While the West is struggling with the pandemic that has now taken over lives and livelihoods, China is emerging at the other end of the crisis, showing the rest of the world a glimpse of hope.
The first case of COVID-19 was reported back in November 2019, 5 months later the Chinese government appears to have managed to contain the spread and calm its people’s spirits, with daily matters sliding back into a new normal.
So what can we learn from the world’s most populous country about resilience and coping mechanisms?
Lesson 1 – Supporting your people is key
Human capital is every venture’s most important asset and ensuring employees of the family office and family business feel supported and connected during difficult times is crucial to endurance. Establishing clear communication channels where these are not already in place is a must. In China, travel and lockdown policies varied from city to city and sharing those local requirements offered great support to employees. Many also looked to the future, sourcing different health supplies such as masks and hand sanitizers to prepare a healthy working environment for their employees on their return to the premises.
Lesson 2 – Cash is king and tax still matters
During uncertain times, maintaining healthy liquidity becomes the top priority for family offices and businesses, with many of them implementing contingency plans to improve liquidity. To alleviate liquidity pressures, government bodies in China extended the deadlines for tax filings and released tax incentives. While some of these incentives were implemented nationally, some were granted by local authorities or subject to the interpretation of local tax officers. For family offices managing investments in multi-jurisdictions, it is important for them to follow the relevant measures introduced by different governments and seek clarity of the implementation and interpretation.
Lesson 3 – Use the time to connect
Business activity suffered a decline in the short term. This was mainly triggered by the closure of a large number of businesses and offices across China. However, since the popular “WeChat” app is one of the most powerful communication tools in Asia, families and business could keep in touch with each other and with their advisers who, in turn, kept them abreast of the situation by offering support and sharing knowledge and insights.
While mobility restrictions were put in place, this was perhaps a better time than ever to become closer to industry peers and advisers and have more time for meaningful conversations which, in turn, helped build stronger relationships.
Lesson 4 – Share and listen widely
Maintaining constant communication is pivotal to good management in troubled times. Furthermore, sharing knowledge outside one’s immediate business and personal holdings with the wider industry, advisers and key decision makers is just as important. Frequent publications and research from internal expertise and business scenarios helped wealthy individuals and those owning businesses in China stay alert and tune into opportunities and ultimately a speedier recovery.
Lesson 5 – Collaborate
The best thing people can do in the face of adversity is stand together. Strong and united leadership sends a powerful message. Reflecting those views into the business’ wider support infrastructure such as Human Resources and IT is critical to the process. While technological capabilities have been put to an immense test by the sheer number of remote business users, working closely across departments and supporting one another has been paramount for survival.
Key takeaways for resilience
Finally, despite the uncertainty and movement restrictions, the world keeps on turning and business owners, family offices and wealthy individuals continue to act on their plans and in some cases, craft new ones.
One of the main positives out of this unprecedented crisis scenario has been more time for reflection and learning from the present to better prepare for the future. In China, as the situation begins to improve, there is a road paved with stronger relationships and an eagerness for what comes next.
We at KPMG Private Enterprise understand the potential consequences of the current global health situation for Family Offices. I encourage you to follow our regular series of blog posts to stay informed about how COVID-19 may affect your Family Office strategies and operations. Please reach out at any time to the KPMG Private Enterprise and Family Office and Private Client advisers in your country or territory for their guidance.
Please visit the KPMG website for our business overview and action checklist titled "Understanding the Implications of COVID-19 for private companies" (PDF 382 KB)”.