The world has seen many different forms of industrialists along with the different industrial ... [+]
Globalization is changing the world rapidly and in profound ways. Significant shifts in the technological, geopolitical, environmental and societal landscapes are merging to give rise to a new phase – Globalization 4.0.
The latest era of globalization has been predominantly shaped by uncertainty as trade tensions, tariff tiffs and blocked acquisitions have dominated the world stage and news headlines. Still, rather than bringing about the predicted end to global business competition, these factors have simply shifted economic landscapes.
As the global mindset continues to evolve, rather than solely focusing on the global issues sparking public debate, it is prudent for family offices and the organizations that support them to look toward the future. This will not only help to understand the challenges that will present themselves but also position these businesses to take advantage of opportunities as they arise.
New Markets
While succeeding in other countries is still considerably more difficult than doing so in a home-market, some of the same obstacles that constrain international flows also increase the rewards for organizations that identify ways to overcome them.
With foreign operations still largely accounting for significantly lower outputs, it makes sense for businesses & investors to examine their local, often more mature markets and identify their core competencies. Then, rather than purely focusing locally where competition may be stiff, the same considerations can be applied internationally within similar markets that require similar jobs to be done.
A real-world example of the successful execution of this type of strategy is illustrated in China's move into the African continent. Africa faces many of the same challenges China did a mere 30 years ago. Realizing the potential in this, over the past two decades, Chinese companies have moved into Africa, offering the same products, solutions and services that had already proven to address similar issues in their home markets.
McKinsey's findings suggest that over 10,000 Chinese-owned organizations operate in Africa, with values exceeding $2 trillion. Furthermore, China's foreign direct investment in Africa has grown at a remarkable rate of 40% annually. When non-traditional streams are factored in, McKinsey shows that this is 15% greater.
So while no two markets will ever be entirely the same and there are always local factors, structures and policies to consider, the figures speak for themselves.
New Structuring Options
This global view means that family offices and private investors can expand not only the locations of their industrial or operational businesses but also the bases for their investments.
Families can select their office and operational locations based on various criteria including operational infrastructure, access to skilled staff, local tax laws and regulatory frameworks as well as political and legal stability. This means that a general or administrative office may be in one country, while others, like investment arms, may reside in major financial centers like Zurich, Frankfurt, New York, London, Tokyo or Sydney. For those desiring to be closer to the growing hubs of opportunity in Asia and the Middle East, Singapore, Hong Kong or Dubai may be attractive destinations.
With competition amid jurisdictions intensifying, many countries are crafting frameworks and legislation to attract wealthy families. This has been one of the most innovative areas of offshore legislation. From this perspective, the world really is the family office's oyster.
Include Global Challenges
When considering the impact Globalization may offer on a more external level there seem to be many benefits evolving, including reduced poverty, improved living standards in underdeveloped countries and increased accessibility to services due to internet-based technologies. To develop commerce that uplifts humanity while respecting both natural and cultural diversity, businesses must lead the way.
Many high net worth families believe that it is their responsibility to help tackle issues that were previously reserved for governmental agencies. As family offices' presence and influence spread across the globe, there is a real opportunity for these families and their organizations to do good.
Partnering with impact organizations that align with the family office's unique values and objectives, regardless of where these companies are based, enables family offices to play a significant role in achieving sustainable development goals both locally and internationally, while still turning a profit.
Service To Support
Just as globalization presents an increasing number of opportunities for family offices, it also creates several prospects for the providers who serve these organizations. Instead of becoming redundant as family offices needs evolve, those who take advantage of the opportunities that present themselves will not only survive but thrive.
As the investment landscape changes, banks can remain an integral part of the family office financial mix by filling a supportive role that accommodates their clients' changing needs. This could be especially valuable for smaller banks with close relationships to their home-market clients that also offer these clients the ability to bank in different parts of the world, supporting them in markets where these services are needed. This not only affords clients convenience and peace of mind but also secures their loyalty.
Local law firms could serve as another example, by offering international legal and advisory services they can help family offices, who often work closely with, to expand their focus to international locations and opportunities. Likewise, software providers can set their sights and digital product development offerings with global operations in mind. This may include the development of robust software systems with integrations that enable global family offices to not only streamline back and front-end operations globally but also manage country-specific tasks within the same system.
As challenging as globalization is, for those willing to seek out and take advantage of the opportunities it presents, a world of possibility and profit awaits.
