Accountant Middle East | April - May 2014 by CFO Middle East

setting standards in financial auditing & accountancy

APRIL - MAY 2014

MAN AT THE TOP

BEST PRACTICE

An encounter with CIMA President Malcolm Furber

What does it mean to you?

FEELING GOOD

BIT BY BIT

Understanding the role of Bitcoin

The return of investor confidence

Meet the strategist How Bassel Nadim is empowering the AAA

editor's audit

Chairman Dominic De Sousa Group CEO Nadeem Hood EDITORIAL Group Director of Editorial Paul Godfrey paul.godfrey@cpimediagroup.com +971 4 440 9105

The advent of change Whether in business or life at large, change is an exciting yet scary proposition. Even connoisseurs in the finance field are apprehensive about change, as it means a complete upheaval and renovation of the operational structure – all of which will depict serious figures in the cost sheet.

Group Managing Editor Melanie Mingas melanie.mingas@cpimediagroup.com +971 4 440 9152 Associate Editor Zenifer Khaleel zenifer.khaleel@cpimediagroup.com

To succeed in finance and within your organization, accounting personnel are expected to constantly gather feedback from peers and managers. There are unique issues and objectives that are critical within the realm of finance. Prominent among these are teamwork, meeting deadlines, alignment with organizational objectives and a clear understanding of initiative.

Contributor Shane Phillips ADVERTISING Group Sales Director Carol Owen carol.owen@cpimediagroup.com +971 4 440 9110 Commercial Director Chris Stevenson chris.stevenson@cpimediagroup.com +971 4 440 9138 PRODUCTION & CIRCULATION Production Manager James P Tharian james.tharian@cpimediagroup.com +971 4 440 9146 Database and Circulation Manager Rajeesh M rajeesh.nair@cpimediagroup.com +971 4 440 9147 DESIGN Head of Design Glenn Roxas glenn.roxas@cpimediagroup.com Designer Froilan A. Cosgafa IV froilan.cosgafa@cpimediagroup.com Photographers Jay Colina Anas Cherur DIGITAL SERVICES Digital Services Manager Tristan Troy Maagma Web Developer Abey Mascreen online@cpidubai.com +971 4 440 9100 Published by

Accounting is a double-edged sword. One poor judgment can reap huge losses for the company. Accountants assume the critical role of being fair to company ethics and quality while devising measures of cost control.

At Accountant ME we are at the threshold of change too. The reigns of this well-established magazine have been handed over to me and I have a big duty to live up to the expectations set by peers. What we are striving to do is create a platform for an intelligent and innovative exchange of ideas where the fundamental principles of accounting can be customised to suit the needs of corporate companies, specially pertaining to the Middle East market.

With this issue, we present the best in our repertoire. There is an eclectic mix of thought-provoking and interesting articles. We have covered current topics of debate like an analysis of the impact of the ‘Bitcoin’ in the UAE. On a more conventional note, we have streamlined the areas in Micro Accounting which can be improvised by companies. We have tried to throw light on the accountability of corporate social responsibility which can be attained without compromising on the humanity element. Our hopes for this magazine are stellar but not impossible. We want it to be the guideline for all matters related to accountancy, in the region. Over the coming months, you can see events, exclusive interviews, ideas, concepts and many more exciting features related to the field of accounting. In business as in life, change is the only constant. But if managed well, change can define all the entities it touches.

Zenifer Khaleel Associate Editor, Accountant Middle East

Office 804 Grosvenor Business Tower, TECOM PO Box 13700 Dubai, UAE Tel: +971 4 440 9100 Fax: +971 4 447 2409 Printed by Printwell Printing Press

SETTING STANDARDS IN FINANCIAL AUDITING & ACCOUNTANCY

© Copyright 2014 CPI. All rights reserved. While the publishers have made every effort to ensure the accuracy of all information in this magazine, they will not be held responsible for any errors therein.

MAN AT THE TOP

BEST PRACTICE

An encounter with CIMA President Malcolm Furber

What does it mean to you?

FEELING GOOD

BIT BY BIT

Understanding the role of Bitcoin

Talk to us:

APRIL - MAY 2014

The return of investor confidence

MEET THE STRATEGIST How Bassel Nadim is empowering the AAA

E-mail: zenifer.khaleel@cpimediagroup.com Twitter: @AccountancyME Facebook: www.facebook.com/AccountancyME LinkedIn group: Accountant Middle East

Subscribe now

www.accountancyme.com 3

Contents APRIL-maY 2014

46 03

Editorâ&#x20AC;&#x2122;s note: The advent of change. Associate Editor Zenifer Khaleel on the positive face of change.

Advisory Board: Meet key personalities contributing to the publication and its raft of activities.

News & Views: Top stories this month that grabbed our attention and are shaping the accounting world.

Standards and Practices

Effective Micro Accounting: We weigh in on why micro accounting is critical for the financial growth of your business.

April-May 2014

Better safe than sorry. Paul Godfrey reviews some of the classic safeguards that can drastically reduce the risks without adding significantly to already hard-squeezed budgets…

Succession Planning: Safeguarding your business for the future. A detailed view on why succession planning is fundamental for business continuity.

Women in Finance

Journey to the top – Helen Brand. An exclusive spotlight on the success story of a key personality, Helen Brand, CEO, ACCA.

Student Accountant

‘No room for complacency’ - Saeed Al Madani, a Senior Auditor at Mubadala, is the perfect role model for students in the field of accountancy.

Event Spotlight

The 4th International Conference for Accounting, Auditing and Governance – Insights and overview. The two-day conference brought together some of the most reputed names in the finance and accounting industry.

Personality & Practice

Age of the specialist. Baasab Deyb, Partner at RSM Dahman, shares his thoughts on the current economic outlook.

Opening any door. We meet Malcolm Furber FCMA CGMA, President of the Chartered Institute of Management Accountants (CIMA).

Future Directions: The Repositioning Strategy of the Accountants and Auditors Association. We talk with Bassel Nadim, CEO, AAA, about the challenging agenda on the road ahead…

Trade Credit Insurance

Credit culture in the GCC. There isn’t much awareness of trade credit insurance in the GCC as the most common practice is ‘Letter of Credit’, which will not be sustainable on the long run, says Roberto Cassaro, CFO of Euler Hermes GCC.

Capital Markets

A time for growth – 2014 set to be a defining period for UAE capital markets. Simi Nehra, Corporate Finance Partner at Grant Thornton UAE, gives valuable insights.

Corporate Treasury

Perfect planning. Sarah Boyce discusses the aims of long-term cash forecasts and how to create them.

Corporate Governance

Accounting and Corporate Governance laws. Associate Editor Zenifer Khaleel on the pivotal role of corporate governance.

Financial Insight

Bit by bit – Bitcoins may revolutionise the currency scene of the country…if you wait a bit. Associate Editor Zenifer Khaleel investigates…

From trainee to whiz kid? Tips for tapping into financial talent.

Social Responsibility

CSR: a case of measuring the immeasurable? Taking up the cause of Corporate Social Responsibility is increasingly seen as a powerful way of building brand equity and ‘giving back’. But can we equate reputational value with figures on the balance sheet? 5

EDITORIAL ADVISORY BOARD The Editorial Advisory Board comprises of eminent personalities in the field of Finance and Accountancy. The primary role of the members is to provide direction, guidance and assist in the process of ensuring that Accountant Middle East magazine consistently publishes material that is of high standard, ensuring that it responds to the ever-changing needs of the industry.

April-May 2014

Ian Gomes

Bassam Hage

KPMG's Head of Advisory and Markets (UAE & Oman)

EY Managing Partner Markets, Middle East and North Africa

Susie Isaacson

Brigadier Saif Mohammed Saif

Head of UAE, Association of Chartered Certified Accountants, (ACCA)

Chairman, UAE Accountants & Auditors Association

Hanady Khalife

Geetu Ahuja

Director, Institute of Management Accountants (IMA), Middle East and Africa

Head of GCC, Chartered Institute of Management Accountants (CIMA) Middle East

Hisham Farouk

Dahman Awadh Dahman

Managing Partner, Grant Thornton UAE

CEO & Managing Partner, RSM Dahman

News & Views

JOINT Forum FOR ACCA

During the event

THE ASSOCIATION of Chartered Certified Accountants (ACCA) recently held a Forum, in partnership with Pearl Initiative, to discuss Integrated Reporting (IR). The event highlighted the challenges and opportunities relating to the adoption of this practice in the region. New research by the ACCA reported that 40 per cent of finance professionals were actively taking steps to introduce IR policies in the next few years, while 60 per cent had yet to do so due to the complexity of changing accounting systems. Findings from a previous ACCA report also demonstrated appetite from the investor community to adopt IR practices. Helen Brand OBE, Chief Executive, ACCA, commented: “The journey towards Integrated Reporting aims to give a full picture of a company’s comprehensive business performance – integrating financial and non-financial factors. Co-ordinated thinking is important given the speed at which business moves these days. What our research shows is that there is an element of seeing who pulls the IR trigger first amongst the finance professional community, but those who do will be ahead of the game.” The Forum was part of the ACCA Council’s biennial international meeting with senior delegations visiting the region to better understand how the accountancy profession is supporting growing economies in the Middle East and South Asia (MESA). 8

April-May 2014

NEW VENTURE FUND IN THE MIDDLE EAST FENOX VENTURE Capital, a global investment firm headquartered in Silicon Valley, and Innovation 360, a leading innovation consultancy based in Dubai, have partnered to launch a new venture fund. The venture fund – Fenox Global Fund IV – seeks to invest US$ 100 million in seed, Series A and pre-IPO funding across the United States, Asia and the Middle East. The fund looks to invest in startups that require seed and Series A funding in the Middle East, pre-IPO companies from Asia, and seed and Series A startups in the United States – particularly in Silicon Valley. Now open to investors in the Middle East, the Fenox Global Fund IV will seek to invest in information technology startups – including Internet, computer hardware and software, and communications – as well as startups in the area of healthcare technology and clean tech. “We are breaking new ground in the Middle East with the Fenox Global Fund IV,” said Brent Traidman, General Partner at Fenox. “I know of no other time that a Silicon Valley VC has used capital from Middle East investors to promote entrepreneurship in the local region.” Meanwhile, Kamal Hassan, Fenox General Partner and president of Innovation 360, advised that the number of businesses seeking VC funding in the Middle East is

small compared to regions where the startup culture is more mature. “Fenox sees the huge opportunity for growth in the MENA region, and so we are offering funding and expertise to a few best-in-class regional startups who we believe will provide significant long-term gain,” he said. “However, by also investing in more mature companies from Silicon Valley and Asia, the fund will diversify the investors’ portfolio and create a greater return for investors.” Fenox has a track record of investing in global businesses from all around the world, having managed funds that focus on entrepreneurial development in South Korea, Singapore, Japan, Indonesia and China. Innovation 360 has been a visible and vocal supporter of the entrepreneurial ecosystem in the UAE. In addition to establishing i360accelerator for early stage startups, founder Kamal Hassan is a Managing Director for the TURN8 seed accelerator established by DP World, and has himself invested in 19 startups from the Middle East and elsewhere.

News & Views

Deloitte experts offer business insights DELOITTE EXPERTS weigh in on the changes that will occur as a result of the Expo 2020 Dubai win, as well as the challenges facing senior management in the GCC countries and wider MENA region as the countdown to FATCA becomes more imminent. Deloitte experts believe that Expo 2020 will be a major “game changer for Dubai” whereby it will create significant changes – whether opportunities or challenges – in most industries and market sectors that could spill over to other countries in the region. “It is clear that Expo 2020 will go beyond a local showcase of commerce, technology and infrastructure, however impressive these things may be,” explains Mutasem Dajani, Deloitte United Arab Emirates regional Managing Partner. He adds: “Dubai will itself become an agent for future global progress as securing sustainable energy and resources, connecting and moving people, goods and services across markets

and exploring the intrinsic spirit of entrepreneurship come together in a location that is uniquely synonymous with achievement in each of these areas.” Humphry Hatton, CEO of Deloitte Corporate Finance Limited (DCFL) regulated by the DIFC, addresses international investments in the region and adds that hosting Expo 2020 in Dubai will “further the attractiveness of Dubai as a base for overseas companies wishing to invest in the Middle East.” Anis Sadek, Dubai Managing Partner at Deloitte points

out that, “It only takes a quick analysis of the impact of an expected additional 20 million international visitors over a six-month period to see that significant investment in hospitality and retail infrastructure will be required.” Rashid Bashir, Head of the strategy practice at Deloitte Middle East, cautions that “it would be beneficial to develop a dedicated legacy plan to ensure that the event’s potential as a catalyst to transform Dubai’s economy is maximised”. Their views are grouped in the report "Expo 2020:

IMA’S TWO NEW LOCATIONS IMA® (Institute of Management Accountants) announced the opening of two international offices in Shanghai and Cairo. The locations are the latest to join IMA’s growing list of global branches, which includes Zurich, Dubai and Beijing. The new offices reflect IMA’s increasing international influence and highlight the important role managerial

accountants play in the global economy. According to IMA’s Annual Report, two-thirds of all candidates currently pursuing the CMA® (Certified Management Accountant) accounting credential are from the Asia/Pacific and Middle East/Africa regions. In addition, the CMA is the only accounting certification endorsed and supported by China’s State

A game changer for Dubai”, and “Countdown to FATCA” available in the spring 2014 issue of the Deloitte Middle East Point of View (ME PoV) publication which also includes the views of other Deloitte partners and industry experts Cynthia Corby, Akbar Ahmad and Jesdev Saggar on the impact of Expo 2022 in the construction, financial services, and infrastructure and capital industries. Other topics covered include in the ME PoV publication include procurement fraud whereby major infrastructure activity is occurring over much of the Middle East with significant construction work being undertaken on behalf of government agencies in areas such as airport terminals, hospitals, port facilities and transport networks. David Clements, Principal Director at DCFL explains: “The incentive to win major contracts can lead individuals and even companies to engage in corrupt and fraudulent behavior and staff within the procurement or project management divisions of contracting organisations may be exposed to inappropriate inducements such as bribes and corrupt offerings.”

Administration of Foreign Experts Affairs training unit. “The results of IMA’s International Salary Survey, released in March, showed that CMA holders in China and Egypt earn more than their noncertified peers,” said Jeff Thomson, CMA, CAE, President and CEO of IMA. “With our satellite offices, IMA is better poised to deliver local services, IMA resources and CMA support to our members and professionals in these growing economic centres.” 9

News & Views

EY highlights MENA IPO acitivity EY’s Q1 2014 MENA IPO update reported that five IPOs from MENA raised US$ 1,283.8 mn in Q1 2014. In comparison to Q1 2013, this marked a decrease of 21 per cent in terms of value. However, in terms of volume, there was no change when compared to Q1 2013. Sector wise, the oil and gas sector led in Q1 2014 Phil Gandier, MENA Head with two IPOs followed by of Transaction Advisory Services, EY telecommunications, industrial, manufacturing and retail sectors with one IPO each. Two IPOs were in Tunisia and one each from Qatar, Saudi Arabia and the UAE. The largest IPO in Q1 2014 was in Qatar, with Mesaieed Petrochemical Holding Company raising US$ 905 mn, which was the first IPO on the Qatari stock exchange since 2010. The company which is a Qatar Petroleum subsidiary was five times oversubscribed. The second largest IPO was Gulf Marine Services from the UAE, which listed on the London Stock Exchange (LSE), raising US$ 275 mn. The remaining IPOs raised less than US$ 100 mn each, with Saudi Marketing Company raising US$ 72 mn on the Tadawul stock exchange in Saudi, followed by Sotipapier in Tunisia, raising US$ 26 mn and Cellcom in Tunisia raising US$ 6 mn. Phil Gandier, MENA Head of Transaction Advisory Services, EY, says: “The MENA IPO market is off to a slower start in the first quarter compared to the same period last year, however compared to IPO performance over the past few years, Q1 2014 has been one of the best performing quarters. The recently announced Emirates REIT and Marka IPOs will spur further IPO activity and point the way to high levels of activity through the first half of 2014.” “The combination of attractive valuations and solid aftermarket performance means that financial sponsors are actively pushing companies to list. The companies expected to list in the region range from subsidiaries of family businesses to large established companies. Sectors that are likely to show strong IPO appetite are those with strong demographics such as retail, consumer products and healthcare,” said Phil. “We expect that Q2 2014 and the second half of 2014 will see strong IPO activity. The ongoing transformation of family groups into institutional entities led by the younger generation that are more competitive and not susceptible to family succession disruptions, will drive IPO activity. With sound economic fundamentals and strong regional liquidity fuelling new listings, the MENA pipeline is looking extremely healthy,” concluded Phil. 10 April-May 2014

DUBAI ASSOCIATION CENTRE LAUNCHED THE DUBAI Chamber of Commerce and Industry, in collaboration with the Dubai Department of Tourism and Commerce Marketing (DTCM) and Dubai World Trade Centre (DWTC), launched the Dubai Association Centre (DAC). The new initiative reinforced Dubai’s position as the region’s leading commercial hub. His Excellency Hamad Buamim, President & CEO, Dubai Chamber, and His Excellency Helal Saeed Al Marri, who is Director General, Dubai Department of Tourism and Commerce Marketing (DTCM) and head of Dubai World Trade Centre (DWTC), signed the MoU and agreed to collaborate to define and establish a platform in Dubai for international professional and business associations to operate from the Emirate and to cater to the region and beyond. The primary goal of DAC will be to offer assistance for the establishment of International non-profit, professional associations and trade bodies in Dubai. Establishing an association within DAC provides an array of benefits and enables access to a relatively untapped market for international associations. A DAC licence enables associations to open an office at the DWTC’s Sheikh Rashid Tower and enjoy use of the complex’s numerous facilities. In addition, associations established within DAC will be entitled to apply for residency visas for their employees; can open a local bank account; and will be able to offer services and products to the constantly developing regional market. They will also be invited to attend monthly networking events and will have access to key government stakeholders through the three founding organisations. It will allow for a formal environment where associations can form a membership-based community or open a regional representative office to conduct business in the UAE and beyond, said HE Buamim. He added, “Dubai today is an international centre for hosting major global events, exhibitions and conferences and is the world’s next door neighbour at the crossroads of Africa, the Middle East and Asia. We offer easy access to many of the world’s largest and fastest-growing economies. The associations will benefit from economies of scale, experience in the association marketplace, flexibility and adaptability, increased buying power and centralised facilities at the centre.” HE Helal Saeed Al Marri, Director General, Dubai Department of Tourism and Commerce Marketing and head of Dubai World Trade Centre, commented: “It is our aim to ensure that doing business in Dubai is made as easy as possible, and to grow Dubai into an international hub for associations. This centre promises to offer a professional and supportive environment in which worldwide associations can base their headquarters. DAC will foster the development of scientific knowledge and professional education in the Emirate.”

News & Views

ICMA makeS updates to CMA exam ICMA® (Institute of Certified Management Accountants), the certification division of IMA® (Institute of Management Accountants), has updated the exam for its CMA® (Certified Management Accountant) credentials to include content related to financial reporting and strategic planning; skills that are increasingly important for management accountants as their roles evolve. The revisions are based on a recent Job Analysis Study that polled CFOs, controllers and other accounting/finance professionals from the Middle East and around the world. The study revealed that the three most important subject areas for management accountants are financial reporting, planning, budgeting and forecasting and performance management. The purpose of the study was to identify the knowledge, skills and tasks currently needed by

management accountants. The update is part of an ongoing process by IMA to ensure exam content is current, relevant and valid. Dennis Whitney, CMA, CFM, CAE, ICMA (Institute of Certified Management Accountants) Senior Vice President said: “As the roles of CFOs and their teams evolve due to external factors such as developments in technology and globalisation, it is essential that we develop the CMA to ensure that it remains the most relevant assessment for management accounts, and equips them with the correct skills to serve their organisations to the highest possible standards. Speaking directly with CFOs and accounting professionals around the world means we are able to fully understand the

DELOITTE LAUNCHES CENTRE FOR CORPORATE GOVERNANCE CORPORATE GOVERNANCE is one of the key pillars of economic development and there has been an increased focus on effective governance frameworks across many countries. To address the growing regulations surrounding corporate governance, Deloitte recently held an inauguration ceremony in Dubai to launch the Deloitte Middle East Centre for Corporate Governance.

The Deloitte Middle East Centre for Corporate Governance will support organisations manage the stringent global and regional regulations that require them to adopt corporate governance processes. Fadi Sidani, Enterprise Risk Services leader at Deloitte Middle East, commented: “The Deloitte Middle East Centre for Corporate Governance offers resources for executives, directors, and other stakeholders who are

developments that need to be made, from the people directly practicing these skills.” The changes in the CMA exam will affect approximately 10 per cent of the exam content. It will remain as two four-hour parts, and each part will include 100 multiple-choice questions and two 30-minute essay questions. Part one of the CMA exam will be renamed ‘Financial Reporting, Planning, Performance and Control, and will include a new content domain ‘External Financial Reporting Decisions’ and a new subdomain ‘Strategic Planning’. In addition to this, part two will include topics related to Corporate Restructuring and Fraud. These updates will take effect in January 2015 (March 2015 for the Chinese language version).

active in governance, to help assess an organisation’s governance processes, including benchmarking them against best practices, and ensuring they meet the needs of the business.” “Proper governance frameworks strengthen accountability mechanisms and open channels of communication within and across the various market players,” said Rami Wadie, Partner and Corporate Governance leader at Deloitte Middle East. “As such, it is essential for companies and organisations in the region to have a proper understanding of sound governance practices and frameworks.”

“The benefits of effective governance for any organisation are obvious: from protecting the organisation’s reputation, to enhancing market value, creating effective risk management processes and increasing awareness of all the developments in the firm,” concluded Wadie. Dan Konigsburg, Managing Director, Corporate Governance & Public Policy, Deloitte Touche Tohmatsu Limited, visited the region on the occasion of the launch of the Deloitte Middle East Centre for Corporate Governance, and presented on recent global corporate governance trends. 11

News & Views

PwC ACQUIRES BOOZ & COMPANY PwC RECENTLY announced the successful completion of its combination with Booz & Company. With the granting of all regulatory approvals for Booz & Company to join PwC, it is now officially part of the PwC Network. All closing conditions for the deal have been met. Marking this occasion, Booz & Company has changed its name to Strategy& (pronounced Strategy and). This new name, which will be used alongside the PwC name and brand, reflects the strength in strategy consulting that Booz & Company brings to the PwC

Network and the benefits this deal will bring to all clients and stakeholders. After a short grace period, Booz & Company can’t legally continue to use the Booz name following the change in ownership. Welcoming the Strategy& team to the PwC Network, Hani Ashkar, PwC Middle East Senior Partner, says, “By establishing Strategy& as part of the PwC network, we’re changing the consulting landscape for good. We’re offering our clients in the Middle East and across the world something they can’t get anywhere else: a combination of strategy

Hani Ashkar, PwC Middle East Senior Partner

consulting expertise and a proven track record of delivery that draws on unrivalled global scale and experience.” “We are delighted to be joining PwC, the leading professional services network in the world, as it enables us to offer both

NEW FRAMEWORK FOR MANAGEMENT ACCOUNTING PRINCIPLES THE CHARTERED Institute of Management Accountants (CIMA) and the American Institute of CPAs (AICPA) have proposed a comprehensive framework to bring consistency to management accounting practices around the world and to help organisations make smarter, faster decisions for the long-term amidst growing complexity and change. The draft framework is called Global Management Accounting Principles©: Driving better business through improved performance. Charles Tilley FCMA, CGMA, Chief Executive of CIMA, said: “Over the last few years, we’ve all seen how globalisation and the break-neck pace of technological progress are making change harder to predict and organisations more vulnerable.” 12 April-May 2014

“We may now be seeing encouraging signs in the global economy, but we cannot afford to be complacent. We must learn the lessons of the last six years. To be confident of a successful future over the long-term, organisations must adopt a robust management accounting system that encompasses their financial reporting. This in turn will provide investors, customers and the general public with a greater confidence.” “Management accountants have the ability and judgement to make objective, ethical decisions that consider the public interest. But the quality of management accounting remains varied. Our principles will enable organisations to leverage both financial and, importantly, non-financial data. They will provide the forward-looking focus and link different

our clients and our people a bigger, broader, and better opportunity to connect strategy to impact,” says Joe Saddi, SVP and Managing Director of Strategy& in the Middle East. “Our clients need great strategy and the ability to execute it. Our combination with PwC enables us to offer our clients in the Middle East and across the globe the ability to develop and execute the right strategy—delivered by one trusted, experienced, and responsive consultant.” PwC Strategy&’s Board of Directors will be chaired by Tony Poulter, a PwC partner and global consulting leader. Cesare Mainardi will be CEO of Strategy&. He has been the CEO of Booz & Company for the past two years.

parts of an organisation in a way that many still lack.” The draft principles outline the values and qualities that represent best practice management accounting on a global scale. They include guidance on preparing relevant information, modelling value creation, communicating with impact and establishing the professional values of management accountants. The framework will include a diagnostic tool which will help businesses and institutions to ensure that they are making the most efficient use of key information. The consultation will reach across CIMA and the AICPA’s network of 177 countries. The two institutes joined forces to launch the Chartered Global Management Accountant (CGMA) designation in 2012 and are working together to highlight the importance of management accounting in today’s economic climate.

News & Views

EY highlights GCC growth potential

Bassam Hage, MENA Markets Leader, EY

ACCORDING TO EY’s latest RapidGrowth Markets (RGM) Forecast report, growth remains robust across the GCC. Qatar’s economy is predicted to grow by 6.0 per cent, Saudi Arabia by 4.3 per cent and the UAE by 4.1 per cent in 2014. Bassam Hage, MENA Markets Leader, EY, said: “Economic growth across the GCC remains robust, with the region re-emerging as

an influential global hub for trade between Asia, Europe, Africa and North America. The key challenge for the GCC remains continuing to diversify its economies and invest in its growing non-oil sectors.” In Saudi Arabia, GDP is expected to grow by 4.3 per cent in 2014 and 2015, with non-oil growth expected to average 4.7 per cent across 2014-2017. While this reflects a slight slowdown from the 2010–2012 period, growth remains strong in the non-oil sector and will continue to support Saudi Arabia in diversifying its economy. The economic outlook in Qatar also remains positive, with growth set to increase by an average of 6.0 per cent across 2014 to 2017. Growth in the non-oil sector in particular is predicted to increase in excess of 10 per cent this year and a rapidly expanding population continues to boost domestic consumption. This growth has been largely generated by infrastructure funding which is set to drive spending on tourism, hospitality, and construction. Major infrastructure projects include the Doha metro and Hamad International Airport.

DELOITTE’S REPORT SHOWCASES TOP RETAILERS IN THE REGION DELOITTE RECENTLY released its Global Powers of Retail 2014 report that ranked the 250 largest retailers in the world, and portrayed the Middle East as a key market with vast retail industry growth opportunities. Following this, Antoine De Riedmatten, Deloitte’s global Industry Leader in Consumer

Business, visited the UAE to meet with clients and other major players in the sector. The Deloitte report ranked the UAE-based EMKE Group that operates the Lulu chain of hypermarkets as one of the top 250 largest retailers in the world. “It comes as no surprise that the 2014 Global Powers

Economic growth in the UAE is set to increase by an average of 4.3 per cent over the next four years. This will be largely attributed to Dubai’s successful bid to host the World Expo 2020. Confidence remains high in the UAE and EY has upgraded its growth forecast for the country in the medium term. Though the benefits of hosting the event will be concentrated mainly in Dubai, EY predicts ancillary growth in other Emirates as a result. The successful bid is predicted to stimulate growth in the non-oil sector, including increased spending on construction, tourism and hospitality. “Emerging markets remain center stage both for the potential they offer and the challenges they pose. Businesses and governments are taking a fresh look at opportunities that can shape the future of their markets and people. Businesses seeking to establish, expand or maintain interests in emerging markets, should raise their sights to the longer term, and the serious prospect that their global position will be determined by these markets,” concluded Bassam.

of Retailing report ranks the United Arab Emirates-based EMKE Group, as one of the fastest growing retailers in the world over a five year period given the buoyancy of this market,” said De Riedmatten. “Last year, we saw many of the retailers, operating in developed economies where growth had slowed; seek growth opportunities in more buoyant emerging markets such as the Middle East.” “News of Dubai being chosen to host the 2020 World Expo will undoubtedly

provide an added boost to economic confidence in the region – not to mention an influx of visitors to boost retail sales,” he added during his visit to Dubai. Dan Konigsburg, Managing Director, Corporate Governance & Public Policy, Deloitte Touche Tohmatsu Limited, visited the region on the occasion of the launch of the Deloitte Middle East Centre for Corporate Governance, and presented on recent global corporate governance trends. 13

STANDARDS & PRACTICES

Effective Micro accounting As competition heats up in the aggressive business world, companies find themselves faced with the prospect of shrinking profits. In such an environment, effective management of financials becomes critical. Micro accounting is essentially accounting that happens on a small, often individual level. It deals with pieces of information and focuses on the accounting options and liabilities for independent people or divisions. Associate Editor Zenifer Khaleel offers a detailed view. 14 April-May 2014

STANDARDS & PRACTICES

icro accounting is a service activity which benefits the company by the provision of apt and timely information. Managers need to know how to interpret this information and accrue it in the best possible way. Based on this they can analyse the financial status of their organisation and manage it to ensure future financial stability. The accounting department does not directly generate revenues. Rather, it provides a ﬁxed set of services to the rest of a company, while striving to do this at the lowest possible cost. Bearing in mind the proposition of cost reduction, the accounting staff is expected to process transactions, write reports, create new processes or investigate old ones. They have to decipher and identify the areas in which costs can be controlled or totally curtailed. This costbased environment is very difficult for most accountants as there is constant pressure from management. Sohail Aosef, Business Transformation Manager for the Cleanco Group based in Abu Dhabi says, “At Cleanco we have a workforce of 10,000 people and a business chain which is spread all over UAE. The accounts of the different departments are integrated and managed by our accounts department in the center. Our accounting system is continually upgraded to keep in step with the times. The finance managers constantly come up with ideas on cost control without compromising on quality. As we are a service industry, our procedures are implemented based on practicality and productivity without affecting efficiency.” To put an effective accounting system in place, a comprehensive Financial Operations Assessment should be conducted periodically to ensure the company’s accounting and financial operations, including staffing, accounting processes, procedures, internal controls and financial reporting are working harmoniously and effectively.

The finance department should thoroughly study the existing ﬂow-chart and identify areas of improvement.

Best practices in Micro accounting • The finance department should thoroughly study the existing ﬂow-chart and identify areas of improvement. Every company has a unique set of requirements based on its operational principles, nature of business, connection with suppliers etc. It would need some re-organisation at different levels to get all fundamental accounts in place • The finance team should conduct a thorough cost-beneﬁt analysis. These costs must include project team payroll and related expenses, outside services, programming costs, training, travel and capital expenditures. • Implementation of new technology in accounting aids the smooth functioning of the finance department. There are new devices or software on the market that can clearly improve the efficiency of a company’s operations, and make a demonstrative impact on a company’s competitive position. However, it is better to wait till the technology has been tested in the marketplace for a short time before proceeding with an implementation. Once the new system is it place, it should also be tested for practical efficiency and risk of failure. • There should be continuous employee training of the new system and procedure. The key element of any training class is procedure. A few untrained employees can result in the failure of a new best practice.

Areas of improvisation in saving The accounts payable function is the most laborintensive of all the accounting functions. It is an excellent source of savings if the correct practices can be implemented. The process is labourintensive because there is such a large amount of reconciling to be done between customers and suppliers. The volume of work can lead to inaccuracies, and incur unnecessary costs even to issue a single payment. The finance department should aim to consolidate the number of invoices arriving from suppliers, thereby shrinking the paperwork from the source. They could also reduce or eliminate the number of receiving documents by basing payments solely on proof of receipt. Electronic transmission of invoices is far less laborious and cost saving than its paper equivalent. It also saves on the time factor. Under an electronic system, the company’s 15

STANDARDS & PRACTICES

systems send a standard electronic invoice, which is automatically translated into the invoice format by the recipient company. In this system, the risk of losing invoices by manual transfer, erroneous transfer etc is eliminated. It also automates all invoices, thereby making the process of reconciliation and tallying easier. Data assimilation, compilation, and generation of reports for the final audit can be done easily by the electronic process. Companies which deal with multiple products, produce large volumes and deal with many suppliers should have a very efficient automated system for invoicing. Forensic accounting is another area of micro accounting which needs careful scrutiny. This needs to occur as soon as fraud is suspected or, better still, as a planned programme of continuous testing for fraud through testing of physical and IT components.

Abdul Mahir

“Forensic accounting helps pinpoint where the accounting system may have gone wrong,” says Abdul Mahir who works in the Fraud prevention Unit of RAK Bank in Dubai. “The term ‘forensic’ simply means suitable/presentable in courts of law. Fraud examiners conduct their examination with the assumption that the case may end in litigation. Issues of fraud need not necessarily be intentional.

Forensic accounting is another area of micro accounting which needs careful scrutiny.ure. 16 April-May 2014

Sohail Aosef, Business Transformation Manager, Cleanco Group

They can also arise due to lack of awareness of policy of the end user. The fraud examiner’s duty is to analyse the data and determine the intention and intensity of fraud. As forensic accounting identifies problems at the more individual level, it can hold a certain individual responsible for certain cases. Ultimately, these issues may end up in the court of law. However we try to deal with the issues on a case- to –case basis.” The process of forensic accounting involves building the case, reconstructing the paper trail, validating and or reconstructing the financials, reviewing the contractual and non-contractual elements around key transactions, identifying side letters and agreements, investigating conflicts of interest in the entity’s dealings etc; to determine whether fraud has occurred. This function falls squarely in the hands of the forensic accountant whose role is akin to investigative audit. He should have the necessary technical IT background coupled with his accounting prowess. In accounting, it is not possible to use all of the best practices together, since some are mutually exclusive. Depending on the nature and volume of your business, the company should formulate the correct set of best practices. Best practices focus on the overall accounts payable process, attempting to either shrink or automate the number of steps required before a company issues payment to a supplier. In a nutshell, the finance department has to conceptualise innovative ways to reduce time, labour and cost in the income and outflow of money.

STANDARDS & PRACTICES

Better safe than sorry With so much emphasis currently on cyber crime, there’s a risk of neglecting the more conventional dangers. For example, it’s often overlooked that many businesses carry substantial amounts of cash either overnight or on a daily basis - potentially putting staff and vital resources at peril. Here, Paul Godfrey reviews some of the classic safeguards that can drastically reduce the risks without adding significantly to already hardsqueezed budgets…

s with any review of the risks facing a business, the best place to start is by trying to remove the risk in the first place. So, unless you are in the retail sector, or have to pay salaries in cash early the next day, why would you be keeping large amounts of cash on the premises overnight? It’s important to ensure that any sum larger than AED5,000 is automatically banked after the day’s business. Staff need to be trained to build the ‘bank visit’ into their daily agendas until it becomes a simple part of the daily routine. Take the sums off the premises and you immediately take away a major element of the risks facing you at night - which is after all the peak danger time, when the business premises are deserted and thieves have unlimited time to break in. Another basic strategy is to ensure that the cash office (or any areas where sums of cash are held) is not easily accessible to casual visitors and opportunistic thieves. 18 April-May 2014

This means ensuring that the cash office is at the heart of the premises, not adjacent to reception - or for that matter, not immediately next to fire exits and points of easy access. Bear in mind, too, that the cash office itself shouldn’t have features such as large sliding glass doors and open-plan access to communal or public areas such as common rooms or corridors leading to wash rooms, etc. Nor should there be any signage telling visitors where the cash office is located - this is a plain invitation to opportunistic thieves. Protecting valuables and staff It is imperative that cash-handling areas are kept safe and sound behind a closed door at all times. If it is necessary for the door to have any glazed areas, this should only involve safety glass wired with a high quality steel mesh and conforming to safety standard DIN EN 356. Similarly, if there is a ‘hatch’ where cash sums are issued to staff and customers, this should be protected with a same-specification glass panel. Any transactions will take

place through a five centimeter aperture at the bottom of the panel, with money and documents passed via a recessed metal tray. The cash office door should be selfclosing and self-locking. Staff will require a key or swipecard to return through the door after exiting. This ensures that there are no vulnerable moments and no unwelcome temptations when cash sums are publicly on display. The door itself should be of steel construction, confirming to safety standard DIN EN 1627F. The added bonus with steel construction is that it is intrinsically fireproof, typically withstanding even major fires for a duration of at least one hour. If there is no cash office facility - or sums typically do not exceed AED10,000 - you may feel there is no need for a dedicated cash office, and can opt instead for a reinforced steel desk or cabinet with fitted cash trays. Desks and cashboxes must conform to DIN ISO 12914 1999, which will give them good

STANDARDS & PRACTICES

break-in security against all but the best-equipped professional thieves. Note, though, that if you are using a cashbox, it’s a good idea to chain it to a strong immoveable object, so that the frustrated thief can’t simply pick it up and carry it away. Another non-negotiable practical step is to ensure that keys to the cash office, desk or cashbox are not kept in plain sight in a keybox hanging on the wall. Rather, these should be held by named staff members with an impeccable record of trust - and copied only on written authorization of the CEO or CFO.

The ‘zoning’ solution With a larger building, a highly effective strategy can involve creating ‘zoned’ areas - identifying where the greatest risks are and prioritizing resources around protecting these crucial areas. For example, in the case of CCTV, cameras can be most cost-effectively allocated to the building’s perimeter and the areas surrounding the cash office - the other areas probably don’t require more than a manual inspection. If you have a security guarding team in place, they will also be best deployed in these two ‘hotspot’ areas. Similarly, areas where staff keep belongings - for example, a cloakroom or locker room - can be zoned so as to receive a ‘medium’ security designation, and can therefore merit being watched without tying up excessive resources or involving the cost of more strict security. If you are using a CCTV system, there is one important point to note. Although the cost of systems has declined dramatically in recent years, there is only a benefit in having CCTV if there is someone there to watch it - and watch it 24/7. Unless it is watched by an external agency - which will involve additional cost - this means tying up staff time, which in many establishments will be better spent elsewhere. Back to the source Surprisingly few businesses spend any time at all selecting good quality doorlocks. Yet these are a completely non-negotiable ‘must-have’, especially in front and back doors and when the cash office is unavoidably left without staff. The lock used should be a five-lever mortice deadlock, with a high carbon steel protection plate over the locking mechanism. It must conform to safety standard BS 3621 2004. (There is no point, however, on spending excessively on locks of higher specification, simply because while a fivelever lock will deter casual thieves, the more

professional intruder can simply drill through a higher-quality lock in a matter of minutes). All windows at ground floor level should be protected with wire mesh safety glass, or preferably - with steel bars across the window. Window frames should be lockable, using a simple Allen-key mechanism. While every premises left unprotected overnight should be fitted with an alarm, remember that this will not necessarily prevent the thief from making off with your goods if they are not properly secured in the first place. The alarm system is better thought of as a means to alerting the police if you have a larger premises where there is danger of losing high value capital goods. Walking the walk A good way to identify where your security risks lay is by simply taking a walk through your premises with a tablet or notepad, recording potential security ‘hotspots’. For example, a classic area of risk will often be the positioning of the reception desk in the visitors’ area, which - if wrongly placed – can allow unwanted visitors to stroll into your offices without authorisation. You will almost certainly notice features such as loose doors on fire exits - allowing ‘bandit’ access to the building 24/7 - open windows, unattended offices and sums of money or valuables left on display and relatively unprotected. This ‘walk’ can also be done in association with a qualified risk manager, to ensure total authenticity.

The insurance imperative Even the most basic Commercial Property insurance policy can protect a business against the loss of cash sums on the premises. Or can it? The reality is that in the absence of all - or in some cases, any - of the features above, it’s extremely unlikely that you will receive the full value of the goods insured (and in extreme circumstances, you may not receive any pay-out at all). The converse, however, is also true. If you put these elements in place in liaison with an insurer, as part of a structured risk management audit, your insurance premium may be reduced by as much as 30 per cent - a substantial saving which means that your security initiatives are likely to pay for themselves in the first two years. The reality is that wherever your business is in terms of scale, turnover and size of premises, good security measures are a fundamental route to keeping the things that matter to you as safe as possible. Or would you rather be sorry? 19

STANDARDS & PRACTICES

Succession Planning safeguarding your business for the future It’s natural for you, as a business owner, to expect continual growth and success for your organisation. But, while you hope for the best, you might forget to prepare for the worst! Succession planning is a great tool that can help you protect your business in the case of any sudden, unexpected changes, and here we highlight why it’s fundamental for business continuity…

uccess through ‘Succession’ planning Succession planning is a key step for any SME owner or director. Why? Because SMEs, more often than not, depend substantially on one or two ‘central’ figures for all their major day-to-day operations and decision making processes. In fact, you may even come across a scenario where one senior level executive is responsible for bringing in all the revenues within an SME. So, what happens when this person is removed from the equation? The answer is simple – the business suffers huge losses, bad reputation, loses key clientele, and in a worst case scenario – shuts down! The ‘Opportunity Pyramid’ One of the biggest business myths of life in an SME is that succession planning should begin only when the business owner plans to leave the business. The reality is that such planning should kick-in years before the actual need arises. Or how else will you have sufficient time to

20 April-May 2014

STANDARDS & PRACTICES

identify, train and nurture your successor? How will you ensure that your company continues to follow the same core values you had set in place at the start of the business? In fact, the longer you wait to start succession planning, the lesser routes you will have to choose from. What’s more, there are chances that your family – especially the non-active members – may not receive their rightful share of the business.

Start today… A good succession plan takes into account three primary elements – the business owner, the owner’s family, and other stakeholders such as employees, investors, senior level management and so on. And, the right approach is to think of your succession plan as an ‘action plan’ you are leaving behind for these three parties to follow, in case you have to withdraw from the business due to unforeseen circumstances. At the same time, it’s important not to confuse succession planning for a ‘disaster-recovery’ plan. It’s not something that can be implemented overnight; it’s a plan that develops change over the longterm. Here, we highlight the basic fundamentals of writing your succession plan: The ultimate goal: Most business owners get involved in their day-to-day operations and often forget to set a goal or endpoint they want to see their business achieve. Your succession plan should address your vision for the company, growth strategies, expansion plans, sustainable practices or CSR activities (if any) – for instance, do you want to contribute a sizeable portion of your business earnings to a charitable cause? Of course, it’s crucial to discuss this ‘ultimate goal’ with other stakeholders and employees to ensure they are on the same page. Value of your company: Succession planning is the right time for you to ascertain the true market value of your business. This monetary value could be a figure that you’ve unanimously decided within the organisation, or you could have a certified accountant or branding specialist do the needful. Determining how much your business is worth is key to understanding how you want to divide it across the several stakeholders within the organisation. As simple as that. Moreover, if you decide to go down the 21

STANDARDS & PRACTICES

The reality is that such planning should kick-in years before the actual need arises. Or how else will you have sufficient time to identify, train and nurture your successor? route of selling your business – you will be prepared with a sale price! Managing control: As a business owner, it’s often hard to come to terms with the fact that you have to eventually let go and hand over all control to a suitable successor. This is another critical aspect that your succession plan needs to cover. It should address issues such as: Would you still have control of the business? Who would be the suitable successor of the business? How would the distribution of assets take place? Would you pass on ownership to a successor but still maintain control? If you do indeed pass on control, how would you distribute responsibilities amongst your successors? It’s also worth noting here that you would have to provide your successor/s with proper, intensive training and mentorship over a reasonable period of time in order to prepare them to take reigns of the business when the time comes. Lastly, there needs to be a timeline clearly mentioned for such transition.

Identify your successor: Many believe that family will inherit and take over the business – which can of course be disastrous. However, this is not true in most cases and it’s critical to identify your successor. Is this someone from within your firm like your existing CFO or CMO? Or perhaps you’d like to hire someone completely new, in the case of which you would have to lay down a detailed recruitment and hiring strategy. Business values: Every business owner has his or her own beliefs and business values which are incorporated into the organisation. These values are reflected across all business transactions and form the basis of all employee activities. Therefore, including these business values in your succession plan will allow your successor and stakeholders to understand the 22 April-May 2014

foundations of your business, and encourage them to keep these alive in the future as well.

Adaptability: An effective succession plan has the ability to make any transition as smooth as possible, without disrupting business operations. However, changes are a fact of SME life. So, taking into consideration sudden changes and allowing for a certain degree of flexibility is something to keep in mind when writing a succession plan. Having said that, it’s important that your succession plan is realistic to begin with and sets in place goals that are truly achievable and within the scope of the business. The role of insurance: One of the most significant areas of all is insurance. There’s no doubt that this is a powerful tool in the succession planning process. Two very popular types of insurance which business owners opt for when planning for succession are life insurance and key man insurance. Key man cover provides the business with the buffer funds to manage a difficult transition – such as the loss of a business owner or key person – and allows you to source a suitable long-term replacement. Understand the legal implications: Since there isn’t tax involved in this part of the world, you don’t have to worry about any legal tax issues. However, your plan will have to be legally sanctioned in case of challenge from family members. It will also have to be pre-approved by the Board of Directors within your business. Finally, ask yourself the following two questions about your succession plan: • Does it fulfil all the interests of the business owner? • Is it in line with the needs of other stakeholders in the business? If the answer to both is yes, you are on the right track!

Key factors: In an online article on Harvard Business Review, Marshall Goldsmith – a leading business educator and coach – explains four factors for efficient succession planning: 1. Change the name of the process from Succession Planning to Succession Development.

STANDARDS & PRACTICES

Plans do not develop anyone – only development experiences develop people. We see many companies put more effort and attention into the planning process than they do into the development process. Succession planning processes have lots of to-dos – forms, charts, meetings, due dates and checklists. They sometimes create a false sense that the planning process is an end in itself rather than a precursor to real development. Many humans fall into the same trap regarding physical fitness. We have may have fantastic plans in place to lose weight. We may be very proud of our plans, which include detailed daily goals for diet, alcohol consumption, and exercise. And if our execution were half as impressive as our planning, we would be very svelte. Our focus should be on weight loss, not planning for weight loss. 2. Measure outcomes, not process This change of emphasis is important for several reasons. First, executives pay attention to what gets measured and what gets rewarded. If leadership development is not enough of a priority for the company to establish goals and track progress against those goals, it will be difficult to make any succession planning process work. Second, the act of engaging with senior executives to establish these goals will build support for succession planning and ownership for leadership development. Third, these results will help guide future efforts and mid-course corrections. The metrics a company could establish for Succession Development might include goals like the percent of executive level vacancies that are actually filled with an internal promotion vs. an external hire, or the percent of promotions that actually come from the high-potential pool. Too often, we find companies measure only the percent of managers that had completed succession plans in place.

3. Keep it simple. We sometimes find companies adding excessively complex assessment criteria to the succession planning process in an effort to improve the quality of the assessment. Some of these criteria are challenging even for behavioural scientists to assess, much less the average line manager. Since the planning process is only a precursor to focus the development, it doesn’t need to

be perfect. More sophisticated assessments can be built into the development process and administered by a competent coach. 4. Stay realistic. While development plans and succession charts aren’t promises, they are often communicated as such and can lead to frustration if they aren’t realistic. Bottom line, don’t jerk around high performing leaders with unrealistic development expectations. Only give the promise of succession if there is a realistic chance of its happening!

What not to do Although the basis of succession planning is preparing your business for change, remember that too much change isn’t ideal either. For instance, if you decide to step down from your business, and have a successor ready to take charge – someone you’ve hired from outside the

Implementing these simple, yet effective, steps will strengthen the longevity of your business, keep your stakeholders happy, give your business a better future and help you make a long-lasting impression on your potential investors. business, a good idea would be to ensure that the rest of the senior level management team remains unchanged. The key is to maintain a balance between reinventing your business and not rocking the boat too much!

Being prepared Implementing these simple, yet effective, steps will strengthen the longevity of your business, keep your stakeholders happy, give your business a better future and help you make a long-lasting impression on your potential investors. More importantly, it gives you sense of satisfaction that your family is financially secure in case of any sudden changes. Finally, always remember the words of the iconic Benjamin Franklin, “By failing to prepare, you are preparing to fail.” 23

WOMEN IN FINANCE

JOURNEY TO THE TOP HELEN BRAND

In an exclusive interview with Accountant Middle East, Helen Brand, CEO, ACCA, shares her success story...

CCA is undoubtedly the largest accounting body in the world in terms of geographical reach and membership. How would you describe your growth and expansion strategy, particularly in the MENASA region? This has been about organic growth and of aligning ourselves where there is a need for the profession to be trained and to grow. It has also been about forging great working relationships with stakeholders and partners such as learning providers, employers, the governments, national bodies, regulators and our members and students. Together, this all adds up to growth.

Please share with us your key career moments in the journey to becoming the CEO of ACCA. My career after leaving Exeter University has been in accountancy bodies, first with the Chartered Institute of Management Accountants right out of university, then ACCA. I rose through the ranks at ACCA, where I worked for 16 years, holding various portfolios including chief operating officer, managing director of strategy and development, and even interim CEO. When the post of Chief Executive opened up in 2008, I knew that my in-depth understanding of the company and indeed the wider profession, helped me get this wonderful post.

24 April-May 2014

As you look back, what were the signiﬁcant relationships that helped you in your journey to CEO? Why? Throughout my career I always had a woman ahead of me, so I was lucky enough to have role models that I could aspire to. I think this is important, having a role model or a mentor in the workplace – and not necessarily a woman. This creates the right kind of atmosphere for aspiration, diversity and personal growth. A significant impact has also been the people I meet from around the world - students, members, learning providers, academics, business people – their insights and passion for the profession has always been inspirational. I also enjoy creating partnerships and working with them so can promote the value of the accountancy and finance professions together. I also enjoy the strategic dimension of being a chief executive. What are the skills important to being a CEO, and how did you acquire them? Being the chief executive of any organisation, you need a deep knowledge of the profession in which you operate; but you also need leadership qualities and you need to be decisive; you also need the ability to bring strategy into life, to make the right appointments to teams and ensure trust

WOMEN IN FINANCE

Being the chief executive of any organisation, you need a deep knowledge of the profession in which you operate; but you also need leadership qualities and you need to be decisive.

Helen Brand, CEO, ACCA

WOMEN IN FINANCE

ACCA as an organisation is the strongest it has ever been. It is vibrant and successful, truly global in nature. in your decisions and actions. I have learnt this throughout my career, while also understanding the need to listen. It is also important to be authentic, and be yourself. Trying to be what the perceived wisdom of what a leader is or isn’t can often be the wrong way to go about things. I’ve said before in interviews that leadership – whether you’re a man or a woman – is about the qualities you bring to the work place – those of decisiveness, the ability to bring strategy into action, to appoint the right people and to trust your actions The point about strategy is a good one to make at this time; we are due to launch our new strategy to 2020 soon, which is all about leadership and growth; it is bold and ambitious and one which I am pleased to be leading. We’ll be announcing this soon, so watch this space! What advice would you give other aspiring women professionals on managing their journey to leadership and to senior finance roles? Again, be a great listener but also ensure you are listened to as well. Have a career plan. Get a mentor. Build great teams.

After your term as ACCA CEO ends, what would you like to accomplish and leave as your legacy? More members, more students, more accountants. I believe the world needs more accountants and finance professionals. What moments, people and activities shape your values and leadership? Values - I adhere to my own personal values very strongly and I am pleased to say that these resonate strongly with those ACCA holds dear – Opportunity, Diversity, Innovation, Accountability, and Integrity.

What are the critical challenges you currently face in your CEO role? Challenges are also opportunities, so I take a positive view of this. Our 2020 strategy will be both a challenge and an opportunity. ACCA as an organisation is the strongest it has ever been. It is vibrant and 26 April-May 2014

successful, truly global in nature and we have worked hard over the last 109 years to develop the profession, serve the public interest and become the highly regarded and influential organisation we are today. Our current strategy was originally designed to run to 2015. However, we all know the world is changing at an unprecedented rate and bringing with it new and different opportunities and challenges for our members and our key partners, such as employers and learning providers. We believe we should respond quickly to the fresh possibilities this changing world is creating at what is a very exciting time for our profession. We have started to explore what the longer-term future holds and what role ACCA will play in that future. As a result of our work, we have accelerated our plans for the future and I’m pleased to announce ACCA will now be launching its new organisational strategy – which is designed to take us forward to 2020 - in April 2014. I would like to stress that our underlying mission and our values will remain at the heart of what we do. We will continue to provide opportunity to people of ability across the world, and support our members throughout their careers. We will continue to advance the public interest and achieve and promote the highest ethical, governance and professional standards. And we will continue to live our core values of opportunity, diversity, innovation, accountability and integrity. But we will be bold and ambitious as we look to the future. Who has been your mentor throughout your career? Two women – Kathy Grimshaw, who was my first boss, and Anthea Rose, the first CEO I worked for at ACCA.

Please give us a brief profile about yourself, including education background, family and hobbies. I graduated from Exeter University with an honours degree in Politics, where I was also President of the Student Union. That experience was very important in terms of leadership and management. I have two daughters aged 14 and 10 who are a great balancing factor in my life. I enjoy cooking with and for them. When it comes to music, Prince is top of my list. Having grown up near Liverpool, I am a lifelong supporter of Liverpool and am enjoying their current resurgence after a couple of decades of waiting.

Student Accountant

‘No room for complacency’

The first Emirati to obtain the prestigious Associate Chartered Accountant qualification though the ICAEW Emirati Scholarship Scheme programme speaks to Accountant Middle East about his journey to the top.

AEED AL MADANI, a Senior Auditor at Mubadala, has become the first Emirati to obtain the prestigious Associate Chartered Accountant (ACA) qualification though the ICAEW Emirati Scholarship Scheme (IESS) programme. IESS was launched in 2010, under the patronage of His Highness Sheikh Nahyan Mubarak Al Nahyan, Minister of Culture, Youth and Community Development for UAE, to attract top Emirati students into the accountancy and finance profession. Goals and aspirations Having passed all his exams in December 2013, Saeed was thrilled: “I was eager to fast track my career with a world-leading qualification that would equip me with all-round skills to become a business advisor but also distinguish me from the crowd. So after extensive research and consultation with seasoned professionals I realised that the ACA from ICAEW is the most suited qualification to help build the business and technical foundation I needed to achieve my future goals and aspirations. It has given me an additional level of confidence in my workplace,” he said. “The UAE's economy has been growing steadily, so there is no room for business professionals to be complacent. With this in mind, more Emiratis should consider training to become Chartered Accountants, obtain solid grounding of business 28 April-May 2014

knowledge and contributing towards the economic development of the country,” he added. Internationally recognised as the premier financial business qualification in 160 countries around the world, the ACA from ICAEW is held by more than 140,000 professionals who have undertaken the requisite theoretical and practical training. Through IESS applicants secure an ACA training place and a three-year contract with either Deloitte, Ernst & Young, KPMG or PwC. Skilled national talent With the UAE’s GDP expected to increase to AED1.7 trillion in 2018 ICAEW says the country will need to attract more skilled and qualified national talent to the finance profession to sustain its long term economic growth.

Internationally recognised as the premier financial business qualification in 160 countries around the world, the ACA from ICAEW is held by more than 140,000 professionals who have undertaken the requisite theoretical and practical training.

Student Accountant

Saeed Al Madani, Senior Auditor at Mubadala

Student Accountant

The ACA has integrated components which give students an in-depth understanding across accountancy, finance and business. Peter Beynon, ICAEW Regional Director Middle East, said: “A robust and well-functioning financial sector is essential for economic development. However, the UAE does not currently have enough Emiratis training to become future leaders in accounting and finance. The ICAEW Emirati Scholarship Scheme is, with the support of our government and authorised training partner, helping to close this gap.” “I’d like to congratulate Saeed on his achievements, which is both a fantastic personal accomplishment and a milestone for ICAEW in the Middle East. We are confident he will continue to enjoy a bright future in his professional career and serve as a positive role model for his fellow peers,” said Martyn Jones, ICAEW President. The ACA has integrated components which give students an in-depth understanding across accountancy, finance and business. To qualify as an ICAEW Chartered Accountant, students will need to complete all components of the ACA qualification which include exams and practical work experience. Accountant Middle East caught up with Saeed Al Madani for this exclusive interview, where he spoke about his journey to becoming an ICAEW-qualified professional. Excerpts from the interview;

Why did you decide to study accountancy? Because of the possibilities. I learned earlier on that in order to be in the business world and succeed in it; grasping the language of business was necessary. Luckily I’ve always been fond of mathematics and economics, so the decision to choose accountancy was one of the easiest decisions I ever made. It has opened many doors and provided career opportunities that I never thought would happen. Is your role with Mubadala Development Company your first professional position? What is your current role and how did you go about securing it? My first professional position was working as a Government Auditor for His Highness the Ruler’s Court of Dubai, prior to joining Mubadala. At Mubadala I was not only offered a place in their Internal Audit Unit, but was also 30 April-May 2014

given the opportunity to choose a professional qualification that would contribute to my own development and long-term career goals. Naturally when an opportunity of this magnitude knocks; you answer. I found that the combination of working in a fast paced environment and the exposure to different company-wide processes across different sectors and geographies has been positively worthwhile as it provided me with a breadth of invaluable experience. It is a career path that has exceeded my expectations of what I had initially planned in order to become a business leader. This has been possible due to Mubadala’s vision to develop a new generation of business leaders – and I am grateful for all the support that I have received from day one of working in the company. What do you think are the challenges in your job today? Internal audit has become an important contributor to a company’s success given the challenges and complexity faced in today’s business environment. This has broadened the scope of internal audit’s activities and suggests that the skills and competency requirements of employees has increased in the workplace. So it is imperative that appropriate skill-sets are developed via training and professional education for staff. What skill sets do you require in your current role to support day-to-day business operations? Internal auditors are seen as strategic advisors to the business, so it important to have a mixture of business knowledge and critical and strategic thinking to provide value by playing a key role in improving efficiency and driving strategic insights.

Do you think having a prestigious accountancy qualification such as the ACA is a must for succeeding in your profession? Yes. The ACA will equip you with all round tools to become a business advisor not just a financial reporting accountant. This is because the training programme requires you to learn about subjects that extend beyond accounting, which includes Tax, Law, Finance, Business Strategy and Audit & Assurance and apply this knowledge on reallife scenarios across different business sectors. The programme is a combination of working fulltime and undergoing academic study, allowing you to integrate your technical and professional skills with practical work experience to arrive at commercial answers.

Student Accountant

What does an ACA qualification add to your credentials? It provides global recognition as global leaders in accountancy, finance and business. I believe the ACA from ICAEW has differentiated me from the crowd due to the rigorous training programme that provided me with competencies and financial intelligence that is needed in a demanding business world. What challenges and incentives motivate you to expand your role? The different types of audits, the clearly defined career path and the interaction with seasoned professionals incentivise me to expand my role within the company.

Where do you see yourself five years from now? I see myself growing with Mubadala in the fields of Accountancy, Auditing and Finance where I believe I can continue to take on additional responsibilities and contribute as much value as I can. I also plan to remain involved with the Institute of Chartered Accountants in England and Wales to further promote the accountancy and finance professions in the region.

Saeed Al Madani

As one of the first two Emiratis to receive an ACA qualification locally, what is your perception of financial and accountancy education in the UAE? Is it evolving? Is vocational training important to supplement what you have learnt at university? Would you recommend more Emiratis join the accountancy and finance profession? Why? I think the financial and accountancy education is indeed growing in the UAE. Emiratis are becoming more aware of the importance of attaining a professional qualification to kick-start their careers. It should be their determination to work hard, grow and seize opportunities that would not only contribute to their own career aspirations but also support the country to become a global player. The UAE is the definition of making history and thinking big, so Emiratis should be motivated to follow the same spirit in whatever field they choose. 31

EVENT SPOTLIGHT

The 4th International Conference for Accounting, Auditing and Governance – InSIGHTS AND overview

he 4 th International conference for Accounting, Auditing & Governance aimed to collate the different strands of research in the broad field of financing, accounting and government principles according to the dictums of Islamic Sharia’h. The two day conference (held on 9th and 10th March) was under the patronage of His Excellency Eng. Sultan Bin Saeed Al Mansouri, UAE’s Minister of Economy, at the prestigious Armani Hotel, Burj Khalifa. The event brought together the most reputed names in the finance and accounting professions and was packed with quality content to be delivered by the best minds in the business.

32 April-May 2014

The conference had over 500 delegates, ranging from government officers, decision makers, professors of administrative economic colleges, accountants, auditors, to researchers in the field of accounting & auditing, employees in the banking sector and stock markets analysts. The main purpose of the event was to create an increased awareness and deepened understanding on how today’s business challenges in the financial and real economy can be addressed from Islamic viewpoints and methodologies. The agenda was ‘Accounting & Auditing in the Islamic Economy & Banking’. As a fast growing financial hub, the UAE has always been inspired by the Islamic Economy and the application of the Islamic banking

EVENT SPOTLIGHT

system. The country’s visionary leader, His Highness Sheikh Mohammad Bin Rashid AlMaktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, launched a plan to place the Emirate firmly as the capital of the Islamic economy. The initiative was grounded on Dubai’s establishment as an international centre for seven economic pillars, including Islamic finance, Islamic economic standards and certification, halal industries, halal tourism, the Islamic digital economy, Islamic art and design and Islamic information and education. The event sought to highlight the positive effects of Islamic banking on individuals as well as the economy. Furthermore, the transparency and independence in accounting would help in attracting investors and business owners, thereby supporting the development plans of the country. It also tackled the integration of international accounting and auditing standards under the realm of Islamic economy and highlighted the role of the Central Bank in the innovation and promotion of Islamic banking. “The recent economic downturn had the global financial system badly shaken with widespread effects of an unprecedented scale, however, it was evident that Islamic finance demonstrated remarkable resilience,” said HE Mohammed Bin Abdulaziz Al Shehhi, the Undersecretary of the Ministry of Economy. “The unprecedented growth and progress in Islamic banking and finance is mainly being driven by deficiencies in the current

Hani Ashkar, Senior Partner, PWC and Saif Bin Abed Al Muhairi, Chairman, AAA

conventional systems that make people search for alternatives, the strong association of the Islamic financial movement and the sturdy moral orientation of Islamic finance,” Al Shehhi added.

The prime objectives of the event Held under the banner of the UAE ACCOUNTANTS & AUDITORS ASSOCIATION (AAA), the primary need of the conference surfaced from recommendations made by investors and decision makers, to discuss the role played by the Accounting & Auditing profession towards supporting the trend and growth of Islamic economy & banking. The AAA is the major national and professional body for overseeing the affairs of accountancy and audit in the UAE. Their directives play a vital role in contributing towards the building of the economy of the nation.

Keynote signing of MoUs One of the focus points of the event was an important ceremony in which the AAA signed two landmark MoU agreements. The first was with the ACCA, the international body regulating the industry participation and conduct of Chartered accountants and one of the largest and most prestigious of all professional associations. The second was with the world’s leading audit and consultancy provider, PWC - ensuring alignment with global benchmarks and quality criteria and ensuring access and full understanding with the international provider’s regional offices. Featured topics The key topics covered in the event were • Role of the Central Bank in the innovation and promotion of Islamic Banking. • International Accounting & Auditing Standards under the realm of Islamic Economy & Banking. • Role of professional & academic organisations towards the education and career development of Accountants & Auditors under the Islamic Economy & Banking. • Governance trends, disclosure and transparency under the Islamic Economy & Banking. • Risk Management under the Islamic Economy & Banking. • Role of professional organisations in setting legislations of Islamic Financial products. • The role of accountants and auditors in educating investors about the various Islamic Financial products. 33

EVENT SPOTLIGHT

A warm round of applause for participants in the first day’s panel session

• Rules and regulations governing professional ethical behaviour in light of adopting mechanisms of Islamic Economy (Legal & Professional Point of View).

As expected from an accounting conference of this calibre, the biggest names and visionaries in the finance field presented their case and observations with detailed analysis. The

Saif Bin Abed Al Muhairi, Chairman, AAA

34 April-May 2014

emphasis was on the need to integrate Islamic finance with conventional banking, as it will ensure a more stable and resilient financial system that functions more efficiently within national economies. Executive Board Member of Islamic Finance Council UK, Omar Sheikh summarised that there is tremendous potential for Dubai to be the global leader of Islamic Economy, if there is an improvement and enhancement of the Sharia'h process. He mentioned that ‘Cross fertilising’ best practices from the conventional auditing system should be encouraged. The need of the hour would be a global professional body that develops and empowers Sharia’h scholars. Rehab Lootah, Managing Director Mawarid Consultancy, iterated that Islamic Institutions are subject to an additional layer of governance across all its functions. In her recommendations, she mentioned the need of a Risk Management Committee to oversee and monitor Sharia’h Risk. She also emphasized that Sharia’h auditing should be conducted on regular basis, and it should cover all corporate activities and not financial transactions only. Dr Khaled El Fakih, Secretary General & CEO of the Accounting and Auditing Organisation for Islamic Financial Institutions (A AOIFI) threw light on standard procedures in

EVENT SPOTLIGHT

International Islamic Finance. He stated that Sharia’h legislations offer more stability to the investor and end client than conventional baking procedures. Dr Syed A Farooki, Global Head Islamic Capital Markets, Thomson Reuters, presented a case on Sharia’h governance and professional ethical behaviour. His main observations were on the challenges faced by the Sharia’h compliant banks. The prime factors he indicated were lack of due diligence in Sharia’h operations, lack of wider distribution channels and yet to be standardised procedures. Bassel Nadim, CEO of the Accountants and Auditors Association, highlighted the development of internationally compatible Islamic accounting standards as well as promoting research and training within the industry. Nadim elaborated on the main attributes of various Islamic banking products like Mudarabah, Murabahah, Salam and Istisna. One of the prime areas of discussion was on the role of professional and academic organisations in the development of accounting and auditing profession in Islamic Banking & Economy. Dr. Mohammed Alabbas, Executive Manager of Institute of Internal Auditors (KSA), stressed the need of supportive professional and academic societies for upcoming professionals in the field of Islamic financing. Dr. Samy Nathan Garas, Head of Business Development for Universities and Schools, ACCA, pointed out that current qualifications in Islamic finance have limitations in requirements, study materials, exams and recertification. There is a need for a new standardised qualifications

The main purpose of the event was to create an increased awareness and deepened understanding on how today’s business challenges in the financial and real economy can be addressed from Islamic viewpoints and methodologies. and the success of these new qualifications is dependent on the contribution of accounting bodies in MENASA countries. Another issue of concern was the information gap in terms of Islamic products and services offered by Islamic Banks. To rectify this Khaled Hussainey, Professor of Accounting, Plymouth University, UK, proposed a holistic model for accountants’ characteristics that enables them in informing investors about different Islamic financial products offered by Islamic institutions. Ahmed M. Lootah, CEO of the Al Hilal Capital, elaborated the process of Risk Management in Islamic Banking. He shed light on the unique risks faced by Islamic Banks and 10 golden rules to combat these risks. On behalf of The International Arab Society of Certified Accountants (IASCA) Chairman HE Dr. Talal Abu-Ghazaleh, Salem Al Ouri, manager of the Society, submitted a paper at the conference. It dealt with the role of professional organisations in developing Islamic banking through setting up standards that govern it. It identified the need of

During the event

EVENT SPOTLIGHT

HE Mohammed Bin Abdulaziz Al Shehhi, Undersecretary, Ministry of Economy

establishing professional programmes to upgrade the efficiency of those working in the Islamic banking sector.

Dignitaries and main sponsors According to Brigadier Saif Mohammed Saif bin Abed Al Muhairi, the Chairman of UAE’s Accountants and Auditors Association, the conference’s main objective was to provide a platform for professionals in the field, to discuss and seek comprehensive solutions in order to support the sectors of both the Islamic economy and the national economy. “Among a myriad of other objectives, the conference seeks to provide a platform for professionals to discuss and seek comprehensive solutions in order to support the sectors of both the Islamic economy and the national economy,” he said “We expect Islamic banks to grow faster than the conventional banking system and the overall banking growth to remain strong,” Brigadier Saif said. Gabriella Marie Kusz, a Senior Financial Management Specialist at the World Bank Group, stated that “Islamic Finance is one of the fastest growing segments of the Islamic services industry and has attracted considerable interest and participation from governments and financial institutions, both from within the Islamic World and beyond.” Addressing the professionals during the conference, Gabriella stressed that the World Bank will continue to forge strategic partnerships with institutions like the AAA, in order to support all-inclusive growth in the area of Islamic finance. “The growing market for transactions compatible with Islamic law (Sharia’h) is further 36 April-May 2014

Rehab Lootah, Mawarid Finance Group chief corporate governance & business development & Managing Director, Mawarid Consultancy

The AAA is the major national and professional body for overseeing the affairs of accountancy and audit in the UAE. Its directives play a vital role in contributing towards the building of the economy of the nation. evidence of growing interest in this mode of finance, and as an institution we will continue to expand our ability as well as our knowledge base to support countries efforts to build resilient financial solutions and institutions,” she added. Other keynote speakers included HE Abdullah Salem Al Turifi, the Chief Executive Officer of Securities and Commodities Authority (SCA),

Distinguished VIPs and guests celebrating signing of MoUs

EVENT SPOTLIGHT

Arif Ali from the Department of Finance, Abdulla Mohammed Al Awar, CEO, the Dubai Centre for Islamic Economic Development and Martin Turner, President of the Association of Chartered Certified Accountants (ACCA).

Active contribution Jamal Bin Ghalaita, CEO of Emirates Islamic, event Platinum event sponsor, commented that: “‘Emirates Islamic’ is pleased to participate as a platinum sponsor in the 4th International Conference for Accounting, Auditing & Governance, organised by the Accountants and Auditors Association in the UAE. This is in line with Emirates Islamic’s commitment to promote innovation in Islamic Banking and to actively contribute to the “Dubai: Capital of the Islamic Economy” initiative. We’d also like to seize this opportunity to acknowledge the important role played by the Accountants and Auditors Association in the UAE in supporting the growth of Islamic Banking and the economy of the UAE as a whole, through the adoption of best global standards in the field of accounting and auditing.” In his inspiring presentation at the event, Ghalatia stated that Islamic banking has grown strongly, and consistently, over the past five years, and on a global level. He affirmed that in order to support this momentum, a number of enablers are needed. Prominent among them are • Unified Sharia’h standards on a global and local level • Improved Liquidity management of Islamic banks • Strong moves to globally champion the ease of transactions in Islamic financing mainly in the cross-country sector. Recent reports show the Islamic finance industry will continue to grow driven by both demand and supply factors. This move will be further facilitated by government agencies and financial regulators. The industry is forecasted to continue to chart double digit growth rates across all sectors, with total industry assets estimated to reach approximately US$2.1 trillion and the total asset of Islamic banking sector to reach US$1.6 trillion at end-2014. Overall, Islamic finance in 2014 is set to experience another increased momentum, particularly in the sukuk market due to thriving interests of key global and regional financial centres in developing Islamic finance, including London, Hong Kong, Singapore, Luxembourg and Malaysia.

Gabriella Marie Kusz, Senior Financial Management Specialist, World Bank Group

Bassel Nadim, CEO, AAA

Abdulla Mohammed Al Awar, CEO, The Dubai Centre for Islamic Economic Development

Personality & Practice

AGE OF THE SPECIALIST With over 20 years of professional experience in finance and accounting, Baasab Deyb, Partner at RSM Dahman, is very positive on the current economic outlook. What are the trends and opportunities shaping the professional scene in the months ahead?

VER THE last 60 days we have witnessed global commodity prices jump as much as 10 per cent with items such as sugar and coffee leading the charge. Markets around the globe seem to be surging forward. Real Estate prices in the Emirate are echoing 2008 prices and the world’s biggest multinational corporations are re-visiting emerging market expansion strategies. While the global economy is cultivating a new spurt of activity, the 21st Century still remains the most complex and volatile of any in recorded history. Where the only constant is change the question is… how does one cope with this new chapter in the annuals of Middle Eastern business? “One clear trend that has been identified by business thought leader Dr Linda Gratton, Professor of Management Practices at London Business School, is the death of the generalist and dominance of the niche specialists,” affirms Baasab Deyb, a Partner at RSM Dahman. “Clients don’t want generic off the shelf products or services, they want a specialist who understands 38 April-May 2014

their businesses idiosyncratic nuances, their risks, and can add real value and insight into their current position,” says Baasab.

Hospitality & Leisure W hile not k now ing at t he t ime, Baasab has serendipitously posit ioned himself to t ake advantage of these new business trends and paradigm shifts as he has specialised in Hospitality and Leisure, one of the region’s hottest markets. In November 2013, Baasab Deb took on the role of Partner for RSM Dahman, a member of RSM International, one of the top leading audit, tax and advisory service networks, which consists of independently owned and managed professional firms. Baasab is responsible for the development of the Hospitality & Leisure services for the firm which is not a drastic change from his previous position as Executive Director at Ernst & Young where he spent 18 years honing his skills in this segment. When Baasab began to specialise his industry experience, no one could have known that Dubai would become one of the top ten hospitalit y

Personality & Practice

As you confront today’s increasingly complex and uncertain consultancy environment, having a mentor is more important than ever before. Whether you are new to the audit/assurance field or a mid-career professional, the benefits of being a protégé are numerous.

Baasab Deyb, Partner at RSM Dahman

destinations in the world, often vying for the highest hotel room utilisation rate against the likes of London, New York and Hong Kong. “Someone’s sitting in the shade today because someone planted a tree a long time ago,” is one of my favourite quotes by Less Brown, celebrated author and motivational speaker, and it seems to capture the patient growth Baasab has been able to nurture over the last two decades. “Moving out of the ‘Big Four’ at this point enables me to get in the driver’s seat of my career and also gives me more agility to deliver custom solutions to my clients. The Big Four has laid the bed rock of my experience, but RSM is the spring 40 April-May 2014

board I was looking for to take my career to the next level,” he says.

Setting up dedicated team Dahman Awadh Dahman founded the firm in the UAE in 1996 and in Yemen in 1997. Then known as Dahman & Co, it was immediately included as a member of RSM International at that time. In 2012, the firms in the UAE and Yemen were renamed to RSM Dahman, reiterating the firm's commitment to becoming a truly international audit firm with local experience and expertise. With a strong track record of personalised services, it is now embracing the “Age of the Specialist” with the commitment to developing columns of industry experts and Baasab's appointment was a key part of that strategy. “Spending 18 years with E&Y I was the leader for Hospitality and Leisure for the Middle East," explains Baasab. "E&Y never had a specialty unit dedicated for the Hospitality & Leisure segment, though it had 50 percent of the five star hotels and leisure industries as their clients. I set up a dedicated team that audited these segments along with setting up internal control documents and master files. From representing the firm at international conferences, to creating local forums, and developing thought leadership for the business, I was totally immersed in the segment.” Baasab was born in Calcutta, India, which is the capital of the Indian state of West Bengal. Located on the east bank of the Hooghly River, it is the principal commercial, cultural, and educational centre of East India. It is also the centre of modern Indian education, science, literature, culture, and politics. “Calcutta used to be the capital of India at some point in time it was one of the pioneering cities in India and over the years the commercial activates of business moved from Calcutta to Mumbai and New Delhi. Later, Mumbai became the financial Capital of India and soon took over as the financial hub. Though these days, it’s Bangalore which has attracted more foreign investors and has become the epicenter for IT and out-sourcing in India.

A cultural thing Calcutta has been left behind in terms of growth and business and has seen an exodus of its intellectual horsepower. Many of the cities playwrights, authors, movie directors and creative artist, politicians, lawyers and CXO’s from large corporations are mostly Bengalis form Calcutta. Unfortunately, while the city is known for producing some of the country’s top talents, it struggles to find its feet. “Being from Calcutta I believe is what drove me to become a Chartered Accountant. My grandfather severed in t he United Nat ions as a f inance

Personality & Practice

professional and was even posted in Geneva for a number of years. If I were to think about my past it all adds up, moreover it’s a cultural thing being a Bengali to have an emphasis on a professional qualification,” says Baasab. “I started as an article trainee in 1990 with A.F Ferguson & Co (Representative firm of KPMG International) and I qualified my Chartered Accountancy from the Institute of Chartered Accountants in India (ICAI) in 1994, and then spent another year with KPMG after qualifying.” “PepsiCo was an account that I was managing as a lead auditor regarding their due diligence in 1994. I was later offered a role within the firm as a regional accountant managing the eastern region for PepsiCo India. This was an exciting career opportunity working with a multinational COBO unit (Company Based Operations). What made it more interesting was that in 1994 when, Ashwarya Rai was crowned Miss World, she was the brand ambassador for Pepsi. We were running the campaign “Have a Pepsi with Aishwarya Rai” and I got to meet her, a memory of the good old days that I still cherish.”

In 1995, Baasab attended a campus interview for audit professionals by E&Y & KPMG that were scouting for professionals to be based in Dubai. Having always been fascinated about Dubai’s Gold rush, its famous duty free and tax free haven, this was an opportunity he didn’t want to miss out on.

Time management is key He was soon offered a role by E&Y which was the beginning of an 18 year relationship. Based out of the Dubai World Trade Centre office in the late 1995, a time when it was the only high rise building on Sheikh Zayed Road. “I fell in love with Dubai the day I landed, I still remember it was at 6 am when I was checking into my hotel and spotted a Pepsi vending machine outside which was something new to me as we did not have them in India yet. I was excited to know more and explore this wonderful city. The glittering streets, the shopping malls and souks had a gravitational pull on me and I knew this city was different. I was immediately hooked,” recalls Baasab. “When I joined E&Y in late 1995 I was a newly qualified CA, and the firm had a policy that 41

Personality & Practice

newly qualified accountants have to start at the bottom. Despite having experience under my belt I had to start at the bottom again and earn my stripes,” says Baasab. This didn’t stop his hunger for growth and within four years he was promoted to Assistant Manager where he began to lead larger client engagements. “Time management is key to my productivity. When I was with E&Y as young professional, I wasn’t really efficient at what I did, though I did come with a strong corporate experience I did not have the time management skills needed to manage multiple clients and numerous projects at once.” “I was mentored by Edward Quinlan who was the MD for E&Y at the time, and very well-known personality and also the youngest professional to have been made Partner at the age of 26. Edward put tremendous emphasis on the importance of managing time well. When I see people working long hours, I wonder if they’re working efficiently. Being organised and being able to prioritise are key foundation stones in any success story. Of course the real pillar to my success is my wife, who has supported me through all of this,” says Baasab. “As you confront today's increasingly complex and uncertain consultancy environment, having a mentor is more important than ever before. Whether you are new to the audit/assurance field or a mid-career professional, the benefits of being a protégé are numerous. To be successful in any field, aspiring leaders require role models and guidance.”

The proverbial glass ceiling E&Y had the best mentors that I still look up to these days. People like Edward Quinlan, Mike Henderson, an ex Partner at E&Y, Joe Murphy, a Managing Partner at E&Y and Anthony O’Sullivan, a Partner at E&Y are few of my mentors that helped me add perspective and depth into decision making and further assisted with refining and developing my ideas.” While a few lucky executives enjoy a rocket fueled ride to the top, others struggle with the proverbial glass ceiling. You can’t touch it, you can’t see it but it’s there and for many, they never get past it. Baasab hit his glass ceiling in 2010 when it just did not seem like his career was moving any more. Was it the market, was it the environment or did he just need a change? “We all have blind spots when it comes to our own performance and personal conduct. Being unaware of how your actions affect others can keep you from accomplishing your goals. I had to take a deep look at my performance, my experience to date and decide where I wanted to go from here. It became obvious that my biggest value contribution is in the Hospitality and Leisure segment and so when RSM 42 April-May 2014

We all have blind spots when it comes to our own performance and personal conduct. Being unaware of how your actions affect others can keep you from accomplishing your goals.

approached me with the opportunity to lead the segment for them it made sense to me as the next logical step in my career,” says Baasab.

Real buzz in the market Speaking about the future of Dubai, Baasab paints a rosy picture of Emirate, which recently won the bid to host the world’s trade fair in 2020. “World Expo 2020 is not simply an exhibition,” he says. “It is much more than that. What differentiates it from the hundreds of other exhibitions around the world is that it is an international event. World Expo also attracts tourists to the host cities and in this case Dubai. It is estimated that the fair would attract over 25 million people travelling into the Emirate. Aside from spending money to fly in to the country, they also dine, stay at the hotels and shop.” “The Hospitality and Leisure industry, in my humble opinion will benefit the most. There is a real buzz in the market about the effect that this mega event will have on Dubai and the UAE and even some neighboring nations. Dubai will also continue to develop its world class infrastructure through real estate development, public transportation and new municipality projects. So I think there will be winners in all sectors,” says Basaab. “With the development of the Emirate, comes the development of its professionals. The next generation of accountants are now being home grown in Dubai, and therefore we are poised for a century that will soon be led by Generation Y, or to put it simply, a generation which grew up with the internet.” Despite t he vast dif ferences bet ween t he generations, Basaab still feels the fundamentals to developing as a professional will stay unchanged. “The core to making it in this field is developing the right set of capabilities, so get a mentor and work hard under them. You also need to know how to communicate and how to present to senior stakeholders. Succeeding in this business is not just about solid expertise — it’s about gaining great judgment, strong insight, and gaining the real confidence of clients through your your industry expertise,” says Basaab. After two decades in hospitality and leisure, Basaab is well positioned to practice what he preaches.

“Enhance Career Opportunities”

Be a U.S. Certified Professional CPA - Certified Public Accountant CMA - Certified Management Accountant CIA - Certified Internal Auditor IFRS - International Financial Reporting Standards New BATCHES COMMENCE SHORTLY Books & Software from publishers U.S. Certified Instructors Live Classes with visual aids E-Group to share and learn Instructors’ support after review Assistance for registration Hands-on & Home Exercises Mock test and follow-up Preparation & Exam strategy

“Leading you to the Global Business Community” M02, Mina House, Mina Road, Bur Dubai, Dubai, UAE Dubai Tel. No.: 04-3521133 E-mail: info@emergeuae.net Web: www.emergeuae.net

Personality & Practice

Opening any door Malcolm Furber FCMA CGMA is President of the Chartered Institute of Management Accountants (CIMA), the definitive professional body representing accountants in executive roles worldwide. He spoke to Accountant magazine about the organisation’s role as a Champion of thought leadership and the everbroadening management remit of the senior finance professional.

alcolm, what do you see as the main benefits of a CIMA qualification? “Firstly, you have to understand that this is a truly global qualification, one that’s internationally recognised. It’s benchmarked and validated across fully replicable criteria wherever in the world you are based. So it has immediate recognition value and professional credibility for every style of business and employer. From 2015, the US will also be fully aligned with exactly the same professional accreditation. “Yet there’s more to the qualification than simply the fact that you comply with certain skillsets: it also involves subscribing to key ethical values, which again, are recognised across the world. These give organisations a powerful sense of confidence in personnel who are CIMAcertified, whom they know will uphold the highest standards of Best Practice.” In the GCC nations, there is no statutory requirement for SMEs to work with a qualified accountant to produce their accounting

44 April-May 2014

materials. So is there as much interest in - and traction for - a CIMA qualification in this part of the world? “The reality is that there is extremely keen interest in this part of the world - more and more businesses are aware that in order to compete globally, they must invest in qualified professionals. The role of online media is an important factor in this sea-change: there is no strictly local business anymore, and you have to buy-in to global benchmarks and expectations. As an indicator of this interest and commitment, I’ve just Chaired a CIMA convocation event that was attended by 220 students - an absolutely full house! Our presence in the GCC markets is currently going through exponential growth.”

We continually see the role of the CFO, for example, changing to embrace leadership activities and highly proactive engagement with IPO and M&A activities. How is CIMA aligned with this new direction? “The first thing I should say is that we see critical activities such as thought leadership to be very much ‘our space’ - we are totally aligned with expanding the sphere of influence of the finance professional through adaptive thinking, and helping organic growth into a full leadership role. This is why our certification agendas include the development of strong leadership skills, strong marketing skills - and the ability to sell a concept to the Board. “We are also pioneers when it comes to innovating the accountancy disciplines themselves, leading the way with techniques such

Personality & Practice

This is a truly global qualification, one that’s internationally recognised. It’s benchmarked and validated across fully replicable criteria wherever in the world you are based.

as predictive analytics, predictive accounting and the role of Big Data. These are aspects that can transform the power and efficiency of the enterprising business and our membership is seen as pre-eminent in understanding these trends and empowering their companies accordingly.”

How do you see the role of Regulation in setting criteria and enabling a level playing field? “CIMA has consistently lobbied for stronger regulation in key markets across the globe. The right level of regulation is crucial. For example, when we polled our membership internationally about what they see as the No.1 business risk, 74 per cent replied that it is the lack of relevant Regulation in certain markets. On the other hand, we’ve all experienced over-regulated markets and sectors, and the last thing we would want to do is stifle entrepreneurism and creative thinking - there’s a lot of truth in the phrase ‘over-regulate, under-perform.’ Our business is improving performance - and the right style and level of regulation is a catalyst for good performance.” CIMA has an enviable reputation for the strong presence of its membership across both private and public sectors - can you tell us a little more about this? “It’s a remarkable fact that we actually have more members in government departments than CIPFA has! (The Chartered Institute of Public Finance and Accountancy). The reality is that the generic strength of the CIMA training is equally applicable in any working environment -

and I would add that the ethical standards we embrace are especially important in terms of appeal to government entities and publicly-listed companies. This combination of core financial skills and code of ethics can in fact take you anywhere. Recently, I was contacted by a CIPFA member based in Australia, who had recently qualified, and he said: “My only question is, where do I go from here?’ My reply is: “Where can’t you go?” You see, one of the great things about a CIMA qualification is its ability to open doors and empower your career in any area you are interested in.”

Malcolm Furber FCMA CGMA is President of the Chartered Institute of Management Accountants (CIMA)

Related to this, tell us something about yourself, Malcolm? “In many ways, I’m a classic example of the power of the CIMA brand to build your career and help you assess financial issues in a way that’s rigorous, relevant and adds to the bottom line. I’m not a graduate - I came up through the vocational route. It was only much later in life that I had the opportunity to study at Princeton and London Business School. I worked at worldclass organisations such as ICI and BOC, and later undertook major consultancy projects for multinationals looking to build market share in fresh markets. Throughout this career - I’ve just turned 60 - I’ve never lost sight of the fact that the right qualifications are not only key to an individual’s personal progress, but to the performance of the organisation you are employed by. It’s a crucial part of the CIMA remit that the training we provide has a worldwide validation and value - and I’m immensely proud to take on the role of President and be at the helm while we navigate through a climate that has such immense promise for the future.” 45

Personality & Practice

Bassel Nadim, CEO, Accountants and Auditors Association, UAE

46 April-May 2014

Personality & Practice

FUTURE DIRECTIONS:

THE REPOSITIONING STRATEGY OF THE ACCOUNTANTS AND AUDITORS ASSOCIATION The Accountants & Auditors Association in the United Arab Emirates (AAA) is set to play a proactive role in both the accounting profession and the financial services sector at large. Strategic initiatives include the adoption and spread of best practice, the development of professional qualifications and the enhancement of a unique professional services offer - and this is just the beginning. CPI’s Paul Godfrey talked with Bassel Nadim, CEO, AAA, about the challenging agenda on the road ahead…

hat do you see as the key current priorities for the Accountants & Auditors Association (AAA)? “I believe there are many, but the overall theme is to conduct initiatives to raise the value proposition that the AAA is bringing to the professional sector, in alignment with the financiallyrelated KPIs of the UAE - providing a secure platform and point of reference for the financial professionals working here. I don’t believe we have reached that point yet: there are some key steps we have to take first. For example, my first priority has been to work closely with the AAA’s board to redefine the vision and the structure of the organization, so that it is a robust and very focused entity; the next step is to secure support and - moving forward - the right partnership arrangements will be very important. “I am giving particular attention to what I would call the ‘operations theatre’ side of things, ensuring that we are in a position to efficiently oversee the entire cycle while providing services to regulators, professionals and members.” Which industry sectors do you see the work of the AAA as being most relevant to? Is it equally applicable to all? “The AAA is a federal national entity and it should be scrupulously fair and provide equal services to all. However, I do feel that in many areas of commercial

life, smaller accountancy and audit firms are not getting a good level of support, and I think it is part of our role to lobby on their behalf. For example, most banks and investment institutions prefer to deal with big audit firms and may not recognise others’ reports as a certifiable comment on your financial standings. This in effect not only deprives smaller firms (which are of course 90 per cent of the industry) of business, but also from claiming better fees. The AAA is geared to develop smaller practitioners as such, allowing SMEs to get prudent and high quality accounting and professional standing. This, in the end, will have a positive impact on corporate financial inclusion in the country. In line with this goal, the AAA is working with IFAC and the World Bank to organise a training event for small and medium practitioners in midJune 2014 .

According to Dubai SME, only 3 per cent of the UAE’s SMEs publish their accounts and less than 38 per cent produce audited accounts at all. What do you feel about these figures? “While it is of course a regrettable statistic, it is justified in the context that producing financial reports is not compulsory. In many countries, working with a Chartered Accountant is a statutory requirement, and it might be helpful if this was the case here. This kind of requirement would increase confidence in the SME sector generally and address 47

Personality & Practice

many of the key funding issues as far as risk and investors are concerned. Part of the day to day work of the AAA is to generate this better understanding of the role of the Chartered practitioner and help companies see that more regular and more transparent reporting is simply good business sense.” We have recently seen the AAA sign a number of important international agreements with key associations. Will there be more of these soon? “There will be, insofar as this process suits the needs of the AAA. We pride ourselves on some excellent agreements and associations - the extremely important recent MoU with the ACCA is a classic case in point, and of course, highly relevant to our professional aims and objectives.

What are the practical benefits that the AAA can bring to my business – whether I’m an SME, an Enterprise or a large business? “We are developing a new level of offer that’s based around three collective benefits for members: content, capacity building and networking. “The AAA is working with its partners to provide knowledge content to members in the form of magazines, e-zines or through white papers. Plans are being developed to address contemporary issues in the profession. Another unique segment that we pride ourselves on, as a national body, is developing capabilities, enhancing confidence for business owners who have the assurance that members of the team are accredited to a national body - and one with very high standards. This confidence is built either through the development programmes, or through the knowledge that our certificate - the UAE Certified Chartered Accountant - will feed directly into the business. We also provide a wealth of very constructive networking opportunities that allow stronger links with contractors, suppliers and customers, developing the best possible environment for exchange. There is another key factor, too: the presence of our members assures your customers that their work will be performed to the most exacting professional levels, and executed to an international benchmark - setting your business apart from those that are working in isolation and have no clear quality standards. Do you see t he traditional role of family businesses here in t he reg ion as being a challenge for the A A A (and indeed for its members working in those firms)? “The situation here with the family business and the accountant will change - indeed, my view is that this situation is starting to change already. 48 April-May 2014

The AAA is working with its partners to provide knowledge content to members in the form of magazines, e-zines or through white papers. As the reputation and influence of bodies such as the AAA becomes more widespread, we will give people more confidence in building a productive career within family businesses, where increasingly - even with the smaller family concerns - the role of the accountant is being seen as fundamental to stability and growth. How do you see the role of the AAA evolving here in the UAE within the next five years? “We will be increasingly connected with larger business issues such as Corporate Governance and Best Practice, and be a key driver of change for SMEs, Enterprise firms and larger corporates. I believe we will move from being a forum of technical accounting to a more modern space of risk management, due diligence and the like. This will mean that our members have very powerful business tools at their disposal and are fully equipped to fulfil the increasingly broad leadership role that we see today’s senior accountants and CFOs being required to fulfil.”

Are you actively lobbying for the greater availability of Arabic-based accountancy and audit qualifications? “Absolutely. We have to enable Arabic practitioners t o e a r n t he s a me u n i ver s a l l y-r e c o g n i s e d qualifications and provide high quality Arabicbased ser v ices to t heir client s. T he A rabic qualification should provide you with something exactly equal to the English-based module - not simply a certificate at diploma level. This is really very basic: we should never prevent non-English speaking professionals from getting qualified to the best standards. “One example of creating this fairer opportunity is that we have recently launched the qualification ‘UAE Certified Chartered Accountant’. This is fully internationally recognised, and enables you to hold ACCA - in this respect, it’s almost unique, because in other cases, regional certificates are not internationally recognised. It’s a core example of our working towards total parity and equality between the regional scene and the key international benchmarks. It’s a first vital step - and a good indicator of where we see the profession headed.”

SEARCHING

FOR REGIONAL DIRECTOR MEASA

Shane Phillips Consultants is currently searching for a Regional Director MEASA for the Institute of Chartered Accountants England and Wales (ICAEW). As one of the world’s most coveted qualifications our preferred candidate will be an ICAEW qualified chartered accountant and will share our excitement for the institution. The Regional Director MEASA will be the spearhead of the ICAEW’s expansion across the Middle East, Africa and South Asia. As such we are looking for seasoned candidates who have the pedigree and gravitas to create influence and consensus with Sheikhs, Royalty, Ministries, Government Heads, CEOs, Board members and senior stakeholders. If you would like to be part of the next milestone of the ICAEW’s history in the emerging markets, please contact us for a face to face meeting at shane@shanephillips.net or call me directly at +971 50 940 7537.

SHANE PHILLIPS CONSULTANTS +971 50 940 7537 |

shane@shanephillips.net |

www.shanephillips.net

Trade Credit insurance

Roberto Cassaro, Chief Finance Officer of Euler Hermes GCC

CREDIT CULTURE IN GCC

There is not much awareness of trade credit insurance in the GCC as the most common practise is â&#x20AC;&#x2DC;Letter of Creditâ&#x20AC;&#x2122;, which will not be sustainable on the long run, says Roberto Cassaro, CFO of Euler Hermes GCC.

ou were recently appointed as Chief Finance Officer of Euler Hermes GCC. How would you describe the local environment for trade credit when you first came to the GCC? When I first came to this region, I noticed the amazing trade efficiency in GCC being an export and re-export market offering huge potential for trade credit insurance. In terms of trade policy, I noticed that the market is still very underpenetrated compared to the conventional markets. It is a real challenge to create awareness about insurance solutions to replace the less sophisticated, costly and time consuming letter of credit. 50 April-May 2014

You have served in other markets, including Madrid, Paris and Rome. In what ways would you say the GCC market is different from the European market? Firstly, it is a very fast growing market offering huge opportunities. Secondly, it is a market not in recession and thirdly it has easy access as there are no sophisticated rules in the insurance regulations. The GCC represents an ideal business location. Maritime opportunities and an adequate export infrastructure (construction of ports, improved logistics) are an advantage in terms of international trade. Credit Insurance supports the sustainable growth by helping companies make informed decisions about the level of credit they should offer their customers, identifying those businesses at risk and enabling them to manage their credit risk exposure accordingly, thereby avoiding the negative impact of unexpected bad debts or the need to make a claim. Here in the region, accounting and credit procedures are still evolving; credit decisions are made largely on the basis of relationships. How do GCC banks, traders and corporations benchmark against their peers in other regions in terms of managing credit and business/ political risk?

Two choices. Since no two businesses are the same.

Months DEFERRED PAYMENT

OR 40,000 KMS SERVICE*

OďŹ&#x20AC;ers include: 0% down payment | 3.99% interest | 5 years or 300,000 kms warranty * Service package includes 3 months deferred payment. Visit www.toyota.ae to register. OďŹ&#x20AC;er valid only on Hiace and Corolla. Length of business starting from 6th month. Terms & conditions apply. Subject to bank approval.

169764

Trade Credit insurance

Indeed, relationships among traders have been there for long and will remain. However, companies should evolve from relationships to the grading of a company in a more structured and sophisticated way as it has been a common practise internationally.

The 2008-2010 global financial crisis followed by the ‘Arab Spring’ affected businesses in the region, leading to financial defaults, insolvencies and bankruptcies. Did these events have any impact on risk appetite and insurance buying in the region? The Arab Spring and international community sanctions on Syria and Iran have redistributed trade dynamics and GCC countries were the first beneficiaries of such events, capturing most of the trade activities thanks to their political stability and openness to trade and export. Other factors that I believe are driving the trend for trade credit insurance in the Mena region include increased sensitivity to trade credit risk among CFOs; sustained economic diversification in the GCC countries; and the implementation of Basel III requirements impacting banks’ operations in financing receivables.

There’s no doubt that in the GCC, few companies made use of trade credit insurance in the past, but this has significantly changed, particularly post the global financial crisis. What are your predictions on how the local market will evolve over the next five years? Credit Insurance market achieved the record premiums book value of US$73 million in 2013 in GCC, with a growth of 25 per cent versus 2012. Euler Hermes GCC is the market leader with a share of 49 per cent in UAE and 60 per cent in KSA. I expect the same robust growth in the coming years. Corporate insolvencies confirmed the generally expected rise in 2013 (+2 per cent) due to the slowdown in the global economy. This increase, following three consecutive years of decline, nevertheless masks two significant but opposite trends: on the one hand, the continued decline in insolvencies in North America (-11 per cent) and Asia (-4 per cent); on the other hand, a rise in Latin American insolvencies (+10 per cent) – albeit from a low level –and particularly in Central and Eastern Europe (+6 per cent) and Western Europe (+9 per cent), where the number of insolvencies continues to rise in manufacturing (+3 per cent) and construction (+1 per cent), with the exception of Germany and the UK. These two contrasting trends are expected to moderate in 2014 when the slowdown in emerging economies should be offset by the better outlook in 52 April-May 2014

Roberto Cassaro

the more advanced countries. Countries experiencing a decline in insolvencies will become the majority in our sample but our Global Insolvencies Index will only show a slight decline (-1 per cent) and nearly 7 out of 10 countries show a higher level of insolvencies in 2014 than before the 2008 crisis. The insolvency index in the UAE is growing as reexport from the country are further increasing. The GCC and especially the UAE have proven to be very cost-effective on logistics, labour, energy and other trade inputs. The countries optimal strategic location is another factor contributing to an accelerated growth in the volume and value of cross-border trade. This has led the region to become an ideal centre for re-exports. But this also exposes traders to additional risk when trading on open credit terms. These increased levels of risk are boosting demand for trade credit insurance solutions which is precisely what Euler Hermes is able to provide from its offices in Dubai, DIFC, Riyadh and Jeddah. We will raise further awareness about TCI solutions for companies of all sizes in the GCC; UAE, KSA and also Qatar will be the leading countries for the trade credit insurance development. In an interview I recently had recently with Citibank, I was informed that the Middle East

Here in the region, where accounting and credit procedures are still evolving; credit decisions are made largely on the basis of relationships.

Trade Credit insurance

US$73m

Premiums book value achieved by credit Insurance market in GCC, last year

region is only a paltry 1.2 per cent of the global trade credit insurance market. Why do you think this is the case? Are there any pitfalls to trade insurance? The GCC is underpenetrated but shows a string growth rate. The reasons for this are largely cultural, as there is not much awareness of trade credit insurance and the most common practise is Letter of Credit – which will not be sustainable on the long run due its high cost and time consuming procedure. The UAE, in particular, is no doubt an international trade hub and a gateway to the wider region and emerging economies such as Africa, Asia and Latin America. Dealing with international companies exposes local traders to potential defaults, insolvencies and bankruptcies of their trading partners. Is trade credit programme structured to help protect businesses, financial institutions and traders against the consequences of defaults,

The Arab Spring and international community sanctions on Syria and Iran have redistributed trade dynamics and GCC countries were the first beneficiaries of such events.

insolvencies and bankruptcies of their trading partners? What role does trade credit programme play in international trade? Euler Hermes is the global leader in trade credit insurance solutions, facilitating trade and exports. Getting paid on time and access to required finance are two major problems traders are facing. Practical and reliable tools linked to the actual economy are needed to tackle these situations. Trade credit insurance is one of these tools as it protects the company against payment defaults and provides companies with a powerful solution to assess new prospects. By assessing and constantly monitoring the risk, credit insurance is able to direct the business of insured companies towards reliable markets and clients that allow the company to achieve stable, long-term growth. The credit insurance policies also enable insured companies to obtain credit lines and related cost effective facilities from banks, which improve the company’s creditworthiness. The major drivers are more information and education by Trade Credit insurers; more interest from banks to support us in this business using Trade Credit Insurance as collateral; and the deteriorating global trade environment in the Eurozone, US and China pushing traders and exporters to increase the mitigation of such risks. The GCC has benefited from all these situations. Regional GDP is expected to grow between 4-5 per cent in 2014 and the political stability and visionary leaders of the UAE, Saudi, Qatar and Kuwait are providing a very fertile environment. We see the GCC as very strategic. Dubai has low cost of labour, convenient energy cost, low taxes, excellent port facilities, infrastructure, logistics and relatively easy bureaucracy – all the elements to make this a worldwide trading hub. And in Mena, the political instability in some areas has heightened risk consciousness. All these factors make the GCC a marvellous opportunity for Trade Credit Insurance and Euler Hermes.

The cost of credit insurance depends on factors such as location of the business, the industry and the amount of credit given. I know in some instances policy can’t be offered if there is too much risk. What are the other pitfalls for trade insurance providers? Firstly, we provide a broad range of policy solutions, depending on the premium the customer is willing to pay for the risk. The cost is based on a risk assessment of the customer portfolio. It depends on the probability of default of the buyers which are the customers of the policy holder, the sector and the political risk associated with the country. 53

Capital Markets

A time for growth – 2014 set to be a defining period for UAE Capital Markets 2013 ended with a fresh spirit of optimism in the region, buoyed by Dubai’s winning the coveted title of host for the 2020 Expo. Yet how is this being translated into actual investment performance - and is the market showing a strong growth platform for the SME and Enterprise sectors? On current form, the reality is that investors are indeed now more confident to deploy cash into the market, with expectations of robust medium and long term returns. To get the latest market intelligence, we spoke to Simi Nehra, Corporate Finance Partner at Grant Thornton UAE.

T Simi Nehra Corporate Finance Partner, Grant Thornton UAE

HE UAE economy is set to grow with significant pace in 2014 due to an overall positive outlook for sustainable growth, and with investors’ confidence building momentum. The country is particularly noted for having the dynamism of the west whilst maintaining the culture of the east. The IMF has predicted a 2014 GDP growth rate of 4.5 per cent which is supported by Abu Dhabi’s buoyant oil and gas industry and its significant infrastructure and industrial investment, spurred on by a rebounding Dubai economy, further enhanced by the recent Expo 2020 win. Equity Capital Markets In June 2013, the UAE’s classification was upgraded from a frontier market to an emerging market, as a result, in May 2014, the three UAE indices, namely, the Abu Dhabi Securities Exchange (ADX), the Dubai Financial Market (DFM) and Nasdaq Dubai, are expected to be incorporated into the MSCI’s emerging markets index. Commentators have

54 April-May 2014

opined that this will attract over US$270 million into the stock exchanges. The UAE stock exchange performance in the past year is notable, with the ADX ending 2013 with a total of almost US$23 billion in share exchange value, posting a significant volume growth of 282 per cent compared with 2012. Socio-political turmoil in the wider region is driving trading volumes with investors seeking a safe haven. This is positively affecting real estate and stock values in the UAE. Moreover, the index opened at 2,631 in 2013, and closed 63 per cent higher at 4,290. In 2013, the DFM was the second best performing exchange globally and in January 2014 it achieved a new five-year high to 3,819 points recovering back to the January 2008 peak.

Initial Public Offerings A strong pipeline of issuers looking to launch IPOs regionally is expected in the next 18 months; Grant Thornton (GT) provides IPO

Capital Markets

The UAE's stock market regulator, the Securities and Commodities Authority, continues to improve and implement higher standards of regulation since its inception in 2002.

4.5% IMFâ&#x20AC;&#x2122;s GDP growth rate of UAE for the year 2014

readiness assessments and acts as a sponsor to companies seeking to list, and GT expects to see several UAE local family groups evaluating listing opportunities in the effort to seek capital injections and to raise their profile regionally. A well-known Abu Dhabi bank expects six companies to go public in 2014 which is estimated to raise US$2 billion. In 2013, the only sizable local IPO was Damac Properties, however its management opted to list on the London Stock Exchange being valued at US$2.65 billion post offering. The last significant IPO which was valued over US$1 billion, which was 15 times oversubscribed, was the port operator DP World Ltd, raising US$4.96 billion in November 2007. After a seven year retreat, it is widely anticipated that there will be a return to this kind of IPO activity. Bourse Consolidation The UAE's stock market regulator, the Securities and Commodities Authority continues to improve and implement higher standards of regulation since its inception in 2002, whilst ensuring investor confidence but also acting not to hinder capital market activity locally. According to Bloomberg, Abu Dhabi and Dubai have completed due diligence on a potential merger of the ADX and DFM, which will ensure a more efficient and national approach to the global investor community.

Simi Nehra is the Corporate Finance Partner at Grant Thornton UAE.

He has over 15 years of experience in financial advisory services, including expertise in corporate finance, due diligence, business valuations, M&A and debt advisory. Simi has led several advisory mandates in the Middle East and North Africa region spanning a variety of industries. He has also provided transaction support to high profile IPOs on the UAE financial markets and advisory services to UAE government entities. Simi is a Chartered Accountant (ACA) and a Corporate Finance (CF) designate from the Institute of Chartered Accountants England and Wales, and holds a BA from the Manchester School of Accounting and Finance. Simi practiced alongside leading professionals in London before relocating to the UAE.

Also, there is motivation from the UAE listed companies to lift foreign ownership limits on their shares. Under the UAE rules, investors from outside the UAE or GCC are permitted to buy up to 49 per cent of their shares. In order to attract further equity from the international investment community including large financial institutions, there is a calling to lift the limit of foreign ownership on UAE shares. The trend to increase limits is noticeable, for example, in Q4 2013, were two major UAE listed banks and a listed real estate developer who have approved increased foreign ownership limits from lower levels to 20-25 per cent of their share capital.

Debt Capital Markets New bond rules are expected to give further stimulus to the UAE debt securities in 2014. According to IFR, a Thomson Reuters unit, bond issuance from the region is expected to flourish due to significant infrastructure investment and refinancing. The UAE, which has the largest portfolio of outstanding debt securities in the GCC, has issued new rules for the issuance and trading of covered bonds (bonds which have a preferential claim on the assets in the event of a default). This is a welcomed initiative for the development of the UAEâ&#x20AC;&#x2122;s debt market, and will allow for a new source of funding for commercial banks.

Islamic Financial Markets In line with the initiative of His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Dubai is leading the way to become a global hub for Islamic finance with the aim to drive Islamic banking and Islamic capital market activity in the UAE and wider region. So far in 2014, Emaar Properties has dual listed a US$500 million sukuk, issued in 2011 on Nasdaq Dubai, providing further momentum to the Dubaiâ&#x20AC;&#x2122;s resolve to become a global sukuk centre. Furthermore, UAE based GEMS Education celebrated the listing of a US$200 million sukuk on Nasdaq Dubai. The next two years are set to be a defining period for UAE capital markets, with expectations of increased regional and international investment into the UAE; growth in both debt and equity security valuations; increased trading volumes and a return to a more frequent and successful IPO listings period. Undoubtedly investors are now more confident to deploy cash on the side lines into the UAE markets with expectations of robust medium and long term returns. 55

Corporate Treasury

PERFECT PLANNING

In the first of a two-part cash forecasting series, Sarah Boyce discusses the aims of long-term cash forecasts and how to create them.

H I L E S H O R T-T E R M c a s h forecasts generally focus on cash management issues, longer-term forecasts (covering periods beyond one year) are designed to address liquidity risk (that is, the risk that the organisation has insufficient funds to continue as a going concern). The key objectives of a long-term cash flow forecast are to: Identify trends and overall cash generation, or consumption, arising from the businessâ&#x20AC;&#x2122;s current strategic objectives; 56 April-May 2014

Identify the impact of changes to the business plan or changes in economic conditions on the liquidity position (scenario analysis); and

Model the impact of transformational events such as acquisitions, divestments or major investment plans. Once created, a long-term cash flow forecast can be used to:

Identify any conflicts between spending ambitions and resources (for example, identify whether a major acquisition can be afforded without increasing gearing);

Corporate Treasury

Develop a financial strategy to include the points below and so provide the basis for planning access to funding and investment markets: • Levels of gearing • Mix of fixed and floating debt • Amount of committed headroom • Monitoring/targeting/maintaining a credit rating • Dividend policy; and

Enable the organisation to clearly and consistently communicate its longer-term financing strategy to the wider community. The forecast will be used by: 1) Lenders – to ensure that sufficient cash is generated to enable the company to make loan and interest payments on long-term debt without jeopardising other activities of the business; 2) Equity investors – to assess future returns on their investment and to make investment decisions;

3) Rating agencies – to populate their internal models and identify an appropriate rating for the organisation;

4) Advisers – as backup for a going concern disclosure or as part of the materials that are required for a significant corporate transaction (for example, a listing); and

5) Private equity – to plan the whole life of their involvement, including an exit strategy and equity pricing. How a forecast is generated In many Western economies, a company may estimate cash flows over a five-year period. But a company may forecast up to 15 years or more for infrastructure finance projects or in countries such as Japan where financial markets are traditionally noticeably less ‘short-term’ in nature. Almost all companies base longer-term forecasts on projected financial statements, known as the pro forma statement method, rather than on forecasts of cash receipts and payments. The main reasons for this are: Beyond about three months, receipts and payments forecasts become increasingly inaccurate; and

Preparing the forecast from projected accounting data makes it easier to ensure that the cash flow forecast is consistent with the accounting forecast.

It is important that the treasury team has a strong working relationship with the finance team and local management as well as being fully aware of the strategic thinking of the board when developing long-term plans. This is particularly important when identifying longterm targets as part of a financial strategy or for management communicating externally as figures need to be consistent and readily accessible. There are a variety of ways to generate accountsbased cash flow statements, but one of the most straightforward, and therefore most widely used, is an approach derived from the corporate budgeting and planning system that uses an opening ‘actual’ balance sheet together with a forecast income statement to generate a forecast closing balance sheet and forecast cash flow statement. Steps in the process: 1) Source an opening balance sheet based on actual data.

2) A sales forecast is generated and the income statement and balance sheet items that appear to be a constant percentage of sales are identified. Where better-quality or specific information is available, this is substituted for the ratio. 3) Projected income statement, closing balance sheet and cash flow statement are created.

4) Steps 2 and 3 will be repeated for each period (for example, each year) until the forecast has rolled as far forward as required. Inevitably, the ‘assets’ will not equal the ‘liabilities and equity’ in the forecast closing balance sheet and so ‘cash’ is used as the balancing figure. If the assets are less than the liabilities, the company is forecasting a cash surplus. If the total assets are greater than the total liabilities, the company is forecasting a cash deficit that will need to be financed. The forecast should be regularly updated to reflect the latest information while staying aligned to the statements produced by the finance department. Most organisations will use this process to generate a range of forecasts (as a minimum ‘plan’

Corporate Treasury

Almost all companies base longer-term forecasts on projected financial statements, known as the pro forma statement method, rather than on forecasts of cash receipts and payments. plus a downside case), based on a range of scenarios. Stress testing, where a company will flex the forecast to see how far from forecast it can move before the plan fails (for example, sales fall by 5% resulting in an inability to service debt), is also frequently adopted. Financial analysis that can be driven from a cash flow forecast derived from prospective financial statements can include: Ratio analysis, including credit ratios such as interest cover and gearing; Potential credit ratings (inferred from the ratios and underlying business risk); and Headroom available (both committed and uncommitted headroom); that is, the amount of fully available cash plus undrawn borrowing facilities.

Conclusion Long-term forecasts are created to measure the impact on liquidity, capital structure and credit ratings of both ‘business-as-usual’ and/or

58 April-May 2014

transformational activity and enable the organisation to identify the size, source (debt or equity) and tenor of any associated funding requirement. It is important that the treasury team has a strong working relationship with the finance team and local management as well as being fully aware of the strategic thinking of the board when developing long-term plans since, by creating and maintaining a robust long-term cash flow forecast, the organisation can opportunistically access the lending markets and save on finance costs over the long term. The ability to source finance at the ‘right price’ for a project may influence the decision to undertake that project. Coordination across the organisation to create a realistic forecast is key since the firm may have to live with the consequences of any decision for decades. This means that the finance version of the forecast may need to be adjusted to show a more prudent picture of predicted future cash flows (sales forecasts are invariably highly optimistic) to ensure that any decisions taken are appropriate. It is important that the cash forecast used by treasury can be reconciled to the forecasts used by the rest of the organisation to ensure that the board is making decisions on one consistent set of numbers. So any adjustment should be shown separately rather than by changing the base figures. Coordination across the organisation to create a realistic forecast is key since the firm may have to live with the consequences of any decision for decades. ( Sarah Boyce is Associate Director of education at the ACT )

CORPORATE GOVERNANCE

60 April-May 2014

CORPORATE GOVERNANCE

ACCOUNTING CORPORATE GOVERNANCE LAWS What does the corporate governance code mean to the gate keeper role of the accountant? Associate Editor Zenifer Khaleel provides valuable insights.

orporate governance is the underlying set of principles by which good business practices are conducted in any country. The hallmark of good corporate governance is the balance of entrepreneurship, control and transparency, while supporting a company in the efficient decision making processes. Solid guidelines are a mandatory requirement in todayâ&#x20AC;&#x2122;s world for every stakeholder group. The need for this dictum is further emphasized by the drastic collapse of giant corporate entities around the world, in the last few decades. Interestingly, lack of adherence to principles and transparency in the accounting discipline is held responsible for the failure of these empires. Corporate governance essentially involves balancing the interests of the many stakeholders in a company - its shareholders, management, customers, suppliers, financiers, government and the community. It provides the framework for attaining a companyâ&#x20AC;&#x2122;s objectives and encompasses practically every sphere of management, from action plans and internal controls to performance

measurement and corporate disclosure. The role of the accounts department, in this scenario, is to maintain proper balance between the components of the system and ensure that the audit and accounting tools are in accordance to proper governance roles. The prime focus of accounting should be that the pillars of good governance procedures are well in place. Practice of proper accounting standards is more relevant issue in the current complex business scenario. Standard guidelines provide a useful mechanism to restructure the core values. Corporate governance in the UAE The laws in the UAE follow international standards for corporate governance quite closely, Prominent among them are rules such as the requirement to have independent directors, the formation of sub-committees to the Board of Directors (for audit/nomination/remuneration) and the need to appoint a compliance officer. It is paramount for listed companies to have these rules in place not just to comply with UAE law but also to ensure best practices for their shareholders. Most corporate governance ideals in the UAE, 61

CORPORATE GOVERNANCE

Corporate governance is the underlying set of principles by which good business practices are conducted in any country.

Nadim Bardawil, Associate of Bin Shabib & Associates

involve companies listed on the stock exchange, especially in light of the two most recent laws, viz, Ministerial Resolution No. 518 of 2009 concerning Governance Rules and Corporate Discipline Standards and its amendments through Ministerial Resolution No. 84 of 2010. The efficiency and transparency of accounting systems are enhanced in the ES&CMA regulations outline. (ES&CMA decision No. 3 of 2000 concerning regulations as to disclosure and transparency). With respect to listing conditions (Decision No. 3 of 2000), the ES&CMA requires corporations to fully disclose with appropriate l eve l o f t ra n s p a re n c y c e r t a i n c o r p o ra te governance-related information. The ES&CM, Article 36, explicitly requires the preparation of the UAE corporations’ annual reports in accordance with the IFRS in both Arabic and English. Such reports should include board of directors’ report, audit report, balance 62 April-May 2014

sheet, income statement, cash flow statement, changes in equity statement, and the notes to the financial statements. The ES&CMA also requests the publication of these reports within 90 days from the end of the financial year. Given the recent government initiatives in the UAE to develop anti-bribery and corruption legislation, and the proposed changes in foreign company ownership, the UAE has embarked on the noble mission to rectify and improve company stature and the country’s reputation on an internal and external level Due to the economic downturn and certain incidence of scandals, trust in banks has been completely lost mainly due to lack of accountability. The law stipulates that accounts have to deliver a ‘true and fair view’ of the company’s performance. But these terms are not clearly chalked out by legislation, or by the accounting discipline. Hence, it is subject to considerable uncertainty and is the most variable and judgmental aspect of auditors’ responsibilities. The basic guidelines of the corporate code advocate that accountability is largely a matter of disclosure and transparency. It entails an explanation a company’s activities to those to whom you owe responsibilities. Corporate managers are inclined to provide voluntary disclosures in order to make financial statements users aware of their managerial ability and avoid misevaluation of their actions and performance. It also helps corporations to avoid litigation costs. Accordingly, corporate managers use corporate governance reporting to give vital information and gain stakeholders’ confidence. The gatekeepers of accounting are under constant pressure to improve the system by providing timely and useful information - both to the sophisticated experts and to ordinary investors. They are challenged to meet the demands placed on the system by the constant advancements in communications, information and the globalisation of the financial markets. Accountability is a very important pillar of corporate governance as it increases the confidence of stake holders through faithfulness in reporting. The strength and accuracy of the reporting is also ascertained by various standards and regulations. The requirement of the disclosure standard is only to disclose the material facts. In the absence of concrete guidelines, ‘what is the relevant’ is a criteria decided by the organisation which could be limited to personal judgment. Nadim Bardawil, Associate of Bin Shabib &

Associates highlights the role of an accountant in a firm which impeccably follows corporate governance code “An important part of corporate governance is maintaining proper accounting procedures and making sure that a company’s financials are properly recorded,” he explains. “A company’s constitution documents should include a standard of accounting procedures as well as a requirement of external audits on the accounting function. The accountant’s role is one which requires detailed knowledge of a company’s corporate governance standards as well as knowledge of corporate legal requirements. Issues may arise in this regard when an accountant is privy to certain information which should be disclosed to a regulator. We have seen situations where an accountant has failed to make such a disclosure and a company has been penalized by the regulator for not abiding by certain laws. As outlined above, it is vital that accountants have adequate knowledge of regulatory requirements and are trained to handle disclosure situations.” Good corporate governance ensures better corporate performance and an enhanced relationship with stakeholders. At the micro level, the proper practice of accounting standards

Good corporate governance ensures better corporate performance and an enhanced relationship with stakeholders. assumes effective disclosure leads to shareholders’ wealth maximization. While at the macro level, they are essential to the efficient functioning of the economy because decisions about the allocation of resources/investment rely on credible, concise, transparent, comparable and understandable financial information. In today’s dynamic economy, investors have become increasingly interested in the fair value of a company’s assets and liabilities, as well as historical cost information provided in financial statements. Accurate reporting aids the investors with the information to make proper investment decisions. It acts as a benchmark which is essential in maintaining the sanctity and integrity of market value. Undoubtedly, accounting under the guidelines of corporate governance will ensure that the company’s ethic code, managerial ability and profitability are on a rise. 63

FINANCIAL INSIGHT

Bit by bit:

Bitcoins may revolutioniSe the currency scene of the country…if you wait a ‘bit’ The Bitcoin is a high-liquidity, virtual currency that has been specifically developed to enable exceptional transparency of dealings and fully encrypted transfer and exchange. Yet it’s currently provoking a good deal of controversy and a hugely mixed reception. Associate Editor Zenifer Khaleel investigates…

64 April-May 2014

FINANCIAL INSIGHT

ritish philosopher and economist, John Stuart Mill stated that “Money is a machine for doing quickly and commodiously what would be done, though less quickly and commodiously, without it”. In a bid to ease f inancial t ransac t ions worldwide, the Bitcoin was introduced in 2009 by Satoshi Nakamoto. This digital, decentralised currency relies on peer-to-peer networking and cryptography to maintain its integrity. It can be purchased in exchange for real money from online traders. Its proponents argue that Bitcoin has many properties that could make it an ideal currency for mainstream consumers and merchants. It has high liquidity which in turn leads to low transaction costs and quick payments across the internet. The USP of the Bitcoin is that is a cheaper alternative for money transfer as compared to conventional money exchange concepts. Retailers are charged up to three per cent for Bitcoin exchange while money transferors can levy fees as high as nine per cent. Another distinguishing feature is the ease of transactions. You can send Bitcoin from your computer, tablet, smart phone (or any other device) to any part of the world, be it day or night. Bitcoin is based on technology that, by its very nature, is designed to surpass the geographic reach of banks and customers. On the flipside, the speed and anonymity with which transactions can be done could make Bitcoin more susceptible to nefarious activities. It can also increase the occurrence of system crashes leading to defective transactions. The concept still has to catch on in the Gulf region and the UAE in particular. The majority of remitters here are from India, Pakistan and Bangladesh - typically ‘blue collar’ remitters who prefer to send money physically at exchange houses rather than online. This is because they are not adept with the technology of online transactions and the cryptography concept involved. Almer Agmyren, Managing Director of Rex Real Estate and an MSc graduate in Economics, feels that the Bitcoin will find a foothold in the region only when the right ‘critical mass’ has been attained. “The expression ‘critical mass’ pertains to the amount of users of the system that makes other potential users feel secure about the Bitcoin currency and thereby begin to use it," he explains. “My informed guess is that this will happen quite soon. The main advantages of the Bitcoin

Almer Agmyren, Managing Director of Rex Real Estate

are lesser costs and the speed with which transactions can be conducted. As internet is omnipresent and the technological knowhow is advancing by the day in this region, it won’t be long before it becomes a normal and accepted medium of transaction,” he adds. On the contrary, K.V Shamsudheen, Director of Barjeel Geojit Securities LLC is of the opinion that this digital currency revolution will take some time coming: “The Bitcoin will create an impact only when it has support of a regulatory authority at the central level. As of now, no central bank is ready to regulate digital currency. Present fluctuation of the Bitcoin is up to 25 per cent. This poses a big risk to wide acceptance. So it will take long time for the concept to be accepted in this part of the world.”

Accounting for the bit With no banks, cash or cards involved, managing Bitcoin transactions is a personal affair. The t ransac t ions are va lidated t hrough f ully

With no banks, cash or cards involved, managing Bitcoin transactions is a personal affair. The transactions are validated through fully transparent accounting ledger software and secured by rigorous computational work by network peers.

FINANCIAL INSIGHT

process. Invariably, companies aren’t going to have the technology to create their own coin. They also can’t do their own mining, since this removes the operational credibility. Additionally, this method also leaks information that the company might not want to share. Finally there’s the sheer complexity of it all. Qualified accountants who are well abreast with the concept of cryptography and digital currency have to be employed for the process.

K.V Shamsudheen, Director of Barjeel Geojit Securities LLC

transparent accounting ledger software and secured by rigorous computational work by network peers. This means you have complete control over your own Bitcoins without having to undergo transaction processes or incur fees for different services. Likewise, the supply and distribution rate of Bitcoins is predetermined and limited. It is nearly impossible to print fake Bitcoins and place them in circulation as it has a unique encryption code for each user. Bitcoin is also a fully transparent and yet anonymous payment system. Every single transaction from the beginning is publicly available for viewing, with balances of each account. However, you don't need to associate your name with your Bitcoins the way you do with a bank account or credit card. Now we come to the integral premise: How will the accounting department record this digital ‘avatar’? Ideally, the company’s accounting department would create an internal company coin. This coin would be convertible to Bitcoin or whichever Crypto currency is prevalent, but would only be used internally. They would then distribute this coin according to the annual budget. Once the books are closed for the fiscal year, all coins would have to be converted to Bitcoin to mark to market for the last time, and that coin would be closed. Then the cycle begins again. This method guarantees internal transaction integrity, transparency and accountability. It also leads to less transaction errors, real time financials and a drastically cheaper method of accounting. On the other hand, there are risk s and complications associated with this accounting 66 April-May 2014

A ‘bit’ of redemption The biggest dent in the rise of the Bitcoin is the lack of a regulating authority or a governing body to control its operations. Recent scandals and few disruptions in exchange process are the other obstacles in its popularity. Under current circumstances, the heavy fluctuation and unstable condition visible now, poses a difficult situation to maintain accounts on digital currency. In its recent guidelines, the IRS has compared the Bitcoin to stock, bond, or piece of real estate whose value fluctuates over time and implied that it should therefore be subject to a capital gains tax when sold. Fortunately, volatility does not affect the main benefits of Bitcoin as a payment system to transfer money from point A to point B. It is possible for businesses to convert Bitcoin payments to their local currency instantly, allowing them to profit from the advantages of Bitcoin without being subjected to price fluctuations. With such solutions and incentives, it is possible that Bitcoin will mature and develop to a degree where price volatility will become limited. Bit c oi n i s a qu ic k a nd se c u r e w ay of exchanging value between two parties which could survive long into the future. It is secure by itself, but it is currently unregulated - and thus worrying to the investor. The service a Bitcoin provides in terms of ease of transaction and accountability is far greater than the problems surrounding it. As virtual cash, it is a useful and secure system and hopefully in the future it can garner the attention of financial institutions and governments to make it more reliable and safe for every user. Dem a nd d ic t at e s w h ic h t e c h nolog ic a l innovations succeed and which fail, and this is certainly the case for the Bitcoin currency. There would have to be a secure and stable payment system in place with the Central Bank to enable the Bitcoin system to prevail in the country. As we are witnessing a generation which thrives on every amenity in the digital form, it wouldn’t be long before the Bitcoin becomes part of our daily monetary transaction norms.

SUBSCRIBE NOW TO THE REGION'S FIRST MIDDLE EASTERN FOCUSED ACCOUNTANCY MAGAZINE. Complimentary subscription for any accountants currently working or studying in the UAE. Every month we will bring you the latest news, expert opinion, interviews with regional influencers and policy makers, as well as CPD advice, job opportunities and moves. Accountant ME will also feature regular articles and reports on auditing, legislation, management advisory services, ethics, professional development and practice management.

To subscribe visit

accountancyme.com/subscribe Contact us today for more information about this brand new title. SALES Christopher Stevenson Tel 04 440 9138 Email chris@cpidubai.com

EDITORIAL Joyce Njeri Tel 04 440 9140 Email joyce@cpidubai.com

Human Resources

68 April-May 2014

Human Resources

FROM TRAINEE TO WHIZ KID? TIPS FOR TAPPING INTO FINANCIAL TALENT Increasingly, the role of the senior finance professional is changing, with more and more responsibility for company direction - and the job of CFO often seen as an ideal training ground for the potential CEO. Whatâ&#x20AC;&#x2122;s more, increasingly challenging legislation requires stringent financial management that only the top certified practitioners are likely to deliver. Yet how to attract, train and grow the best financial talent? How to create the assessment matrices that ensure the right people get to the top? Associate Editor Zenifer Khaleel assesses the climate of change in the finance department.

he primary aim of any organisation, irrespective of its operational capacity, is to say it big with numbers in the profit sheet. Since the economic downturn gripped the world in 2008, finance professionals are under added pressure to create and sustain long-term value for the organisations they work in. But ultimately, this goal is dependent on the way that the organisation taps into the hidden talent of the personnel within their finance department. Any organisation which hopes to capitalise on its financial manpower should create an integrated talent management framework targeted at development opportunities for both the organisation and the employee at a personal level. It should link recruitment and development structures with competency frameworks, performance appraisals and reward systems; thereby creating clear standards and reference points so that a culture of high performance can be developed. Pressure is a comprehensive and versatile element in the functioning of the finance department and there is no escaping it. There is the need to minimise operational costs, to generate maximum value in a period of slow economic 69

Human Resources

important element as any mismanagement in cash flow has a direct impact on business.” says Alwyn Crasta, CFO of Al Dahra Agricutural Company based in Abu Dhabi. “People power emphasizes that the workforce is empowered to manage the future of business. Companies should ensure that their workforce believes in its operational values and are motivated to create new ideas and values.” he adds In order to empower the finance personnel, a few factors should be taken onto consideration:

Shaveta Duggal, Lecturer Business & Finance

Pressure is a comprehensive and versatile element in the functioning of the finance department and there is no escaping it. growth, to take opportunities that arise as conditions improve, to respond to new regulatory and tax pressures around the world and many more. The talent scenario in finance is being increasingly affected by broader changes across the workforce, changing demographics, the globalisation of business operations and the development of more complex entity structures. In lieu with increasing performance expectations, finance leadership must rethink its talent aggressively; while comprehensively reexamining its models, capabilities and business relationship in order to help the organisation create value and growth. Maximising on people power How does a CFO or finance manager constantly adapt to these changing equations of pressure and improve finance effectiveness? “The finance function gained more focus due to various scandals in renowned companies like Enron and WorldCom. Since then the operational strategy has been reformatted to control accounting and correct reporting. Cash flow management is another 70 April-May 2014

Authority: To accomplish a particular objective or target, the finance manager should be given sufficient authority to plan, delegate, improvise and even change operational strategies. If he has no authority to take necessary steps to complete the job, he will not feel confident enough to lead to the task to success. Risk Ability: Since finance is a very unstable entity, it is normal that some decisions will go right while others turn wrong. Finance personnel should be judged according to their aptitude and given the freedom to take calculative risk. Competence: Finance teams need to reduce complexity in order to manage potential risks and implications. They should have deeper business knowledge and recognise potential weaknesses.

Performance and reward: Bonus structures should encourage finance teams to plan ahead. Compensation packages should be geared to process improvement and the sustainable delivery of goals. Data management: Raw data should be processed into a valuable source of information and insight

Training and career development: Structured training and career development not only help ensure finance teams have the right capabilities, but also enhance recruitment and retention. Technologies: Organisations should continually upgrade their systems with the best technology and features to deliver solutions that will transform the business. The ultimate financial ‘whiz kid’ Like any other field, finance personnel should have occupational, industry and technology skills to be proﬁcient in the workplace. Shaveta Duggal, a lecturer for Business & Finance at the Abu Dhabi

Human Resources

To accomplish a particular objective or target, the finance manager should be given sufficient authority to plan, delegate, improvise and even change operational strategies.

Shared services to improve efficiency Outsourced or offshored services to reduce costs Like minded finance business partners (FBPs) to provide analysis and support to the organisation.

Alwyn Crasta, CFO of Al Dahra Agricutural Company

Vocational Education and training institute, gives a brief description of the ideal characteristics of the finance employee: “A methodical approach to your work, involving logical thinking and attention to detail is expected all the time. In addition to that, you have to be a number cruncher. The ability to understand, manipulate and make use of numerical and statistical data is very crucial. An insight into business procedures, the nature and functioning of organisations, and the commercial world at large is very essential. Being surrounded by numerical information, (finance employees) should have sharp analytical abilities and the acumen to critically examine information before accepting it. “Additional traits should be social and interpersonal skills, communication skills, responsibility, leadership, teamwork, time management etc. Aptitude for accounting/finance management can be summarised thus: they should have a good head for numbers, a driving interest in business and a keen eye for detail not undermining the importance of workplace literacy and numeracy, information technologies, self-management, problem-solving and decision-making, oral and visual communication, relationship management and life skills at the same time.” To attain a perfect finance system, companies should incorporate a preferred model which has the following elements: Centres of excellence bringing together specialists in disciplines such as tax or risk,

The qualitative approach Cost control is the most imperative yet tasking aspect of any business. However, it is difficult to take a quantitative approach to manage employee relationship and talent when the results you seek are purely qualitative. A company could devise a few measures to integrate a range of qualitative measures to improve the potential and competency of finance. Surveys can be conducted of stakeholder satisfaction in relation to the quality of FBP support provided. Similarly, employee surveys can provide insights of how people feel about the learning and development, the clarity of their career paths and general level of engagement in company activities. Regular training in the various aspects of the company is also important as the finance manager can decide on the true capability of the employee and which rung of the finance ladder he is most suited. As businesses are becoming increasingly globalised, there is the need to capitalise on the potential of the local talent pool and convert it into international standards and output. Finance managers should be on constant vigil to source the right person from the local talent scene and make them adapt to the company’s international policy. This provides a beneficial situation for both the employee and the company. The company does not have to hire people on an international payroll, thus reducing costs significantly. Local employees know the culture of the country and do not need to adapt; moreover they get the opportunity to work in a multinational company thereby boosting their morale and technical knowhow As we cater to a very complex and demanding corporate world, the real competency edge and profit boost for any company lies in having the right service delivered from the right location by the right skill set. 71

Social responsibility

CSR: A CASE OF MEASURING THE IMMEASURABLE? Taking up the cause of Corporate Social Responsibility is increasingly seen as a powerful way of building brand equity and ‘giving back’. But can we equate reputational value with figures on the balance sheet? Are we pursuing a ‘fire and ice’ equation for which there is - at best a marginal financial return? Do we fully understand the complexities that a CSR programme can impose on the business? Associate Editor Zenifer Khaleel evaluates. 72 April-May 2014

Social responsibility

with enormous ramifications especially for larger corporates. Without doubt, the companies that can integrate sustainability effectively in their operations will be the most successful in attaining shareholder attention and interest. Climate change, alternate energy solutions, economic development, education, healthcare, human rights, protecting ecosystems, etc are the enormous challenges faced by the world today. Businesses that are the most innovative in finding solutions to these global problems will eventually turn out to be the most profitable too.

CSR and financial performance The relationship between CSR and financial performance has also gained prominence by the substantial rise of CSR practices in the GCC region. Companies engage in CSR because they think it will be good for their profit margins. The challenge, however, is to develop an approach that can deliver substantial results both for the company’s image and in the balance sheet.

orporate Social Responsibility may be a relatively new concept in the UAE but it has been growing at an enviable rate. Companies are beginning to understand the viability of CSR as not only a means of accomplishing goodwill and brand value, but also as a measureable and concrete way to enhance shareholder engagement. Today, CSR is considered to be vital for the functioning of any major company and is becoming an essential element of their value proposition. Over the years, CSR has emerged from a simple act of patronage to a complex set of principles that signifies nearly every interaction a company has with society. It has garnered the power to dictate how companies can make profits and what to do with those profits. It goes beyond philanthropy and addresses how companies manage their economic, social, and environmental impacts, as well as their relationships in all key spheres: the workplace, the marketplace, the supply chain, the community and the public image. Most importantly, it has also embraced the ‘sustainability’ agenda -

A few trends observed by companies involving in CSR are Corporations are trading not on products or services but on their reputations, brand value, ‘goodwill’, and ‘intellectual capital’. These are termed ‘intangibles’ and have an actual numerical value on the company balance sheet. Having a CSR activity means the company is a ‘safe bet’ for investors as they are compliant and conscious of governing laws and regulations. Many investors consider ‘socially responsible’ companies to be more secure investments. Companies will go to great lengths to appear socially responsible so that the morale of employees are boosted. A company can position itself as the market leader in its field, by taking up CSR as a strategic business policy. Ultimately, CSR can save money. Some environmental measures such as minimising waste

Over the years, CSR has emerged from a simple act of patronage to a complex set of principles that signifies nearly every interaction a company has with society.

Social responsibility

The companies that can integrate sustainability effectively in their operations will be the most successful in attaining shareholder attention and interest. or saving energy can also reduce operational costs. These measures are often prioritised by companies as part of their operational policy. A healthy and ongoing CSR activity can have more impact than a heftily priced advertising campaign.

ENOC Group - a champion of CSR in the country Emirates National Oil Company (ENOC) is a pioneer establishment in the UAE which aims to promote year-round CSR activities of varying levels. In 2013, they conducted 29 key campaigns touching all aspects of life; like

Hosting international students on knowledge sharing Visiting environmental conservation activities as part of Earth Hour Promoting women’s empowerment by organising International Women’s Day Supporting the IPC 2014 Power Lifting World Championship organised by the Dubai Club for the Disabled, among others This April, they were accorded with the CSR Label Award presented by the Dubai Chamber of Commerce & Industry for excellence in undertaking initiatives that make a difference to the community and the world. Noaman Al Saleh, CSR & PR Manager of ENOC states that “CSR is the core responsibility of ENOC to the society and environment to pursue its corporate value enhancement through innovation and sustainability. It holds a holistic return financially and morally. There is a set budget for CSR activities and campaigns. Those are all imbedded within the budgeted sheet which entails other activities too. It may take a little more effort to plan and incorporate CSR activites on an ongoing basis. But ENOC strongly believes that all that ‘profit’ is not necessarily meant only for the balance sheet”. Most recently, ENOC has rolled out “Human Fuel”, its most ambitious CSR campaign, by partnering with United Nations World Food Programme (WFP) and Dubai Charity Association to raise funds to support the activities of the two organisations to address global hunger.

74 April-May 2014

A few CSR guidelines Many companies start small with CSR as just a way to garner some publicity with activities that are quick and easy to implement. CSR strategies can be improvised and managed in a more professional and profitable approach. The greatest opportunities for CSR will arise from areas that your nature of business regularly interacts with. Concentrate your efforts on those key areas so that time and resources can be utilised more effectively. This way, the business can gain a deeper understanding of the mutual dependencies and attain the highest potential for the mutual benefit that exists. Organisations have to find the right partners who benefit from your core business activities and capabilities so that you can benefit from them in turn. Partnering is easier when there is a quotient of mutual advantage as there is greater motivation to realise the substantial benefits. Relationships - particularly long-term ones that are built on a realistic understanding of the true strengths on both sides - have a greater opportunity of being successful and sustainable. Notwithstanding, CSR activities do not have many tangible benefits or vivid outline policies. Companies that indulge in CSR as a feel-good or quick-fix exercise, run the risk of missing huge opportunities for both the business and society. A meticulously planned, step-by-step approach should be implemented by leaders, to reap the true benefits of CSR. It may cause drastic rearrangement and reallocation of company personnel and resources. It may also call for more demanding time schedule, a shift in mind-set, greater focus, added work pressure and long-term commitment. But the rewards are potentially much greater for all entities involved, viz organisation, employees and the society. The impact of business on society is directly proportional to the benefits accrued from the society and the mutual responsibilities that this entails. CSR is a very handy tool to increase trust in businesses, enhance customer choice of product or service and improve reputation with suppliers. Being socially active and aware also increases employability as the next generation of leaders will choose employers whose values match their own. Many companies have recognised that CSR has to be implemented on strong foundations within the company and as a commitment to the society. Around the world, traders who analyze their share value have understood that corporate social responsibility has inherent value for a company. While it may not be clearly quantified or accountable in exact currency figures, the general trend toward greater corporate engagement in social issues is one that will have long-term impacts on the company and the community at large.