Family Enterprise Beyond COVID-19

It’s been months since the COVID-19 global pandemic first emerged. Family offices and family businesses continue to navigate the uncertainty while drawing upon the resilience and ingenuity that have brought them this far.

To support your efforts to prepare for what’s beyond this crisis, we’ve spent the past several weeks exploring the top 10 megatrends that family office and family business leaders should have on their radar. One theme connects them all: each trend has the potential to upend your business plans and growth projections.

Ernst & Young LLP (EY US) Managing Director James Bly has followed these issues for years. James and the EY Family Enterprise team continue to put their historical research and updated analysis into context amid the significant economic, financial and cultural changes underway.

In the previous piece, we discussed the transition wave that family-owned businesses face. We also talked about the heightened emphasis on economic, social and governance criteria, and the opportunity to build a legacy that fosters equity across demographics.

In this final installment, we look at the impact of peak oil demand and take an expanded view of unexpected risks.

Peak oil demand

Earlier this year, oil futures plummeted into the negative before inching upward again. A number of factors contributed to the swing, including competition among countries. For the first time in more than 60 years, the US became a net exporter of energy, boosting production as demand softened.

Energy drives much of the economy, affecting supply chains, manufacturing, employee transportation and other areas. Once COVID-19 took hold, there was little movement on any of these fronts. While demand for natural gas should increase, commodity price declines in oil and natural gas could force a rationalization on upstream exploration and production company balance sheets.

Expanded view of unexpected risks

There are risks that come with normal economic cycles. And then there are risks that are so statistically improbable, it wouldn’t even cross your mind to prepare for them.

Some believe that this is the first time that the entire planet is at war with a single, common enemy. Globalization, which fostered improved travel and an interconnected economy, left the world more vulnerable to unfamiliar and uncommon threats like COVID-19.

Most contingency plans weren’t built for an event of this magnitude. As you contend with this ongoing threat, it’s not too soon to rethink what potential risks lie ahead and to develop a strategy.

The definition and perception of expanded risks are likely to impact businesses in terms of regulations, governance and resiliency. Professionalizing your governance systems and revamping how you communicate with family members, lenders and others could ease fears and enhance your ability to respond to future threats.

Getting ahead of the curve

As businesses adapt and the economy cautiously reopens, the key questions to ask are, can we expect permanent changes and will you be ready? As you look beyond 2020, think about how these megatrends will impact your business in 2021, 2022, 2023 and beyond and get ahead of the curve.

I would love to hear how you are navigating the challenges and opportunities. Reach out and let me know how you are thinking about the now, the next and the beyond. 

The views reflected in this post are mine and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization.