Now is the time to put your family values to work for your business in PNG
The COVID-19 pandemic is having a devastating impact on economies and health systems on a global scale. To date, the impacts on PNG’s health systems and the number of confirmed infections have been relatively minor, thanks largely to the early actions taken by the PNG government, in particular, restricting international arrivals. However, the impact of the national and provincial restrictions on movements, together with the closure of markets and many other non-essential activities, when combined with the global economic downturn in trade flows and commodity prices, are having a significant impact on the PNG economy as a whole and most individual PNG businesses. PNG is expected to see anything from nil to negative GDP growth in 2020, with a blow out in Government debts caused by the decline in tax and dividend revenues and additional COVID-19 response expenditure. The private sector has also experienced lower employment levels as business responds to the downturn in demand. Whilst we have started to see some signs of easing of restrictions at home and overseas as the “curve” trends downwards, these economic impacts are expected to lag and extend far beyond the pandemic itself.
So this is a time of great challenge for all businesses. But those who have planned ahead and taken advantage of the crisis or disruption to rethink their business strategy and adapt their operations and structure can not only sustain themselves better through the crisis but emerge from it stronger than before.
This is particularly relevant for family business owners for a number of reasons.
Many PNG companies, both large and small, are currently facing major business continuity challenges. The restrictions on movements and non-essential activities may have dried up your demand, cashflows may be faltering, foreign exchange becoming even harder to secure, sources of funding are likely to be uncertain and operations and supply chains could be facing discontinuity and dislocation. On top of this your workforce may be on reduced hours or depleted, some may be working remotely and most will be anxious about their health and future livelihood. For owners of family businesses, though, the COVID-19 crisis also raises issues around ownership. Ownership issues are just as critical as the business challenges, and potentially even harder to manage.
PwC’s Owners Agenda framework focuses on four aspects of ownership that are distinct but equally important to business-owning families: values and purpose, governance, continuity and family wealth.
With these in mind here’s some advice for family business based on what we have been experiencing globally:
Values and purpose
For a family business, values are the connective tissue – the source of your success, commitment and longevity. But when survival is at stake and these values are challenged, cultivating them may not feel like a priority.
It should. Now more than ever, it’s vital to stay united as a family and embrace and live your values. You need to send a clear message to your employees, customers, suppliers, financiers and other business partners that your family is backing the business. As highlighted in our 2019 Family Business Survey, family business owners understand the important role they play in supporting their local community and this takes on even greater significance in times of adversity.
Communicate strongly and clearly so that your stakeholders understand the actions being taken and your commitment to survive and thrive. This is important because it will reinforce your values and help build trust and confidence. Family businesses will need the support of their workers and their customers when the situation begins to return to normal.
Business continuity
Succession is critical to the success and continuity of any family business. While it’s usually a relatively drawn-out process, this recent crisis has often demanded quick and effective decisions. Unfortunately, in most countries it has been the older generations that have borne the brunt of the COVID-19 pandemic, often leaving little time for family farewells, let alone properly plan for the future of the family business. It has brought a stark reality that business continuity and transition needs proper advance planning and it is never too early to start or revisit the plans.
This is also the time to turn to your next generation for leadership. The younger generation plays a huge role both in the business and in the family. With remote working and digital solutions becoming a new normal, now is the time to leverage the digital savvy of the younger family members as this can make the difference between falling behind and staying ahead. It also gives the next generation an opportunity to prove themselves. As digital natives, they can be involved in digital transformations and in activating social media effectively because it is critically important to have a clear and confident voice in the market. This crisis can be an opportunity to accelerate the bridging of the generational gap and fast track generational transitions.
On governance
Effective governance – both family and corporate – is of critical importance at any time. But it’s even more vital during a crisis when the trust, transparency and clear expectations it creates can be a real differentiator, helping you manage current and future challenges in the right way.
That said, a crisis such as today’s creates governance risks that go beyond the usual challenges. So, you should keep directors' duties front of mind to avoid wrongful trading risks. Be ready to seek external expertise if you’re uncertain. Assess if there is anyone else who should join your family company Board who could bring unique skills and experience to help in the current situation. Are your board members and executives fully prepared to manage the current crisis or do you need someone with more expertise to step in? Think about the role that everyone can play to add support but also think about how to proactively manage risk.
Family wealth
As a family business owner, you may find the COVID-19 crisis requires you to change your strategy for protecting your personal and family wealth. You should make a full assessment of the impact on your estate and tax planning, as well as your private investments in the various asset classes and foreign currency risks. Your business survival may require you to reinvest additional capital in the business. Many businesses may not be in a position to continue with existing charitable giving/philanthropic activities.
There is no guidebook for this crisis, so our advice is to start with those closest to you. Talk to your family, your advisers and long term employees, ask them what they see as the most pressing need right now.
We hope these recommendations will resonate with you as a family business owner. Staying true to your values and purpose is the most powerful thing you can do right now. This gives family businesses their competitive advantage and will enable you to survive and thrive as our economy adapts to the new normal.
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