Family offices are less likely now than they were a few years ago to underestimate the risks they face, according to a new survey from law firm Dentons. When Dentons published its first report on risk management for family offices in 2020, 42% underestimated the risks they faced. In the most recent report, The Evolving Risk Landscape for Family Offices, that number has declined to 30%.
“There certainly have been significant improvements in how families approach security and risk,” says Edward V. Marshall, global head of family office for Dentons. “There is more notice and awareness of risk exposure.”
The report looks at gaps in risk management including insider threats, cybersecurity, investment risks and insurance. It also examines ways for family offices to strengthen their risk management capabilities.
“I typically look at risk across different domains ranging from privacy to health and everything in between,” Marshall says. “They all play against each other — if you try to focus on them in silos, you get substandard results. Focusing on good cybersecurity but forgetting about good physical security will just put holes in your cybersecurity, and the like.”
The report describes what it calls a “reactionary mindset” among family offices — noting that the percentage of family offices taking a “reactionary” rather than preventative approach to risk management has increased since 2020, from about one-quarter of family offices to about one-third.
“One thing that we saw in the data is that families have to shift their risk mitigation mindset from what I call ‘accepting the unexpected’ to ‘expecting the unexpected,’” Marshall says.
The financial press covered various aspects of the report:
- WealthBriefing: Evolving Risk Landscape For Family Offices — Dentons Study
- Institutional Investor: Internal Threats Pose Underappreciated Risks to Family Offices
- Wealth Professional Canada: Family offices have ‘dangerous gaps’ in risk management, report warns