Resilient legacies

What is the issue?

Many wealthy families focus heavily on investment risk but neglect broader risks such as governance gaps, succession, cyber security and geopolitical exposure, leaving them structurally vulnerable.

What does it mean for me?

Advisors must expand their role beyond their professional expertise into risk-governance advisors, helping families build holistic, non-financial risk frameworks.

What can I take away?

A risk management policy helps families to understand where they are vulnerable and to prepare action plans for when threats become a reality.

Families are generally proficient in managing investment-related risks. However, broader risk management, particularly regarding non-financial risks, remains underdeveloped and frequently overlooked. As geopolitical landscapes evolve and families operate across multiple jurisdictions, the capacity to anticipate and respond effectively to both predictable and unforeseen risks is fundamental to preserving long-term wealth.

STEP’s Attitudes to Wealth report highlights a growing awareness among families of the need to ensure the financial resilience of future generations.[1] However, few business-owning families maintain a formal risk management policy. They rarely take the time to assess the probability of potential risks materialising or to evaluate their likely impact on the family as a whole.

Similarly, the UBS Global Family Office Report 2023 identifies a clear risk: while intergenerational wealth transfer remains a core objective, only 42 per cent of families have a formalised succession or governance framework.[2] Families being unaware of this exposure, particularly those with complex, multi-jurisdictional and multi-generational business interests, leaves them vulnerable.

A strategic response

A risk management plan is not only prudent step; it is essential. Although many families perceive this as complex and therefore unnecessary, the reality is more achievable. With the right structure, a practical risk management process can offer immeasurable value, enhancing both family preparedness and the sustainability of wealth.

Risk planning sits within the broader family governance framework, ideally as a documented policy managed by the family council or, where no formal council exists, tabled at a family assembly. The process compels families to consider ‘what if’ scenarios, articulate potential responses and build resilience into both their thinking and structures.

Families are then empowered to act quickly and decisively in moments of disruption, ensuring their wealth strategy and succession plan remain aligned with long-term objectives, even in adverse conditions.

Practical and technical considerations

An effective risk-governance framework does not need to be overly sophisticated or complex. It should, however, be proportionate to the complexity of the family structure, asset base and global footprint. At a minimum, the following should be considered:

• A risk officer: a family member or trusted advisor to coordinate annual reviews and help the family keep an eye on events that may give rise to risk.
• A risk register: which documents known and emerging risks alongside mitigating measures. It should contain the columns set out below.

• Date: when the risk is entered on the register.
• Risk description: what is the identified threat?
• Likelihood: how probable is it?
• Impact: what is the potential financial or personal damage?
• Mitigating steps: what can reduce exposure?
• Adjusted risk: residual risk after mitigation.

• A risk management policy: a short, formal document that outlines roles, review frequency and reporting structures to ensure consistency from year to year.
• Annual reviews: regular reflection helps maintain awareness and highlight where to adjust strategies where needed.
• Response implementation: a formal document that outlines the response needed if a risk becomes a reality. Without planned actions, the review is of limited value.

While technical in nature, this approach introduces discipline, clarity and forward-thinking into family decision-making. Importantly, if mitigation measures are not actively implemented, even the most elegant register becomes redundant. The value lies in both planning and execution.

Risk governance framework and review

The risk governance framework should serve as a practical and supportive tool for the family in assessing risk, rather than introducing unnecessary complexity into otherwise straightforward matters. It provides a structured approach for how the family collectively evaluates and responds to risk, with the aim of preserving and sustaining family wealth across generations.

Risk governance is anchored in the family’s shared purpose, vision and values, which collectively inform the family’s understanding and definition of risk. A well-considered risk attitude, aligned with long-term objectives, is essential to ensuring the continuity and resilience of the family’s wealth and legacy.

In this regard, the designated risk officer facilitates an annual risk review. This process involves each branch of the family reflecting on their own circumstances and identifying risks they perceive, both personally and in terms of how those risks may impact the wider family unit.

The review encompasses the following key areas:

• Personal and family risk: each family member considers personal risks that could affect their well-being and the broader family or business.
• Asset-related risk: the risk officer incorporates input from the family’s investment advisor, lawyers and accountants, who prepare a preliminary risk analysis related to financial and tangible assets. This is presented to the family for discussion, enabling a shared understanding of key financial exposures and the implications of potential adverse events.
• External risk factors: macroeconomic, geopolitical, environmental and regulatory risks are also reviewed, with emphasis on evaluating both the likelihood and potential impact of such threats.
• Updating of the risk register: following this review, the family’s risk register is updated. Each identified risk is categorised and assessed according to its likelihood and potential impact. The risk officer is then responsible for proposing appropriate mitigation strategies. These may focus on either reducing the likelihood of the risk materialising or limiting the impact should it occur.

Though some risks are straightforward and lend themselves to clear mitigation strategies, others, such as ‘black swan’ and ‘grey rhino’ events, are less predictable. Nevertheless, where possible, contingency planning should be addressed to enhance resilience.

Role of the advisor

The advisor plays an integral part in the risk assessment process of the family. Each advisor contributes their perspective on potential risks, their impact and their likelihood. It is highly beneficial to gather all advisors at a roundtable to consider various scenarios before reporting to the risk officer. The focus of the roundtable is to identify risks as seen through the lens of each advisor and their field of expertise.

Conclusion

In an increasingly complex and uncertain world, risk is no longer a peripheral concern; it is a core aspect of preserving and growing family wealth across generations. Where families have traditionally excelled at navigating financial markets and their risks, it is the broader, non-financial risks, governance gaps, succession vulnerabilities and geopolitical instability that now pose the greatest threats to long-term continuity.

Crisis-proofing the family and its wealth demands more than reactive thinking. It calls for a structured, intentional approach, where risk management is embedded as a routine family practice, not merely an annual obligation. Establishing a tailored risk governance framework, underpinned by regular reviews and actionable policies, provides clarity, cohesion and confidence in the face of disruption.

Above all, families that treat risk management as a living process that is regularly revisited and is proportionate to their global footprint will be best placed to weather uncertainty. By doing so, they protect not only their assets but also their values, legacy, family harmony and purpose that underpin their wealth.