By Edward Marshall, Global Family Office Group
October 30, 2018Posted InFamily Office
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How family offices can identify, mitigate, and manage privacy and reputational risks
Family offices feel a strong sense of duty to protect the privacy of the ultra-high net worth families they serve. Regardless of whether family members are celebrities, high-profile business owners and executives, or famous philanthropists, there is an expectation that a family office will take effective measures to safeguard the privacy of a family’s actions, assets, and personal affairs.
However, this has become a bigger challenge as we have moved towards an increasingly digital world. The information revolution has not only changed the way we view privacy; it also has fundamentally changed our expectations of it. Furthermore, people's willingness to share their information - whether knowingly or unknowingly - is staggering. In a world where we are all crunched for time and people want effective results instantly, many share personal data to ease a process without fully realizing the consequences of their actions.
Family offices face many challenges trying to achieve a myriad of goals set by their principals - investment returns, family harmony, philanthropy, perpetuating wealth across generations, wealth education, and convenience. In addition to their long list of responsibilities, trying to comprehend and control the amount of personal information available on ultra-wealthy families can make family offices feel powerless.
But family offices must prioritize privacy protection no matter how daunting the task. There are three key reasons why family offices should take action now:
Many families have something they want to keep private
While families might not harbor state secrets, they may well hold information that would cause shame or embarrassment if made public. Everyone has confidential knowledge that they may not want their friends or family to know, let alone business rivals or the media. Ultra-wealthy families and their family offices are typically private in their nature – but they are at an increased risk of having their secrets revealed because of the public interest in how they live and work.
There is an inherent link between privacy and reputation
Protecting reputation requires both a defense against falsehoods and the protection of private truths. Privacy enables people to manage how they are judged by others. If reputation can be simply described as what others think of you, then privacy is the extend of what they know about you.
The preservation of privacy engenders trust which in turn promotes candor, interaction, and social cohesion between family offices and their principals.
Big data creates new privacy threats
In the era of ‘big data’, the vast amount of personal and business information that can be hacked and sold exposes ultra-wealthy families and their family offices to identity theft, fraud, and safety risks.
Once personal data is breached, there is an increased risk of a malicious actor attempting to log onto social media, banking, or corporate websites with these compromised credentials and lead to a very detrimental outcome.
To find out how family offices can identify, manage, and mitigate privacy risks, read our full white paper: Protecting the privacy of the world’s wealthiest families.