Securing the legacy: Why planning and governance matter for family businesses

• Useful global and local insights at SLID-SEC-CSE forum on 17 June

Understanding this critical need for longevity of family businesses, the Sri Lanka Institute of Directors (SLID), Securities and Exchange Commission of Sri Lanka (SEC), Colombo Stock Exchange (CSE), and KPMG as the knowledge partners have organised the family business forum on 17 June, to discuss the solutions to these challenges with practical examples. 

KPMG Centre of Excellence for Family Business Global Managing Director Daniel Trimarchi, who is one of the top 50 family business advisers, will give the keynote address, followed by a thought provoking panel discussion. 

SLID said, “Family businesses have long underpinned Sri Lanka’s corporate and social fabric, contributing significantly to employment, entrepreneurship, and community development. Many of these businesses have survived through decades of political and economic challenges, including the civil conflict, pandemics and worst economic crisis any country could experience.”

Family-owned businesses have several unique strengths that contribute to their resilience, longevity, and success. Family businesses often prioritise sustainability over short-term profits, focusing on building a legacy for future generations. This long-term perspective supports strategic investments and patient capital. Family businesses are typically built on deep-rooted values, such as trust, loyalty, and integrity. A shared sense of purpose and identity often leads to a strong organisational culture. With fewer bureaucratic layers, family businesses can often make decisions faster and adapt more quickly to market changes.

Despite their strengths, there are inevitable challenges family businesses has to face and because correct planning is not carried out. Only about 30% of family businesses survive into the second generation, Just 12% make it to the third generation and fewer than 3% continue into the fourth generation and beyond. Some of the main reasons for these failures are,

1. Lack of Succession Planning – Many family businesses delay or avoid planning for leadership transition. This can lead to confusion, conflict, or even business failure when the founder steps down or passes away.

2. Mixing family and business roles – Blurring the lines between family relationships and business responsibilities can create tension. Appointing family members based on loyalty rather than merit often undermines performance and morale.

3. Poor governance structures – Operating without formal governance (e.g., boards, advisory councils, family constitutions) can lead to unclear decision-making and accountability issues.

4. Lack of professionalisation – Failing to bring in external expertise or professional management can limit growth and innovation. Some owners are reluctant to delegate or share control, which can stifle the business.

5. Inadequate communication – Avoiding difficult conversations, especially around money, roles, or succession, can lead to misunderstandings and long-term conflict.

6. Overdependence on a single leader – Relying too heavily on the founder or a single family member can create vulnerabilities if that person becomes unavailable.

7. Emotional decision-making – Letting emotions override business logic — especially in hiring, firing, or investment decisions — can harm the company’s health.

8. Ignoring wealth and estate planning – Without proper financial and legal planning, family wealth can be eroded by disputes, or poor asset management.

To overcome these mistakes that threaten the longevity of family businesses, a structured, proactive, and inclusive approach is essential. Families who sustain a growing family business and preserve wealth for generations start the process early by creating awareness within the family and take action to plan. 

Many Sri Lankan family businesses are now in their second or third generation, with younger leaders bringing in global education, digital transformation, and strategic diversification. This generational shift is seen as a key opportunity for growth and modernisation. However, will face the risks of failure if planning for these challenges are not actioned.