Last Tuesday evening at 8pm, as I sat in my plane seat, the captain informed us that suddenly Brussels airport was closed due to drone sightings. We did not know how long we will be stuck there and if we would make it home at all. As I sat there, tired and concerned, my mind raced on a million things. I had all the time of the world as we eventually took off after 3 hours stuck in the place. However one thing that crossed my mind was how family business face risks and the unknown. Like it never crossed my mind that I would be caught on a plane due to drone sightings, not knowing when I would be able to leave the plane and when or if the plane will be allowed to depart, family businesses also have to face risks and many unknows. Which derived the question: How are family businesses dealing with risks and the unknown? Are they identifying such risks and mitigating them?

While larger business often have established, formalised risk management processes, family businesses often do not. Family businesses form the backbone of many economies (including Malta’s) yet studies suggest they often manage risk informally, relying heavily on the personal intuition of the owner-manager rather than a systematic process (Mitter et al., 2022a; Riepl et al., 2024). This informality, while allowing for rapid, flexible decision-making, can leave family business feeling particularly vulnerable and at a loss when a “black swan” event hits—like a sudden supply chain collapse or an unexpected loss of a major & long standing client occurs.

The core reason for this feeling of being overwhelmed often lies in the following elements.

Family owners prioritise non-economic goals—the desire to maintain control, preserve the family legacy, and ensure the firm’s continuity across generations. Research indicates that a family business’s risk profile is highly dependent on the emotional and cognitive outlook of the owning family or the controlling family leader. Those with strong emotional ties may resist formal change (like setting a formal risk management system) as it feels like ceding personal control over the destiny of the business and the family’s future.

When a massive, unknown risk materialises, the threat isn’t just financial; it’s a threat to the family’s identity and reputation. This intense emotional attachment can lead to risk-averse or passive, reactive behaviour, with family members preferring to avoid taking action because assessing the risk and setting priorities feels difficult (Poza & Daugherty, 2020; Visser & van Scheers, 2018). This is why, in a crisis, the initial feeling for many family owners is that of being frozen, overwhelmed by the possibility of losing what they’ve spent generations building.

The path forward is not about abandoning the family’s soul, but about professionalising the risk mindset to better protect the wealth generated by family businesses. The latest studies highlight specific strategies for turning the fear of the unknown into a competitive edge:

1. Define Your “Risk Appetite” and Risk Goals
   The family and the board must collaboratively articulate their risk appetite—the amount and type of risk they are willing to assume to achieve their goals (both financial and non-financial). This needs to be a written statement that integrates family values. Use measurable criteria (e.g., maximum percentage of equity to commit to a new project, desired liquidity ratio, or the number of years of reserve capital) to guide resource allocation and ensure decisions align with the family’s stated risk tolerance.
2. Embrace “Good Governance” as your core defence line
   A lack of formal structure is a common weakness. Good governance acts as the line of defence that holds the family and business elements together. Appointing independent board members or an advisory board brings in objective, external perspectives, helping to check the family’s optimism bias and ensure robust debate on high-stakes decisions. A written family constitution clarifies the values, vision, and rules regulating the relationship between family and business, heading off future conflicts—the number one threat to family business survival.
3. Build an Adaptive & Proactive Culture
   Instead of merely avoiding risk, the goal should be to become risk-aware and risk-prepared. This is why it is important to invest in training to develop a common knowledge base for all key stakeholders (family, owners, and non-family managers). An educated basis for decision-making is less reliant on just one owner’s intuition. It is also healthy to blend the formal establishment of a risk management function with the family’s informal strength—the ability to act decisively and trust key relationships. Using the formal system to identify, assess, and prioritise risks on one hand and then leveraging the family’s agility for rapid, focused mitigation. Another important element for risk mitigation is the active seeking to diversify business interests to create a buffer against industry-specific downturns.

When I was there stuck on the Brussels airport tarmac, the plane itself, for all its technical might, was powerless against an external unknown. The takeaway for family businesses is that their great strength is not in avoiding the unknown, but in creating a structure—a blend of financial prudence, emotional clarity, and professional governance—that allows them to take off again, no matter what suddenly closes the airspace. The next unforeseen risk or unknown isn’t necessary a loss; it’s a test of the foundation you’ve built for your family business to keep moving along, no matter what.