Inside-Out Risk: When The Threat Isn't A Hacker Or Headline, But Your Own Structure

Forbes

10-08-2025

In the built environment, structural failures rarely start with storms. They begin with something invisible. A misaligned beam. A flaw in the foundation. Over time, these quiet compromises add up, until one day, the weight is too much.
Family offices can suffer the same fate. The vulnerabilities that do the most damage are not always external. They live within the walls. And they are often overlooked.
While the headlines focus on AI-driven cyberattacks and deepfake fraud, the most enduring risk to long-term wealth continuity is much more mundane: governance without clarity, decisions without structure, and cultures built on loyalty rather than accountability.
This year's Family Office Risk & Security Report 2025 brings this into sharp relief. When asked what threatens continuity most, families and advisors did not cite hackers or hostile media. They pointed inward. Over-dependence on individuals, unclear authority, and a lack of next-gen readiness topped the list. And perhaps that is the real warning: that the greatest risks do not always breach the perimeter. They come from assumptions we have never questioned.
Risk rarely announces itself. Sometimes, it simply fills a vacuum.
Family offices are, by nature, high-trust environments. Relationships are long-standing. Roles are fluid. A CFO may also serve as a gatekeeper. An assistant might act as chief organiser, scheduler, and informal fixer. Founders often function as the gravity centre of it all.
In many ways, this is a strength. It allows for discretion, agility, and intimacy. But when critical knowledge and decision authority are concentrated in one person, the office is exposed to what is often called key person risk, ****the possibility that the departure, absence, or compromise of a single individual disrupts operations or continuity.
What happens when that individual retires? Or falls ill? Or makes an error that no one else is positioned to catch?
As Oriane Cohen, founder of OC Strategic Advisory, explains in the report, 'It's not just about what happens when something goes wrong. It's about whether the system is even built to notice.'
The same applies to decision rights. In the absence of documented authority, who gets to make the call? Who gets to override it? And how does the family know that governance isn't just symbolic, but operational?
Culture without clarity is not a strength. It is a blind spot.
There is a common belief among legacy families that formalising governance erodes culture. That writing things down makes them transactional. That transparency reduces trust.
But culture and structure are not opposites. They are partners. Structure gives culture its shape, and culture gives structure its soul.
Michael Macfarlane, an advisor to family offices navigating generational transitions, points out that risk often accumulates not from malice or neglect, but from habit. 'Most families don't notice the problem,' he says. 'Because everything seems to work. Until it doesn't.'
This is especially true in founder-led environments, where the lines between family, ownership, and management are blurred. Decisions happen fast, informally, and often with good intent. But speed can't replace succession. And intent is no substitute for infrastructure.
Governance, done right, is not a constraint. It is an act of stewardship. It is what allows families to make decisions across time, not just in the moment, but with continuity in mind.
What protects you is not policy. It is posture.
The best-run family offices are not the most complex or the most expensive. They are the most aligned. They do not wait for crisis to create clarity. They operate with decision architecture that is as clear internally as it is compliant externally.
This often starts with scenario planning. Not just for liquidity or geopolitical shifts, but for personnel changes. Who is essential? What is undocumented? Which risks would only become visible once it is too late?
In this context, governance works like insurance. It protects against uncertainty, reducing the chance of operational failure and limiting the impact when it occurs. Just as a sound structure is paired with cyber liability, Directors and Officers (D&O) insurance, or key person cover, governance and insurance together form complementary layers of protection.
In some offices, red-teaming exercises, often used in cybersecurity, are now being applied to operational risk. In others, crisis simulation workshops are exposing gaps in decision flow and communication chains.
But beyond the tools, what matters most is the mindset. That governance is not a reaction to risk, but a way of respecting complexity. That trust is not diminished by structure, it is made possible by it.
The biggest risk may not be external. It may be cultural stagnation.
One of the quieter findings in this year's report was how few offices conduct internal audits of decision rights. Not financial audits, those are standard. But clarity audits. Authority audits. Succession simulations.
It is no longer enough to assume things will run as they have. The scale of risk is growing, but so is the scale of responsibility. Family offices now manage assets, staff, brand narratives, and digital footprints across multiple jurisdictions. With this comes exposure.
Linden Baker of Legendary, who advises clients on reputational resilience, puts it plainly: 'You cannot manage risk if you don't know where it lives. And increasingly, it lives in unspoken places, in what families assume will always work.'
In this sense, resilience is not built in response to the last crisis. It is built by interrogating the calm. What are we not seeing? What are we relying on too heavily? And what might happen if that changed?
Clarity is not bureaucracy. It is respect.
There is no single governance model that fits every family. Some prefer lean teams. Others build full institutional backbones. But all resilient offices share one trait: they do not mistake familiarity for preparedness.
They document. They align. They rehearse.
Because in a world where risk moves faster than ever, the most dangerous threats are no longer dramatic. They are quiet. They live in the background. And they are waiting, if not to strike, then to be ignored.
It is easy to focus on the outside world. But the offices that will thrive in the years ahead are those willing to turn inward. Not for control, but for continuity. Not to fix a crisis, but to make sure the foundations are built to last.