Mr. Teeranun Srihong, President of KBank, deemed a leader in family business segment with total business value of 17 trillion Baht, said that strategic family business development and solid succession are key to the overall business situation in Thailand.
Being aware of rapid and ever changing conditions in the global trade arena, KBank has forged an alliance with two Swiss organizations, namely the IMD business school – the world's top institution for family business studies and Lombard Odier Group – an institution with more than 200 years of experiences in private banking and risk management. With this collaboration, training courses and business advisory service are offered for Thai family businesses, to further empower their competitiveness.
Emotional challenges exist for family businesses. Among them are ineffectual business succession,management disagreements among family members who are prone to greater sensitivity, the feelings of family members in regard to financial management and differences between parents and children. Common ground between two generations should be agreed, to drive the business forward in harmony. Strong governance in family businesses holds the key to the healthy growth and expansion of business empires, to be passed on to the next generation.
Family businesses are vital to the worldwide economic sector. They represent 80-90 percent of the country's business sector in the US, 83 percent in Europe and 75 percent in the Middle East. In Thailand, KBank's family business customers total 7,500 companies, accounting for more than half of our total large corporate customers.
Currently, Thai family businesses are largely managed by the second or third generation, preparing to pass them to the next generation in line. This presents the most challenging time for businesses, in how to select appropriate heirs and viable business operating models, because the chance of successful succession is often slim. According to statistics, 70 percent and 90 percent of family firms do not survive into the second and third generation, respectively; and only 4 percent survive into the third generation. The average life cycle of family firms has declined gradually from 50-60 years in 1990 (for second/third generation governorship) to 24 years currently (first/second generation management). For those reasons, KBank is determined to promote family businesses; along with ensuring that family business succession is sustainable. Under KBank's care, the large family businesses of our customers have thrived well.
Professor Denise H. Kenyon-Rouvinez, Director of the IMD Global Family Business Center, added that sustainable family business succession under corporate governance is widely accepted, as this lends sound business management to achieve good operating results in the long term. It also allows family businesses to prepare themselves for heightened competition. However, corporate governance in family businesses is more complex than other businesses because family members or partners are major variables in business undertakings.
The corporate governance model in family businesses aims for operational transparency and to ensure trusts among family members, thus leading to a sustainable business. In other words, good business performance and family harmony are key drivers to achieve effective family business succession and asset planning.
According to Ms. Anne-Marie de Weck, Vice-Chairman of the Board of Lombard Odier Group, Switzerland, family businesses adopting corporate governance models will enjoy asset management benefits. Implemented over an extended period of time, the best practices of governance in family businesses include "Partnership – Legal Structures", "Financing", "Risk Awareness" and "Next Generation".
Mr. Teeranun finally added that this world-class collaboration with partners whose principal focus is on family businesses, certainly underscores KBank's top position as the main operating bank for Thai family enterprises. More importantly, the tie-in with the IMD Global Family Business Center and Lombard Odier Group will greatly benefit our family business customers, notably large-scale enterprises with enough potential to grow, as well as to ensure a secure and smooth transition into the age of AEC, where competition in the global trade arena will be more intense. With both institutions' exceptional expertise – different, but working in perfect combination – family businesses will be fundamentally stable. Their enterprises will be steered towards growth and stability, helping increase the value of our economy overall.