Family owned businesses (FOBs) in the UAE need to establish risk management, internal control, and governance systems in place in order to survive, according to the director of Al Fardan Group, one of the leading family-owned business conglomerates in the UAE.

Osama Al Rahma warned that only 15 percent of FOBs in the UAE will survive through to the third generation because of the absence of a governance structure that will guide future generations in operating the business successfully.

He was speaking at the Family Business Forum of the Internal Audit Festival, which was organised under the patronage of HH Sheikh Maktoum bin Mohammed bin Rashid.

“This in addition to lack of discipline, not being able to articulate and pass on the knowledge of the business, as well as family business issues will make it difficult for family owned businesses to survive, much more succeed,” he said.

Al Rahma said that many FOBS hire internal auditors because they just have to have somebody to deal with external auditors. “We need to realise that an Internal Auditor can add so much more value to a business than just monitoring operations and reporting losses or variances. He can provide insightful analyses of risk factors involved in, for example, acquiring a new business or taking out a loan facility for business expansion.”

Abdul Qader Obeid Ali, president of the Internal Audit Association, organisers of the Internal Audit Festival, said: “Unfortunately, the word ‘auditing’ gives negative and untrue impressions,that it is all about inspection and control. Our role is verifying and improving what is currently being done to help achieve desired business goals.”

Meanwhile, a similar forum on family owned businesses was organised in Abu Dhabi, where Hamed Kazim, who heads his own Hamed Kazm Consultancy, spoke on the importance of adopting a proper governance structure and setting up risk management and internal control systems for FOBs to succeed.

“The benefits for FOBs of setting in place such structure and protocols include having a thorough understanding of ownership and management issues, thereby providing clarity to owners and management; as well as legitimising family leaders thus enlisting the collective support of the other family members,” Kazim said.

The first-of-its-kind Internal Audit Festival organised by the Internal Audit Association UAE (IIA UAE), is aimed at raising awareness of the Internal Audit as a profession by stressing on their key role in both private and public sectors. – TradeArabia News Service