UAE, Gulf family businesses still have some work to do on digital transformation

In the past, the prosperity of the GCC’s economies was due to the integral role played by family-owned businesses – they contributed around 60% of the region’s GDP and employed more than 80% of the region’s workforce. But they will need to adapt their business models if they are to maintain their influence in transition economies.

The GCC’s thriving economy has always been underpinned by its rich oil reserves, but as reliance on oil wanes, a new knowledge-based economy is emerging. Digital transformation, innovation and technology are at the heart of the GCC’s economic and social development plan – opening doors for industries in the digital space and reshaping traditional industries.

Digitalization is advancing at a rapid pace, and family businesses need courage to stand out from the competition. According to global management consultant McKinsey, during the pandemic, the digital adoption rate of enterprises has increased by about seven years in just a few months. And it’s here to stay, with 125 million new consumers in the US and Europe adopting digital channels since the pandemic began.

Of course, we’re seeing companies expand their adoption of “regtech” and “wealthtech” solutions to support their compliance, reporting and anti-money laundering (AML) obligations; and to enhance their onboarding processes.

The pandemic has also arguably accelerated awareness of climate change. Findings from an IMF report earlier this year suggested that the pandemic has increased public concern about climate change — and willingness to support green recovery policies. We need to adapt to changing emotions.

Investors are demanding more evidence-driven approaches to achieving the Sustainable Development Goals. Subsequently, we saw the emergence of large alternative fund structures that deployed capital into areas such as renewable energy. It is also worth noting that intergenerational wealth transfers are driving the rapid growth of sustainable finance.

In the long run, the business case for continuing to be part of the sustainable financial solution is strong. Not only that, but family businesses have a responsibility to use their expertise and capital to support the global economic transition to an environmentally and socially sustainable economy. They need to adopt an ESG framework with equal weight – societal issues around employees and wellbeing are receiving increasing attention.

Furthermore, the debate surrounding family businesses and family offices, especially around governance, has changed significantly over the past few years. Governments, regulators and the private wealth industry recognize the increasing importance of the contributions that families and their businesses make in terms of employment, investment or innovation.

Just as the GCC is transitioning from an old economy to a new one, businesses need to adapt and evolve. They will need to be visionary, innovative and agile; they will need to attract and care for the best talent to stay relevant; and they will need to embrace technology.

Both of the region’s major economies – the UAE and Saudi Arabia – have introduced significant regulatory and legal changes that directly target family businesses, supporting their operations and providing a framework to help address governance and succession issues. These changes are cutting-edge and, in some cases, first-of-its-kind on a global scale.

Those family businesses with the capital, a clear vision, strong values ​​and a long-term focus on the future will be in the best position to not only navigate the economic transition but also future-proof their businesses for future generations. Both the private and public sectors recognize and accept this.