Governance Guide for Saudi Family Businesses for the year 2023.
We will take a general overview of the concept of governance of family businesses in Saudi Arabia, its importance, its benefits, its system and regulations, and the most important points that we will clarify in this article.
Here comes our role as CFOONLINE, the authorized financial office in the Kingdom of Saudi Arabia,
with its effective contribution in guiding and supporting these companies to successfully achieve their goals and providing free consultations.
What is Governance Guide for Saudi Family Businesses?
Family business governance is one of the main factors affecting the sustainability of family businesses, and it is a basic methodology for managing
and leading companies in a way that achieves a balance between the interests of various stakeholders.
Family business governance extends to a set of policies and practices that organize decision-making processes and define roles and responsibilities within the company.
Benefits of family business governance and Saudi family business governance guide
In our article, a guide to the governance of Saudi family companies (system, law, and reasons), we will explain the most prominent benefits of family governance, which are the following:
- Enhancing company sustainability: When there are effective governance structures and mechanisms, strategic decision-making is stimulated based on clear and objective criteria.
- Family businesses with strict governance practices : are usually better able to attract long-term investments.
- Family business governance enhances the following: transparency and partnership between management and stakeholders, which contributes to building a positive reputation and mutual trust.
- Governance also plays a vital role in the long-term continuity of family businesses: these companies face unique challenges as a result of the overlapping family, financial and administrative dimensions.
Family business governance PDF
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Family governance practices:
There is great importance in implementing strict governance practices to ensure its continuity, including:
- First: Negotiation and balance
Governance practices contribute to achieving a balance between the interests of the family and those of the company.
- Second: Defining roles and responsibilities
Governance contributes to clearly defining roles and responsibilities between family members and executive management.
- Third: Transparency and disclosure
Governance practices encourage transparency in operations, decision-making and financial performance.
- Fourth: Planning for the transition between generations
Governance practices help plan generational transitions and prepare new generations to take over leadership.
- Fifth: Strategy and growth
Governance helps guide growth strategies and develop investment plans consistent with the family business’s long-term goals.
- Sixth: Achieving sustainability
Governance practices contribute to achieving sustainability for family businesses by ensuring continued strong and effective financial performance.
What is the financial sustainability of a family business?
The concept of financial sustainability refers to a company’s ability to maintain strong and sustainable financial performance over the long term.
Financial sustainability of the company
There are several important aspects that we will clarify through our article, Saudi Family Business Governance Guide, in order to achieve a high level of financial sustainability for the company, including:
- Debt Management: A company must be able to manage its debts appropriately.
- Financial Liquidity: Maintaining adequate levels of financial liquidity is important to meet financial obligations in cases of financial stress or sudden changes in the market.
- Diversifying revenues: Relying on multiple sources reduces exposure to the risks of relying on a single source.
- Investing in research and development: Investing in developing and improving new products can lead to sustainable growth and renewal in the financial system.
- Dividend Distribution: Dividends should be distributed in a way that strikes a balance between providing capital for investment and providing returns to shareholders.
- Risk management: Evaluating and managing financial risks well helps avoid unexpected surprises that affect financial performance.
Ultimately, studies show that family businesses with strict governance practices have better long-term performance.
These practices enhance the company’s ability to challenge and enhance its ability to achieve sustainability goals and achieve a balance between financial, social and environmental dimensions.
All that matters to us at CFOONLINE, as an accredited financial office in the Kingdom, is serving our customers, facilitating their financial transactions in all their forms,
and providing our various services to ensure their success.
Family business system
The Family Business Law constitutes the legal and regulatory framework that controls the establishment and management of family businesses in the Kingdom of Saudi Arabia.
This system aims to:
- Promoting the sustainability of family businesses and organizing them effectively.
- This includes determining the organizational structure of family businesses and the legal requirements for their formation.
Family business governance law
The Family Business Governance Code represents the legal framework that defines the principles and regulations that family businesses must comply with.
Family Business Council
The Family Business Council is a key element in implementing family business governance.
This Council shall play a vital role in:
- Making strategic decisions
- And monitoring
- And censorship..
Family business governance charter
The Family Business Governance Charter is a basic document that defines the principles and rules that a family business must follow in its operations.
Now, in this article, we will present the Saudi Family Business Governance Guide to explain what is the Family Business Governance Regulation.
Governance regulations for family companies
The Family Business Governance Regulations are an important legal document that sets out the principles and regulations that family businesses must comply with to ensure correct and transparent governance practices.
The details of the regulation can vary from one country to another and even from one family business to another, but here are some general points that may be included in the family business governance regulation:
- Formation of the company council
- Company charter
- Council meetings
- Transparency and disclosure of information
- Dealing with conflicts
- Performance evaluation
- Appointment and promotion
- Alliances and investments
- Legal compliance
- Governance reports
- Implementation of the regulation
What is the governance system for family businesses?
The family business governance system is a set of systems, principles and practices that regulate the establishment and management of family businesses.
With the aim of:
- Ensuring transparency
- And integrity
- And sustainability
- And achieve the company’s goals effectively
- And protecting the rights of all parties concerned, including members of the royal family and external investors.
Reasons for family business governance
There are many reasons why the governance of family businesses is necessary and important, which we will explain in our article, Guide to the Governance of Saudi Family Businesses, which are the following:
- Corporate Sustainability: Family business governance contributes to enhancing the company’s long-term sustainability. By applying governance principles, risk management and decision-making are improved in a sustainable manner.
- Transparency: Family business governance increases the level of transparency within the company. This means that financial information, performance and strategic decisions become more available to members of the royal family, investors and employees.
- Avoid internal conflicts: Family businesses often face internal conflicts due to conflicting interests among family members. Family business governance establishes mechanisms to resolve these conflicts in neutral ways and avoid a negative impact on the company’s performance.
- Attracting investments: Family businesses sometimes need to attract external investors to finance their growth and expand their activities. Having a strong governance system increases the company’s attractiveness to external investors.
- Improving administrative performance: Corporate governance contributes to improving the performance of executive management and enhancing its efficiency. Defining responsibilities and required reports helps improve overall company management.
- Improving the public image: Family companies that apply strong governance have a better reputation before customers, suppliers and investors, which contributes to enhancing their reputation and competitive strength.
- Strategic direction: Corporate governance contributes to better direction of strategy. By having an effective board of directors, the company can be directed towards sustainable and future goals.
- Compliance with laws: Family business governance ensures compliance with local and international laws and regulations, reducing the risk of exposure to legal sanctions.
Family Business Governance Center
What is the Family Business Governance Center and what is its importance? This is what we will learn about in the next lines of our article, Guide to the Governance of Saudi Family Businesses.
The Family Business Governance Center is an institution or body that provides specialized services and support to family businesses regarding governance and company management issues.
The role of this center is as follows:
- Providing resources and tools
- Guidance for family businesses to ensure the implementation of best corporate governance practices
- and comply with relevant standards and regulations.
Here are some of the main tasks and roles of the Family Business Governance Center:
- Mentoring and Training: The Center provides guidance and training to family business board members and employees on best corporate governance practices.
- Providing customized consulting: The Center can provide customized consulting to the family business to help it develop and implement a governance system appropriate to its unique needs.
- Issuing guidelines and regulations: The Center may issue guidelines and regulations that contribute to guiding family businesses in the field of governance and compliance.
- Performance evaluation: The Center can evaluate the performance of the family business board and the company itself in terms of compliance with corporate governance principles and continuous improvement.
- Providing a platform for discussion and exchange: The Center may organize events and conferences that bring together representatives of family businesses to share experiences and ideas and build networks.
- Support in case of update and change: When there are changes in laws or regulations related to corporate governance, the Center can provide guidance and support to family businesses to comply with legal changes.
- Encouraging business ethics: The center can encourage business ethics practices and ethical behaviors within the family business.
- Research and development: The center can conduct research and studies on family business governance topics to increase understanding and enhance knowledge in this field.
Among the most important related articles:
_ Governance in the government and private sectors in Saudi Arabia
_ The concept and principles of governance in Saudi Arabia
_The meaning of governance is a comprehensive guide for the year 2023
_ Non-profit sector governance report, foundations and standards
Most important frequently asked questions
We review the most important questions about Governance Guide for Saudi Family Businesses:
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What are the reasons for Governance Guide for Saudi Family Businesses?
- Providing sustainability and continuity for the company
- Improving transparency and managing internal conflicts
- Attracting investments and investors
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What is the role of the Family Business Governance Center?
- Providing support and guidance in implementing corporate governance principles
- Providing training and awareness to Family Business Council members and employees
- Issuing directives and regulations to ensure compliance
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What is the Family Business Governance Regulations and what is its role?
Regulations are a set of regulatory rules and directives that regulate the governance of family businesses.
The role of the regulation: is to guide family businesses to comply with corporate governance principles and legal controls.
-
How can family businesses adhere to corporate governance principles?
- Forming a qualified family business council according to the required standards.
- Preparing and implementing the family business governance charter.
- Cooperating with the Family Business Governance Center to receive guidance and training.
- Compliance with family business governance regulations.
In conclusion, Governance Guide for Saudi Family Businesses one of the most important pillars of the national economy. Applying family business governance principles can make the real difference between success and failure.
Here the role of our certified financial office, CFOONLINE, shines, which contributes seriously and professionally to directing these companies towards a bright future and guaranteed sustainability.
Thanks to our commitment to providing the best services and guidance, our office plays an essential role in supporting the success of family businesses and contributing to the growth of the Kingdom’s economy.
Most important sources:
