Family Office Security & Risk Report 2024

“Optimistic individuals play a disproportionate role in shaping our lives. Their decisions make a difference; they are the inventors, the entrepreneurs, the political and military leaders – not average people. They got to where they are by seeking challenges and taking risks.”–Daniel Kahnemanm, Thinking, Fast and Slow

The changing world brings new opportunities, but also risk. The modern family office is ideally positioned to structure investments to meet target growth rates, diversify asset allocations, mitigate risk across an array of strategies, moving the needle in areas of concern through impact investments and philanthropy, in addition to delivering a range of personal and professional services. Risks, though, are plentiful. The shifting tectonics of geopolitics, national political contests, staff shortages, and threats to the personal security of family members make calculations of resource allocation and approaches complex.

Might a light-touch technological solution prevent fraud or give family members peace of mind about their security more efficiently than personnel-intensive approaches? How do family offices weigh the risks to their reputation from a data breach? The reality is that magic bullets do not exist. Families need to develop comprehensive risk mitigation plans bespoke to their organisation, asset structure, and location. Optimism thrives when families assume acceptable risk levels in the domains of their choosing.

Supporting families building the next generation of family offices is at the heart of Simple’s mission. Risk management is one of the key pillars upon which to build. Discussing risk usually entails weighing probably and the severity of risks to fill out a matrix between high and low probably, and high and low severity. More advanced thinking might take the step of proactively gaming out scenarios and responses. Prompted by the rise in epoch-shaping events over recent years, family offices are increasingly taking a systematic approach to risk management across their internal and external activities. Many are taking the forward-looking view that robust risk management not only protects their family interests, but it improves decision-making and operational effectiveness in a resource-efficient way. If family offices were more relaxed about low probability and high severity risks in the past, they are now accounting for the full range of challenges that a turbulent world may bring.