, Singapore

How single-family offices are dodging 4 disruptions hitting them

Amongst these disruptions include cyber breaches.

From being more socially responsible to improving cybersecurity, single-family offices (SFOs) have been taking steps to address the four disruptions it's facing, namely economic, regulatory, social and technological challenges.

Based on a study by EY, SFOs are no longer just focusing on their financial metrics, with 83% saying monitoring non-financial metrics also matters. 

Amongst non-financial metrics that SFOs are focusing on is social responsibility, with 44% saying they are now actively excluding investments that clash with their ethics and values, and the same percentage said they plan to make social or environmental investments over the next 12 months.

SFOs are also looking into addressing regulatory issues, expressing concerns about increasing requirements for global transparency and information exchange (53%), the increasing complexity of cross-border tax compliance (48%), and increased regulatory uncertainty in the wake of the COVID-19 pandemic (46%).

Another key area of focus for SFOs is cybersecurity and incident planning.

In recent years, 74% of SFOs experienced cyber breaches. Currently, 72% do not have a cyber incident plan and 61% do not have processes in place to detect IT breaches, which may leave them exposed to future attacks.

On the brighter side, 81% have expressed plans to take action on cyber breaches, indicating that they will invest in three or more digital technologies over the next two years.

Unlike cybersecurity, there's a decent amount of SFOs which have good risk management, with 49% having processes in place required to identify risks on the horizon, and 31% acknowledging that decisions about risks facing their organisations are not taken at the highest levels.

Act now

Steven Shultz, EY Global Private Tax Leader, said SFOs need to "act now" against a sobering mix of strategic, technological, regulatory, and operational disruptions they are facing.

"With reputational risk, and ever-increasing threat, SFOs need to look closely at their risk management practices, to ensure they are robust, and when it comes to strategy and governance it’s hard to overstate the importance of taking into account non-financial metrics," Shultz said.

Desmond Teo, EY Asia-Pacific Family Enterprise Leader, for his part said SFOs in Asia-Pacific should "look into implementing a more structured process for identifying risks on various fronts and address them accordingly and professionalize these systems to align with the family’s purpose and priorities.”

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