How to prepare for tough economic times
In January 2019, Deloitte released a survey of 147 corporate chief financial officers that found 55% expected a U.S. recession by the end of 2020.
The United States has enjoyed a long period of economic growth. Now we may be heading into rough times.
Over the past year, corporate governance experts have criticized public companies’ emphasis on short-term results. Family businesses’ focus on investing for the long term is now being promoted as a model for public corporations to emulate. But family shareholders, who in good times are optimistic about sustaining the company for future generations to own, tend to view their investment more skeptically in a downturn.
Family members who rely on their dividend checks might be anxious about the prospect of lower profits. Their fear could manifest itself as mistrust of the business leader or the board. In the worst cases, family meetings can devolve into a blame game or shouting match.
What can your family do to prevent family volatility from compounding the challenges of economic volatility? Here are two suggestions:
1. Beef up your family education efforts. Ask your financial adviser to lead a family education session on economic life cycles so everyone understands the situation. Investigate how your adviser could help family members with personal financial planning and risk mitigation. Enlist executives from the family company to explain the business strategy at a family meeting.
2. Focus on shared family values. Review the family’s history of surviving tough economic times and emerging stronger. Declare your commitment to each individual family member and emphasize the need for the whole family to pull together. Review your family code of conduct (or create one, if you don’t already have it) and explain the importance of level-headed decision making.