flexible. However, there are some intrinsically similar challenges that every business faces, and a strong governance framework is key to ensuring its long-term survival and success.
Over the past few years many companies across the region have not only come to accept, but embrace the need to adopt integrity-related policies and best corporate governance practices. The companies leading this charge in the Gulf region are in the process of designing and implementing rigorous codes of conduct and compliance processes that can subsequently be embedded throughout the culture of their organisations.
As individual companies begin to implement robust models of transparency and accountability, the next stage in the adoption process is to share best practices with each other. Sharing best practices encourages others to adopt these higher standards, which makes good business sense for all stakeholders in our regional markets. This is particularly important as it means that we can adopt locally relevant best practices that have a real and practical application within the region. Every company investing in setting rules, implementing systems and carrying out training to instil values has an interest in other organisations in its value chain doing the same.
As we increasingly ask questions of our third-party agents, suppliers and business partners on their governance, risk and compliance practices, it is in all our interests to spread the word and raise the level of the playing field in our own industries and sectors.
There is a growing understanding of how corporate governance can help a business attract external capital, customers and business partners. However, the main pressures to adopt these frameworks come from the danger that without urgent action to institutionalise and professionalise their structures, these family firms face the risk of destruction of value and even collapse.
Almost three quarters of the region's family businesses are owned and managed by the second generation, and more than US$1 trillion in assets will be handed over to the next generation in the next five to 10 years. Therefore taking into consideration the global average statistic that only 15 per cent of family businesses continue to create value beyond the third generation, it is no wonder these firms are taking urgent action.
In order to understand how they operate, it is important to understand the culturally relevant sphere within which family businesses operate. First, families in the Arab world are large. By the third generation the number of family members may reach three digits, meaning any income from the business is distributed increasingly thinly and pressure grows to support more family members.
This situation also creates a steep hierarchy with even relatively minor decisions being made at the top. This flat pyramid of power, with a few elders at the top and many youngsters below seeking guidance and instruction, can lead to tensions that could threaten the stability of the business.
In addition, one element that is increasingly important to consider is the inclusion of women in senior management and on the boards of these family firms. Traditionally, firms in the region were male-orientated, however nowadays more daughters and granddaughters are keen to get involved in the family business. This is a very positive trend that will undoubtedly lead to immense benefits and value creation within businesses and families alike.
Despite the potential for conflict, however, the Arab business is not just run by the family; it is run for the family. The success of the firm is not viewed purely in terms of assets. Instead, great care is taken in transmitting good moral values not only to the next generation but also to their stakeholders. Given that it is currently Ramadan, perhaps this is a good time to reflect on this point. Ramadan promotes good character, particularly truthfulness and trustworthiness, which are also the pillars of good corporate governance practice.
By acting with integrity in all areas of their operations, businesses will not only help themselves, but also encourage others to adopt better business practices across the region.
Just as the spirit of Ramadan encourages us to do away with bad habits, if companies throughout the UAE as well as the wider region rejected unethical temptations then those who insist on continuing with corruptive conduct would become increasingly isolated.
While Ramadan is an important time for our region, it is the basic principles that the month represents that are at the core of successful corporate governance and the values that shape the culture of our family-owned businesses.
The success of our nation's companies and providing ongoing security for our families lies beyond simply making profits. It lies much more in retaining a strong family business culture, their embedded values systems, and providing a service to the community in which it is integrated.
Badr Jafar is the founder of The Pearl Initiative and the managing director of the UAE's Crescent Group
UAE currency: the story behind the money in your pockets
Why are asylum seekers being housed in hotels?
The number of asylum applications in the UK has reached a new record high, driven by those illegally entering the country in small boats crossing the English Channel.
A total of 111,084 people applied for asylum in the UK in the year to June 2025, the highest number for any 12-month period since current records began in 2001.
Asylum seekers and their families can be housed in temporary accommodation while their claim is assessed.
The Home Office provides the accommodation, meaning asylum seekers cannot choose where they live.
When there is not enough housing, the Home Office can move people to hotels or large sites like former military bases.
THE BIO
Born: Mukalla, Yemen, 1979
Education: UAE University, Al Ain
Family: Married with two daughters: Asayel, 7, and Sara, 6
Favourite piece of music: Horse Dance by Naseer Shamma
Favourite book: Science and geology
Favourite place to travel to: Washington DC
Best advice you’ve ever been given: If you have a dream, you have to believe it, then you will see it.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Ways to control drones
Countries have been coming up with ways to restrict and monitor the use of non-commercial drones to keep them from trespassing on controlled areas such as airports.
"Drones vary in size and some can be as big as a small city car - so imagine the impact of one hitting an airplane. It's a huge risk, especially when commercial airliners are not designed to make or take sudden evasive manoeuvres like drones can" says Saj Ahmed, chief analyst at London-based StrategicAero Research.
New measures have now been taken to monitor drone activity, Geo-fencing technology is one.
It's a method designed to prevent drones from drifting into banned areas. The technology uses GPS location signals to stop its machines flying close to airports and other restricted zones.
The European commission has recently announced a blueprint to make drone use in low-level airspace safe, secure and environmentally friendly. This process is called “U-Space” – it covers altitudes of up to 150 metres. It is also noteworthy that that UK Civil Aviation Authority recommends drones to be flown at no higher than 400ft. “U-Space” technology will be governed by a system similar to air traffic control management, which will be automated using tools like geo-fencing.
The UAE has drawn serious measures to ensure users register their devices under strict new laws. Authorities have urged that users must obtain approval in advance before flying the drones, non registered drone use in Dubai will result in a fine of up to twenty thousand dirhams under a new resolution approved by Sheikh Hamdan bin Mohammed, Crown Prince of Dubai.
Mr Ahmad suggest that "Hefty fines running into hundreds of thousands of dollars need to compensate for the cost of airport disruption and flight diversions to lengthy jail spells, confiscation of travel rights and use of drones for a lengthy period" must be enforced in order to reduce airport intrusion.
