Succession planning: Asia’s rapid wealth rise creates complexity
Family-owned businesses are the economic lynchpin of many countries – and are particularly important in Asia.
In India, they account for about 79% of gross domestic product (GDP), one of the highest ratios globally, and in mainland China they represent about half of GDP, dominating the private sector.
Many of these companies are now in the throes of an unprecedented transition from either the first to the second generation, or to new management.
The issue is that entrepreneurs in the region aren’t planning ahead to the same degree as their counterparts elsewhere – that’s because it’s more complex.
Managing wealth
To dig deeper into why this might be and why succession planning is more complex in Asia, we surveyed about 1,800 high-net-worth business owners globally with at least US$2 million of investable assets in our report, Family-Owned Businesses in Asia: Harmony Through Succession Planning.
The findings tell us that the region’s contrasting economic history and cultural dynamics may come into play.
While entrepreneurs in Asia have benefited from the region’s recent and rapid economic rise, they have less experience in managing the wealth that has flowed from it, our research suggests.
Economies have radically changed in the space of just one generation, forging different expectations among the second generation in the process.
On top of this, all companies face a more globalised world where geopolitics, international trade and competition are in flux.
Different perspectives
Rising financial wealth does not make discussions about business succession any easier. It can have the opposite effect.
What can be a sensitive topic for any family is likely to be far harder if the first and second generation have experienced radically different lives because of their country’s rapid economic transformation.
Many first-generation entrepreneurs in India and mainland China were born into humble beginnings. The second generation, on the other hand, have grown up in cosmopolitan urban environments, with many studying overseas.
This difference in experience can make succession planning more complex, with first and second generations having different ideas on how to take the business forward.
Supporting businesses
At HSBC, as the bank for entrepreneurial wealth, we’re committed to supporting business owners at different stages of their journey – whether planning growth, managing succession, or preserving their legacy.
Entrepreneurs and their families in Asia can better prepare for the future by embracing a dynamic, forward-thinking approach to extending business longevity, protecting wealth and promoting greater family harmony.
Asian family-owned businesses: Harmony through succession planning
Find out more about how attitudes are evolving and how entrepreneurs and their families can better prepare for the future.