#50 - June 2016

WWW.FINANCEMIDDLEEAST.NET ISSUE 50 I JUNE 2016

by 2020 we believe it is possible for driverless cars to be running on the highway.”

– Volker Bischoff, General Manager, Robert Bosch Middle East

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INSIDE

Doing it by herself Never too old to learn

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I hope you enjoy this issue!

Jessica Combes Read my blog at: http://www.cpifinancial.net/blog/author/112/jessica-combes Follow us on Twitter: @FinanceMidEast WWW.CPIFINANCIAL.NET

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LOG ON TO WWW.FINANCEMIDDLEEAST.NET FOR NEWS, POLLS, EVENTS, ANALYSIS, BLOGS, FEATURES, COMMENTARY AND MORE.

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his has been an exciting month for FinanceME as we kicked off our new interactive section of the magazine, ‘Behind the scenes’ where Mini Exchange CEO Sarah Jones welcomed us into her office and let us spend a good part of the day watching her run her business (Pg 46). We got to interview her as well as talk to her team, while we live Tweeted the day, which can be found on Twitter with the hashtag #FMEBTS. Please also take a look at our website for our video interview with her as well.

This month Volker Bischoff, General Manager of Robert Bosch Middle East is on our cover and we learned that the technology of the future is closer than we realised. Driverless cars, in line with Sheikh Mohammed Bin Rashid Al Maktoum, ruler of Dubai and Vice President of the UAE’s goal–to have 25 per cent of the vehicles on Dubai’s roads be driverless by 2030–is a reality.

Bischoff talks about the technology the company is developing to make this happen as soon as 2020 (Pg 18).

Our case study this month features Al Baleed Resort Salalah, the latest development by Anantara, Oman. James Hewitson, the General Manager of Anantara, Oman talks in great detail about the construction of the resort in the vicinity of a UNESCO World Heritage Site, employing a predominantly Omani workforce and developing a mutually beneficial relationship with local businessmen and suppliers (Pg 34).

In light of financial management and debt avoidance being ongoing concerns for SMEs, our feature on company credit cards has input from Noor Trade and financial advisory firm Acuna, where the question of whether or not to apply for a business credit card is addressed and how it can be properly managed so business owners can avoid running the risk of getting into debt, that they may not be able to repay (Pg 30).

Our Facetime piece takes an interesting look at further education for business owners. Universities traditionally offered full-time, classroom-only courses, but are expanding their curricula to include part-time, night time, and online courses to accommodate students already in the workforce.

David Thomas, Dean of the McDonough School of Business at Georgetown University discusses the potential benefits of further study as well as bringing a real-world context into business education (Pg 38).

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PUBLISHED BY

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NEWS ANALYSIS Suffering cybercrime

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FAST FACTS SME sector growing rapidly

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26

FEATURE Credit where it is due

30

FEATURE Calculating credit

5 TOP TIPS Keeping your company productive over Ramadan

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CASE STUDY Scenic Salalah

38

OPINION The future of SME finance is now

FACETIME Higher learning

40

FRANCHISE Welcoming Wendy’s to the wider region

Editors JESSICA COMBES jessica@cpifinancial.net Tel: +971 4 364 2024

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START-UP Tea time!

44

TECH FOCUS With the big guys

SARAH OWERMOHLE sarah@cpifinancial.net Tel: +971 4 375 2527

OPINION Prevent going broke

LEGAL FOCUS Safeguard your firm’s interests

16

CHALK TALK Basma Al Fahim

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EVENTS Prime oil price is at $58

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CEO CHAT Like a Bosch

48

BEHIND THE SCENES Sarah Jones

22

FEATURE The bye-bye benefits

50

LAST WORD Partnering art and law

Get the next issue of FinanceME before it is published.

Full details at www.financemiddleeast.net

MAY 2016 COMIC RELIEF AT YAS ISLAND

We expect by opening our other planned attractions and providing a year-round calendar of events, we should welcome 30 million visitors by 2018.

– Mohamed Al Zaabi, CEO, Miral Asset Management

COMIC RELIEF P18

APRIL 2016

at Yas Island

Peace of mind Packed with goodness

WWW.FINANCEMIDDLEEAST.NET APRIL 2016

In our part of the world where the cost of starting up and growing is so tremendous, [funding] really is a maker or breaker of businesses.

P44 MILLIONS FOR MUMZWORLD

– Mona Ataya, CEO, Mumzworld

millions for

+ INSIDE

In good taste Guilt-free ice cream

Cover Issue 48.indd 1

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Managing Editor GEORGINA ENZER georgina@cpifinancial.net Tel: +971 4 391 3728

WILLIAM MULLALLY william@cpifinancial.net Tel: +971 4 391 3718 NABILAH ANNUAR nabilah.annuar@ cpifinancial.net Tel: +971 4 391 3726 London Bureau ISLA MACFARLANE isla@cpifinancial.net Tel: +44 7857 429476 Contract Publishing Editor SARAH SPENDIFF sarah.spendiff@ cpifinancial.net Tel: +971 4 391 3729 Chief Designer BUENAVENTURA R. JALUAG, JR. jun@cpifinancial.net

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ADVERTISING sales@cpifinancial.net Sales Director OMER HUSSAIN omer@cpifinancial.net Tel: +971 4 391 5419 JON DESPRES jon@cpifinancial.net Tel: +971 4 433 5321 Business Development Managers NIKHIL NIDHAN nikhil@cpifinancial.net Tel: +971 4 391 3717 MOHAMED MAKSOUD mohamed@cpifinancial.net Tel: +971 4 391 5320 DANIEL BATEMAN daniel@cpifinancial.net Tel: +971 4 375 2526 NAPOLEON ESTAMPADOR napoleon@cpifinancial.net Tel: +971 4 391 4680 Head of Contract Publishing & Business Development VINOD THANGOOR vinod@cpifinancial.net Tel: +971 4 391 3725 Data Analyst NADINE ABOUZEID nadine@cpifinancial.net

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Chief Executive Officer ROBIN AMLÔT robin@cpifinancial.net Tel: +971 4 391 4681

Senior Designer FLORANTE MAGSAKAY florante@cpifinancial.net

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Chairman SALEH F. AL AKRABI

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NEWS ANALYSIS

Suffering cybercrime

The rise of the Middle East region as a hub for banking and finance, has made it a tempting target for cybercriminals, as the recent attacks on the banking sector would suggest

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orty-eight per cent of organisations do not have a senior management executive assigned to oversee cybersecurity, while 46 per cent said they do not have a boardlevel representative responsible for cybersecurity, according to a poll conducted of over 200 companies by cybersecurity firm, Dark Matter at the Gulf Information Security Expo & Conference (GISEC)in March 2016.

Symantec's Internet Security Threat Report (ISTR) revealed that the Internet Security Threat Profile across the UAE in 2015 had gone up in world ranking from 49 in 2014 to 41 in 2015 and that the UAE had emerged as the eighth most targeted country globally and the first in the Middle East and Africa for spear-phishing.

Sending spear-phishing emails to target employees remains the most common attack method used by criminals to compromise organisations, and typically they have malicious attachments, such as an innocuous-looking PDF or word document, according to Luke Brown, GM and VP EMEA, India and LATAM, Digital Guardian.

Spear-phishing has recently been used in a wave of cyberattacks against banks in the Middle East, according to a statement released by cybersecurity firm FireEye. The statement added that emails containing malicious, macro-enabled Excel files were sent to banking employees, with seemingly legitimate content, meaning those emails were forwarded to other employees.

One of the reasons why this is such a problem in the Middle East is the cumbersome nature of the legal process of the region, where the user is more or less liable for any misuse of electronic accounts, according to Nicolai Solling, Director of Technology Services at information security solutions provider, Help AG. “In Europe, a consumer is protected by the European Union (EU) legislation for consumer protection which means they can only be held liable for a small portion of damage in the case of data breach or theft,” he added.

Therefore, banks in the EU are focussed on minimising risks as they hold the liability, almost all of them have a proper two-factor authentication solution for users, said Solling. For an SME in the

GCC, if an attack is carried out against its banking partner, not only will resolution be a challenging process, but but the attack could impact cash flow and liquidity and affect the organisation’s ability to conduct business.

He added that it is worth noting that SMEs can be gateways for cybercriminals to target banks. In the UAE such an attack was carried out against RAKBANK, resulting in approximately $5 million in damages. The attack occurred when RAKBANK’s business partner in India, which printed all the bank’s credit cards, experienced a data breach where the credit card numbers and CVC codes were lost, allowing the cybercriminals to replicate the cards and deduct funds from the accounts.

“Organisations need to understand where their sensitive data is at all times, while having complete visibility and control over who is accessing it and where it is travelling. This will enable organisations to perform a proper risk assessment across their IT infrastructure, including their physical, virtual, and mobile environments,” said Brown.

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FAST SME SECTOR GROWING RAPIDLY Recent figures show a 115 per cent increase in the number of consumers searching for business loans between January and March this year, up from the same period in 2015, according to financial comparison site, Compareit4me.com.

The figures suggest that growth of the SME sector is continuing and more businesses are looking to banks for financing. The UAE Government recently put in place a bankruptcy policy to protect SMEs against prosecution, providing more stability for start-ups.

Compareit4me.com CEO Jon Richards said that the UAE has, for a long time, been a good place for entrepreneurs to launch their businesses, and now with slightly less risk to SMEs and banks adding to their portfolio of products to SMES, this continues to be the case.

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FACTS

TURN8 CONCLUDES ACCELERATOR PROGRAMME ADIB LAUNCHES APP FOR SMES Abu Dhabi Islamic Bank (ADIB) has launched a mobile app for its SME customers to provide them with convenience in a response to the increasing need for services to help them run their businesses more efficiently.

The app is designed to allow users to perform functions such as checking card balances, view transaction history, transfers, approve transaction, pay utility bills and manage their finances remotely.

Customers need to be smart when making financial decisions to meet the needs of their clients, and this app is designed to make banking convenient, and ADIB will continue to introduce new features to improve the serve, said Mahdi Kilani, Head of Business Banking at ADIB.

Accelerator TURN8 recently concluded its growth programme for new tech start-ups where graduating teams pitched for late seed or early series A funding from investors from the UAE and the wider GCC region.

There are plenty of opportunities in the GCC for new ideas. There is also no better time for corporate investors to look out for alternatives and to diversify by investing in entrepreneurial ventures to gain medium- to long-term returns, said Abdullah Al Dawood, Managing Director and CEO of Al Tayyar Travel Group, which invested in start-ups such as Careem and Wadi.

Editor-in-chief and CEO of Arab Publisher House, Khuloud Al Omian, added that relationship between investors and entrepreneurs is of mutual benefit as it produces mutual financial gains and is an investment in creativity and technology.

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LONDON BUSINESS SCHOOL HOSTS ENTREPRENEURS

BANK MUSCAT HOSTS SME WORKSHOPS Bank Muscat hosted two workshops on the basics of finance and cash flow management for SMEs in Muscat and Salalah, between the end of May and the beginning of June. The workshops were arranged as part of an initiative to improve avenues for SME development in Oman, and to help business owners evaluate how to make decisions based on cash flow management.

Topics included managing a business’s balance sheet, income statement and cash flow statement as well as understanding cash financial indicators and ratios.

Bank Muscat holds regular workshops to help strengthen the SME sector in the sultanate in line with the Government’s initiative to support the economic development of Oman, as well as offering a number of SME products and services.

Bank Muscat has also launched al Wathbah SME non-collateral finance, affirming the bank’s commitment to growing an entrepreneurial culture in Oman.

London Business School’s Dubai Centre hosted the Middle East Entrepreneurship Conference, an event designed to connect its alumni with entrepreneurs and start-ups from across the region. Participants met with experienced entrepreneurs, investors, and experts to discuss the entrepreneurial ecosystem in the Middle East.

Key speakers included Ambareeen Musa, Founder and CEO of online shopping platform Souqalmal.com and David Markah and Richard Toyne, Founders of design consultancy, Ochre Brand.

While entrepreneurship is still emerging in the Middle East, the quality and quantity is expanding rapidly compared with other regions, said Mariam Farage, Head of Business Development and Career Centre, London Business School, Dubai.

She added that the UAE has taken advantage of its geographical location as an entry point to the developing markets in Asia, Africa, and the rest of the Middle East, to become a key hub for trade and commerce. As a result, the opportunities the region presents make it ideal for entrepreneurs looking to start their own businesses.

FAST FACTS

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T CK FAC S ON SMES QUI

282,000 SMES IN THE UAE

90%

CONTRIBUTION TO UAE EMPLOYMENT

4%

BANK LENDING TO SMES

40%

CONTRIBUTION TO GDP

50-70% RATE OF LOAN REJECTIONS

Source: KPMG UAE Banking Perspectives 2016

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TOP TIPS

PLAN AHEAD

KEEP WITH THE SPIRIT OF RAMADAN

Ramadan is the month of giving, so take another look at your company’s corporate social responsibility (CSR) policy as Ramadan is not only a period of increased reflection for the Muslim faith but is also a time of giving. Taking a charitable role during this time will not only benefit the greater community but also improve staff morale by creating a sense of unity among all staff members.

With the average working day reduced to six hours, this can cause a bit of stress to achieve more in less time. Ensure that the tasks set for your staff are achievable. Also, plan ahead for how efficiency can be improved once office hours are back to normal.

BE FLEXIBLE

The day time can be stressful for employees who are fasting, as their energy levels drop towards the afternoon. This can result in reduced productivity. Have an honest discussion with your employees about their workload, and if they feel over whelmed, help them to prioritise their tasks. This may include putting a temporary solution in place, such as different shifts.

Keeping your company productive over Ramadan A number of contributors share their advice on how businesses can maintain productivity during the holy month of Ramadan

STEP BACK AND REVIEW The overall drop in activity during

Ramadan is a good time to observe the company as a bigger picture. Are there processes that need to be improved? Are there practices you have wanted test out? The summer lull may the best time to collaborate with your team and brainstorm any improvements that can be made.

TAKE INTO ACCOUNT A DROP IN WORKFORCE

If a percentage of staff takes a portion of their annual leave over Ramadan, you will need to plan accordingly. Ensure their absence has been relayed to their respective line managers to avoid any issues with miscommunication. Ask employees to draw up a list of tasks that need to be handed over and ensure they are properly distributed to the right people.

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OPINION

S

ecuring a bank loan is a long shot for MENA SMEs, which form a meagre eight per cent of MENA bank loan portfolios–a figure that dips to two per cent in the GCC. Compared with the global average of 18 per cent and the developed economy average of 22 per cent, it is clear that SMEs in the MENA region are underserved by the banking sector.

With low oil prices and the resultant economic downturn looming, banks are beginning to further reduce their exposure to the SME sector, making the prospect of a loan increasingly bleak.

So where does that leave regional entrepreneurs in need of cash to maintain, grow, or scale their operations?

Fortunately, the region is home to an increasingly vibrant financing ecosystem that includes venture capital, angel investors and, more recently, an emerging alternative finance sector that includes peer-to-peer/ marketplace lending and equity crowdfunding.

Equity crowdfunding offers potential to get growthoriented SMEs the capital they require to scale by

Sam Quawasami

The future of SME finance is now

Sam Quawasmi, Co-CEO and Co-Founder of equity crowdfunding service Eureeka, looks at how the platform provides an alternative to traditional financing solutions available to SMEs greatly expanding the pool of available investors to include venture capitalists, business angels, and casual retail investors.

It is worth noting that SMEs in need of a loan for operating capital should look to marketplace lending platforms rather than a bank.

These platforms enable individual investors to pool their money and issue a loan.

In the region, it is certainly a more accessible way of securing debt financing than that provided by institutional lenders.

For operational growthoriented businesses requiring

equity financing to scale, equity crowdfunding is an ideal fundraising vehicle for a number of reasons.

ACCESS TO CAPITAL Simply put, equity crowdfunding has brought the age-old equity finance process online, thereby making it more accessible, efficient, and transparent.

Equity crowdfunding platforms, in essence, act as marketplaces that connect entrepreneurs raising capital with investors in search of promising equity deals.

Because it significantly lowers the financial barriers

to entry for investors by enabling them to invest smaller amounts such as $1,000 or $2,500, as opposed to the $10,000 to $25,000 often required by many angel groups, the pool of potential investors is greatly expanded.

More investors, with varying risk appetites and investment interests, mean more available capital.

In addition to improving access to capital, equity crowdfunding platforms also offer a more efficient capitalraising process. By bringing the process online, entrepreneurs can interact with investors in a centralised space.

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It is worth noting that SMEs in need of a loan for operating capital should look to marketplace lending platforms rather than a bank.”

– Sam Quawasmi

For example, rather than having 50 meetings with 50 individual investors, an entrepreneur can have one meeting with 10,000. Since there are undoubtedly important benefits to in-person meetings in terms of relationship building, equity crowdfunding platforms will typically have investor relations teams that connect entrepreneurs with interested investors, creating additional, often offline touchpoints.

CUSTOMER BUY-INS When investors buy equity in a company they are immediately linked to its success. There is not an eight per cent return at the end of each month like with a loan; investors only profit if the business continues to grow and then offers an exit opportunity in the form of a liquidity event. Therefore investors, savvy ones at least, will do whatever possible to promote the brand so it succeeds.

Promotion can range from advocating that their contacts buy the product or use the service, to opening doors on a more strategic level such as connecting the business with better

priced suppliers or getting a licencing application pushed through a particular agency.

An exciting subcomponent of this is customer buy-ins.

Businesses can use an equity crowdfunding campaign to convert their existing customers into shareholders, cementing their loyalty to the brand.

Customers, who already know, use, and support the product, are an excellent source of investment that, prior to the emergence of equity crowdfunding, was difficult to tap into.

An emerging trend in the global equity crowdfunding space is the internationalisation of platforms; that is, platforms are expanding into new markets, which expands and diversifies their investor networks and the deal flow of businesses raising funds that they offer.

This expansion has significant implications for MENA-based SMEs as they can now raise capital and build customer bases in these markets and lay the foundation for future market expansion. The

exportation of MENA SMEs to non-MENA markets has been limited so far, but we expect this to change as the ecosystem continues to mature and the level of innovation increases. As this occurs, businesses will want to raise local capital from the markets they plan to enter, and a globalised equity crowdfunding platform can effectively facilitate this.

The same is possible for foreign businesses seeking to enter the MENA market.

For example, a UK-based business might have its sights set on Dubai and its large expat community, and will use a local equity crowdfunding platform to raise local capital.

One such example is Homes or Houses, a British company that specialises in the sourcing and renting of properties for expatriates and foreign buyers investing in UK property; which raised $611,000 in late 2015. Its investors were primarily based in the UAE, where a large percentage of the Homes or Houses client base resides. Included in this was a $200,000 investment from a local UAE institutional investment firm

that is helping the business open an administrative office in Dubai.

EXPOSURE Equity crowdfunding is quickly becoming a hot topic in the media, and individual campaigns are able to benefit from this by picking up media coverage. Equity crowdfunding platforms will often have in-house PR and communications specialists that assist entrepreneurs in generating media coverage, as it promotes not only the fundraising business but also the platform itself. Everyone benefits from the coverage.

Lastly, campaigns are by their very nature public endeavours and can generate free marketing exposure among users of the platform.

Raising capital is a difficult, time-consuming process.

Equity crowdfunding by no means makes it easy, but it certainly makes it less difficult and less time consuming than raising more traditional sources of capital. And as outlined above, there is a whole host of other benefits that can make an SME’s journey to unicorn status, where private companies are valued at $1 billion or more, a bit smoother.

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OPINION

Prevent going broke W

hen a company is growing at a rapid rate, the owner needs to ensure that they have sufficient sources of cash to fuel that growth, and many business owners underestimate how important it is to keep a very close eye on the cash flowing in and out of the business.

Most will look at the profit and loss statement and see that it shows a profit, but that does not mean that it has cash in the bank or sufficient funds to continue fueling the growth.

This is how businesses run out of cash and have to close. Cash is the oxygen of the business and without it the business dies.

In addition to this, when cash becomes tight, the first place owners will look is outwards towards those who have access to cash–friends, family, banks, investors, loans etc.

Instead of this, if the owner looked inwards to their own business they would find sources of cash that they did not realise existed and that is where

the following strategies can be used to ensure that there are consistent sources of cash ideally generated internally to fuel the growth of the business.

ACCELERATING CASH FLOW A key performance indicator that measures how long it takes for a dirham spent on anything such as marketing, payroll, or rent, to find its way back into the business’s bank account is called the cash conversion cycle.

There are three key ways to accelerate cash through a business.

The first is by shortening the cycle.

This is all about increasing the pace of everything that the company does. Some ideas of how to prevent this include shortening the sales cycle, which is the time taken from a customer’s initial interest in the product to closing the deal. This can be done by keeping CRM up to date and by following up with customers on the agreed upon timeline.

Another way to accelerate cash through the business is by shortening the time taken to deliver a product or service. A great start for SMEs to adopt this process would be by utilising the two second lean approach of Paul Aker, author of 2 second lean: how to grow people and build a lean culture.

Business owners can also ask to be paid sooner and ask to pay later, something many fail to do due to the fear of people saying no. They would be surprised how many times their suppliers/customers will say yes. This is a case of managing a relationship with customers and suppliers, to gain a mutual understanding of payment on time and sustaining the business relationship.

Finally, a business owner needs to be specific as to when payment is expected and check in with customers prior to the due date to make sure payment will be received on time.

For suppliers that are paid as and when their services are used, business

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Mike Hoff, CEO, Mike Hoff Consulting, looks at how a business can manage its cash flow to ensure growth

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If the owner looked inwards to their own business they would find sources of cash that they did not realise existed.”

– Mike Hoff

owners can ask to pay in full at the end of the month rather than when they see them.

The second way to accelerate cash flow is by eliminating mistakes.

Inefficient processes, lack of attention to detail and insufficient management attention all lead to mistakes occurring within the business. This in turn leads to customer frustration and tends to be the main reasons why payments are not made on time. Some ideas of how to prevent this include asking clients why they are paying late. The answer may be something simple, such as a recurring invoice mistake or misalignment with their account system can cause late payments.

A business owner should ensure there is one person accountable to follow up on payments and make sure invoices are timely. Also, quality control should be in place for all completed work and that any shortfall must be corrected immediately to avoid payment delays.

The third and final way for a business to accelerate its cash flow is by spending time brainstorming ways to make changes to the way the current business model operates. Two ways to achieve this include getting customers to fund the business.

A good example of this is a gym membership, where customers pay in advance, whether they use the service or not.

On the flip side, a business can have its suppliers fund their business by extending credit terms to the point where cash is received from clients before payments have to be made to the suppliers.

SUMMARY The benefits of focusing on cash management as it moves in and out of the business not only has the obvious result of making a business owner more aware of their current and future cash position, it also increases the business acumen of management and its team which leads to better decision making as the business continues to grow.

So whilst it is essential to keep a focus on growing top line revenue which makes everyone feel good and drives the ego of the organisation, a daily focus on a business’s cash position is vital to ensure that the business keeps consistent sources of cash to maintain its growth.

It is recommended that a report showing what cash has come in and gone out of the business, along with the current cash balance, is generated daily.

SEVEN LEVERS OF CASH FLOW

APPLYING JUST ONE CHANGE TO THE FOLLOWING ITEMS WILL IMPROVE THE BUSINESS MODEL 1. Price: increase the price of goods or services by one per cent.

2. Volume: increase the quantity sold while maintaining the price.

3. Cost of goods: pay less for raw materials.

4. Operating expenses: decrease the cost of running the day to day operations.

5. Accounts receivable: receive money owing in a shorter number of days.

6. Inventory: release cash by not holding as much stock.

7. Accounts payable: take longer to pay those you owe.

Source: Allan Miltz, Founder of Inmatrix and Pearl Finance Australia

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LEGAL FOCUS

I

n February 2016, the Personal Status Court of the Dubai Courts issued an order stating that should an individual shareholder of a Dubai-based firm pass away unexpectedly, the company's bank accounts would be frozen. The funds would then be transferred to the court's treasury, until it determines who is to inherit the company and its funds.

It could take three to six months for the funds to be released; in the meanwhile, the funds will reside with the court treasury, and will be disbursed as per the local inheritance law.

RAMIFICATIONS This decree will have a huge impact on businesses. With bank accounts being frozen, day-to-day activities of the organisation are likely to come to a standstill, majorly impacting the operations of the firm. In case the company’s trade licence is due for renewal, chances of

Deepak Gurnani

Safeguard your firm’s interests

Deepak Gurnani, Partner, JUST LEGAL Consultancy, details how single-shareholder firms can deal with having their accounts frozen, should the stakeholder die unexpectedly without an inheritance policy it being renewed are remote, until the matter is resolved in court. Depending on the nature of the business, the company might lose its markets, its clients and its key accounts, thus jeopardising its very existence.

In cases where one or more legal heirs are minors, their respective shares will be withheld by the court treasury until they become eligible to inherit at the age of 21 years, as per the rules in the UAE. Under such circumstances, the

new successor might not be able to manage and run the business with access to limited funds since there might be major business liabilities to be taken care of. Needless to say, the situation would provoke debtors of the company to take maximum advantage of the situation, which may lead to the company not receiving what is rightfully due to it.

Without access to all its funds, a company will not be able to survive and manage

its basic operational costs, such as payment of salaries to employees, rent, utility bills, and other overhead costs.

Prior to the issuance of this law, company accounts would still be frozen in the event of the unexpected demise of a single shareholder; but the funds were left in the bank account, and released, once the court order was passed to the respective banks, as per the local inheritance laws of the country. The issues existed even before the new

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Companies will have to take proper steps to make sure that a situation does not arise that leads to their accounts getting frozen.� – Deepak Gurnani

order was passed; the only difference now is the longer duration of time it will take to resolve the financial matters.

Incidentally, the new court order affects Muslim as well as non-Muslim owners.

POSSIBLE SOLUTIONS The recent changes in stance taken by the courts regarding inheritance means that companies will have to take proper steps to make sure that a situation does not arise that leads to their accounts getting frozen. Inheritance planning is, thus, vital for single-shareholder firms.

Companies need to structure shareholding properly, have multiple signatories for all bank accounts and have offshore holding companies.

Safeguarding company assets is critical, and companies and establishments should seek reliable legal support and closely monitor legislative or regulatory changes.

In most countries, there is only one procedure or department to register your will, but in the UAE, there are two options for doing so. While securing their personal assets, clients are generally advised to secure their company shares by getting their will registered at the Dubai Notary public, or Dubai International Financial Centre (DIFC). However, this option is available only to a non-Muslim individual, since local inheritance law (Shari'ah) is a must for both Muslim expats and locals.

Alternatively, companies can opt for Legal Corporate Structuring from the succession point of view, wherein the ownership of the company is transferred to a foreign company instead of an individual or partners owning it. In such instances, the matter of succession will be out of the purview of local laws; it will come

under a different jurisdiction where they get alternate and favourable options in the matters of inheritance law and planning. They should avail of this option, and structure their company accordingly.

The flip side of the coin is that shares of a minor will be protected, no matter what.

The interests of financial institutions and other creditors are protected through the recent court order. In cases where they have given any loans, or have outstanding amounts to be received from the company, as per the UAE laws, financial institutions and other creditors have full rights to settle these outstanding amounts against the deceased’s estate, in spite of the funds being frozen.

No family member or legal heir can be held responsible for any liability of the deceased, but the estate and assets in the name of the deceased if any, are liable.

Once the funds are transferred to the court treasury, there is an assurance bestowed that the shares of a minor are not susceptible to be misused by any other legal heir or successor of the business.

However, this depends on individual situations, as cases usually differ from one another.

In the long run, the local court must set up a dedicated department for wills and probate, and undertake an initiative similar to the one the DIFC court has undertaken. It must be remembered that a DIFC court faces a limitation in that it can only take care of Dubai-based assets.

It is up to singleshareholder companies to do all they can to protect their interests in their lifetime. The best thing to do is to make it an essential part of setting up their business in the first place.

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CHALK TALK

I really believe in energy and whatever you think, you attract –good or bad.� – Basma Al Fahim

BASMA Al Fahim

The Founder and Managing Director of Eventra Events discusses fashion, fairy tales and a dollhouse

I

was studying marketing when I stumbled across the events industry. Two of my friends had an events company and they asked me to join them. They were already established and they offered me the chance to do the marketing. We started by freelancing and it did well so we moved to an office space.

They were based in Abu Dhabi and I was in Sharjah. I felt like I could not give them 100 per cent as I was still in university and it was a long commute so I backed out, to be fair to them.

Once I graduated, I worked for Nakheel for two years in their events department.

Then the recession hit.

Everyone around me started losing their jobs and companies were downsizing; and that included the marketing department. I did not want to be in customer service so I resigned.

The same year I resigned I got married.

I was depressed going to a job I did not love doing.

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When we came back from honeymoon I started job hunting. I’m a workaholic.

I love to work, and I cannot just sit at home. My husband would go to work and I was at home and really, how much TV can you watch?

My husband was very supportive.

I always talked about my passion for events and he said ‘If you love it so much, why not create your own company?’ I did not know where to start. I have met a lot of people who face this question, where to start. They have so many questions and they just need that push from someone, to lead them in the right direction.

I started my company in a recession. I think in every negative situation there is a positive side. I looked for a place and I rented the warehouse we are currently in. People thought I was crazy renting this space, but it was a good price and right next to Sheikh Zayed Road. I had a vision. I knew I would need this space because I knew I was going to grow.

Getting the first few clients was really hard without a portfolio. They had to take a leap of faith based on my experience with Nakheel. I was blessed that my first event was a corporate event. I did the running around, the paperwork, I was the PRO, I did everything. Slowly I got one person on board and now we have a team of 15 to 18 for events. Imagine, during a recession I blossomed.

Now I own four businesses.

Whenever there is a change in the market, we adapt to the change and we stay positive. If you think you are going to have a bad day, then that is what you will have. I really believe in energy and whatever you think, you attract–good or bad.

After two or three years of events, I opened my salon called The Dollhouse, with my partner.

Now we have two branches and we are expanding. We had to learn

everything about the beauty industry from the ground up. The first spot was the Dubai ladies club.

I did events there and they were looking for a salon. It was the right space, and I just thought it was a great idea. I knew where to put my money next. So, four years ago the Dollhouse was established.

Sometimes you need guidance.

But you just have to believe in yourself. I was not scared of asking every single person I know questions. Some were very helpful; some were a bit scared to share information. You have to research; you have to know trends abroad and trends here.

I got involved with a fashion line with my sister a year and a half ago. She wanted to start a business and she is really into fashion. At that time my mother-inlaw told me about these tailors she has been working with for about 15 or 20 years and they lost their jobs.

I wanted to open a tailor shop.

Loyal customers do not want to lose their tailors of 15 or 20 years, and we could produce the line there as well. It would be win-win for everybody. I said I would handle the business side and my sister was going to handle the creative side–the colours, cuts, designs and the tailors would create the line on site. We use it as a workshop and we supply the designs to shops.

My sister later withdrew from the business so I took over with doing the designs as well.

I started a play area with my best friend in town centre, called Fairytales. I have two boys and she has two girls, and whenever we went on play dates, we would watch them play with props and they act like pirates or other characters. There is not really anything here in the UAE that encourages imagination and develops the mind of the children.

I had a meeting at Town Centre Jumeirah, and it was mentioned that a vacant space was available. I asked if they would be open to having a play area in the space and they agreed.

Fairytales stands apart for a few reasons. Every member of staff is a teacher. They all have teaching certificates in educational play and first aid. We believe in educational play where children can play and learn from it. We customised everything in there. There is a big ship with rooms inside. As soon as kids arrive they change into costumes, so they can choose their characters.

We also have really high hygiene standards. Every child has to use antiseptic hand wash before they go in and they have to wear clean, antislip socks. As a mother, I do not want my children to get sick.

There are many play areas that celebrate Easter, Halloween and every single holiday you can imagine.

But nowhere celebrates our Arabic traditions. So we have storytelling and children can learn Arabic. We have celebrations where kids can learn about our traditions too. Of course we celebrate western holidays as well.

You have to set your priorities.

My kids come first. From the day I had them I had them on a strict schedule.

I go home for my lunch breaks and spend that hour with them. I make sure I get home before their bed time at 7.30 pm then I continue working.

I schedule my time around the priorities I have. I try shut off work over weekends. Obviously, if there is an emergency I will deal with it.

My hard work was done myself.

Everything has come from my savings. It was hard for me, because when I accomplished things, people assumed I had help from my family.

My father gave me emotional support, so did my husband. Other than that, it has been all my hard work. People are so quick to assume I got everything on a silver platter.

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CEO CHAT

LIKE A BOSCH

Volker Bischoff, General Manager, Robert Bosch Middle East, discusses the company’s growth and further expansion plans across the Middle East Volker Bischoff

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Automated driving is one of our areas of growth and by 2020 we believe it is possible for driverless cars to be running on the highway.”

– Volker Bischoff

R

obert Bosch Middle East showed 12 per cent growth across the region in 2015, equating to AED 1.8 billion in consolidated sales across the region’s 14 countries. The strong growth is the result of being a diversified company operating in several different divisions, said Volker Bischoff, General Manager, Robert Bosch Middle East.

Bischoff said that the low oil price has had an impact on construction, in which Bosch’s power tool division is active.

“We need to be realistic–the oil price is impacting the construction business. There are some projects that are being delayed as payment terms are being stretched. Also, governments have less money in their coffers to spend on construction and infrastructure investments,” he said.

GET SMART Bischoff said with the UAE, and particularly Dubai, being a frontrunner in innovation, Bosch has a lot happening in many fields, specifically in driver assistance solutions.

The first is a parking lot management solution. Sensors installed in the pavement will wirelessly relay whether or not a space is occupied to a server.

The data can be uploaded into a realtime map which rivers can access over their smartphones or the internet. The driver will know where available parking spaces are within 50 or 100 metres, saving time. Currently a pilot is running successfully in Stuttgart, Germany.

The second development is automated valet parking whereby a driver can pull up to a parking space, exit their vehicle, open an app on their mobile phone and instruct the vehicle to park itself.

“Imagine how space could be optimised. The space between cars would be much smaller as drivers would not need to get and out of their cars in the bays,” said Bischoff.

Bischoff added that Bosch is also heavily involved in government innovations. His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai has launched the Dubai Autonomous Transportation Strategy, which aims to

see 25 per cent of all trips in Dubai to be driverless, by 2030, and the company has a large role to play.

“Automated driving is one of our areas of growth and we are developing the systems so that by 2020 we believe it is possible for driverless cars to be running on the highway. The driver will be able to relinquish control of the vehicle while they read the newspaper or listen to music,” said Bischoff.

Bischoff added that the technology will work owing to the car’s sensors that will collect information from the surrounding environment pertaining to cars in the vicinity as well as relaying to the driver any information regarding traffic jams or accidents, increasing the safety of the driver.

“We are convinced automated driving will reduce the number of accidents tremendously. Human error can happen within a split second; whereas when the car registers an accident is about to happen, it will stop in time. If there is an accident or traffic jam up ahead, it will take another route and inform the driver, which will help reduce congestion,” he said. cont. overleaf

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CEO CHAT Drivers will be able to park their cars using an app on their mobile phone. cont. from pg. 19

Part of Bosch’s automotive development includes electromobility, which Bischoff said is an exciting field of the company’s operation but currently there are two factors affecting its development. The batteries required for the vehicles are still too expensive, and they do not hold a sufficient charge, and need to be recharged regularly.

However, he said by 2025, 15 per cent of vehicles will run off batteries.

Innovation is not only happening in the automotive field, but also in the area of white goods. Bosch has developed a fridge with a camera that can send a photo of its contents to a mobile phone, providing convenience to someone doing grocery shopping who cannot recall the contents of their fridge. This technology will be rolled

in Turkey in October 2016, followed quickly by the rest of the Middle East.

PAKISTAN AND IRAN Bosch has been doing business in the Middle East for decades, starting with a car workshop in Palestine in the 1920s.

Pakistan is the latest location where the company has established its presence, said Bischoff. Bosch opened its Pakistan office in 2015 and its inauguration took place in February this year.

Setting up the business was straightforward as the relevant authorities were very welcoming and the company received a lot of press coverage.

“We believe that a country with a population of 180 million people cannot be ignored. There is a lot happening in construction projects

to improve infrastructure, and there is a growing middle class which means more purchasing power. The country’s GDP has shown a stable development of about four or five per cent over the last few years, so it is a promising country to be in, although it is not without its challenges,” said Bischoff.

The biggest challenge facing the company was dealing with the amount of counterfeit products on the market. Bischoff said this is due to the purchasing power per average still being quite low, coupled with rather high customs duties, which result in some companies not playing by the rules.

Bischoff said dealing with this issue is a long-term project which involves working closely with government networks to raise awareness on the issue,

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Sensors Sensors in in parking parking bays bays will will inform inform drivers drivers if if the the space space is is vacant. vacant.

BOSCH IN NUMBERS 2020 Bosch aims to halve the cost of electromobility batteries.

and building good relationships with their local partners.

“From Bosch’s side we do not compromise on the price or quality of our products, so when people buy our products, they can be sure of the quality.

Our local partners are also competent– they know the market, they offer good service and they are reliable,” he added.

Bosch also re-established its presence in Iran, shortly after sanctions were lifted. As the only country in the Middle East that has automotive production, and production numbers of approximately one million vehicles per year, Bischoff said it made sense for Bosch to re-enter the market, given that the company is one of the largest suppliers of automotive parts. By the end of 2016, Bosch should have about 50 people in Iran, across all their divisions.

2020 AND 2022–THEN WHAT? Bischoff said that while there is scope for Bosch’s involvement in the FIFA World Cup 2022 in Qatar– from providing the power tools for building the stadia, the mechanisms for opening and closing their Warner Brothers World will be fully roofs, to security technology enclosed to accommodate guestsfor the event–these mega events during the summer. are economic focus points now, but they are only pieces in a bigger puzzle.

He added that while these Expo 2020 and the FIFA World Cup 2022 do provide opportunities, there would still be growth, with investments into construction and infrastructure, without them. Even once these events are over, something else will come up, because that is the nature of the region.

3 million battery charge spots installed around the world by 2020.

15% of vehicles will feature an electrified powertrain by 2025.

10% reduction in diesel consumption by 2025.

20% reduction in gasoline consumption by 2025.

2,500 Bosch engineers currently working on automated driving and parking.

5,000 hours invested by engineers in development of the new parking function.

40% of car accidents, resulting in

material damage, due to parking and manoeuvring incidents.

Source: Robert Bosch Middle East

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SHUTTERSTOCK.COM

E o SB Setting aside funds for future EoSB payouts will benefit a company further down the line.

THE BYE-BYE BENEFITS

Samer Abdel Kader, Head of SEI Investments Middle East, takes a look at the end of service benefits set out under UAE labour laws from the perspective of SME owners

E

nd of service benefits (EoSB) laid out under the UAE Labour Law, are designed to compensate employees for their services to the company, and are calculated according to the employee’s length of service.

Under the labour law, employees are eligible for gratuity at the end of completing a full year of service and this payment is calculated as 21 days’ basic salary. This excludes any car or housing allowances.

A recent report published by Zurich Global Life, Middle East & Africa, exploring the end-of-service benefit dilemma, highlighted challenges associated with EoSB payments. The report estimated that the average EoSB payment has

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Funds for EoSB should be segregated from working capital and, protected by a trust structure as part of a corporate pension or savings scheme.”

– Samer Abdel Kader

risen by 140 per cent over the last six years, owing to an increase in the typical length of service from fewer than five years to nearly seven years, and the associated rate of salary growth over that period.

There is no law that states that a company has to set aside monies to pay future gratuity payments, although it would be good business and accounting practice to do so.

Per wealth management firm SEI’s latest EoSB survey report, 70 per cent of SMEs in the region do not segregate the funds allocated for EoSB from their working capital. This is at odds with best practise as SMEs are prone to cash flow issues and can often be strongly impacted by market fluctuations that may see them using the EoSB funds for other purposes, according to Samer Abdel Kader, Head of SEI Investments Middle East.

He added that in times of economic upheaval, SMEs may look at downsizing their staff, only to realise the EoSB pay-outs will make an impact on their bottom line as the liability increases year on year.

At the moment, particularly in the oil and gas sector, employers are laying employees off and they have to find the money to do so at a time when the oil price is down.

As to penalties for not making these payments, he said the penalty would most likely be, but not be limited to, litigation. Aside from the legal penalties involved in mismanagement of EoSB payouts, the reputational risk to the company could have far-reaching and longterm effects, not only with regards to recruitment and employee morale but also with partners, vendors and industry peers.

“The best way to avoid pitfalls such as these is to ensure that the funds for EoSB are segregated from working capital and, preferably, protected by a trust structure as part of a corporate pension or savings scheme,” he said.

Kader added that SMEs are typically focused on growth and this makes recruitment a high priority.

With the number of start-ups and SMEs in the region, competition for top talent is fierce and becoming established as an employer of choice is a proven way to stand out from the crowd. Recruitment is not cheap, however, and offering hefty bonuses and pay increases will strain any company, regardless of size.

“A more efficient way of recruiting and retaining talent is by offering them more meaningful benefits than the typical cash pay out. This can come in the form of offering a pension plan or an employee savings plan that helps employees invest and save a portion of their salaries that they may then withdraw at the end of their tenure. In most cases, this will amount to more than the basic end of service benefit and can encourage employees to stay with the company longer, knowing they are working towards a savings goal. Some employers choose to reward high performers by contributing to this savings as well, thereby encouraging performance and retention,” said Kader.

PLANNING AHEAD While some companies continue to hold provisions for EoSBs in a separate fund, the majority of participants still continue to pay benefits from their cont. overleaf

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E o SB

TOP THREE TIPS FOR SME OWNERS TO ACCOMMODATE EOSB PAYMENTS 1. Protect the funds for EoSB Ensure that the funds allocated towards EoSB payouts are separated from your working capital as this could have serious repercussions further down the line.

2. Ensure the EoSB account is regularly funded EoSB liabilities increase yearon-year and fluctuate with the number of employees recruited and their tenures at any given point in time. By ensuring liability projections are up to date, companies are in a better position to ensure their EoSB account is adequately funded at all times.

Samer Abdel Kader cont. from pg. 23

company accounts, according to the sixth End of Service Benefits survey by global advisory firm, Towers Watson. The firm surveyed acrosssection of 180 organisations in varying sectors based in the Middle East, in order to ascertain the level of provision, and the structure and delivery of mandatory and enhanced employee ESoBs. Kader added that liability projections are the first step in a wellmanaged EoSB plan. In projecting future EoSB liabilities, companies are

made aware of the funds required for EoSB payouts at any given point in the future. Once this liability is determined and funds are suitably accrued, it is incumbent upon the company to protect these funds by segregating them from working capital and possibly investing them to allow for the account to be suitably funded. Liability projections should be done on a regular basis to ensure companies are not blindsided when employees retire or are made redundant.

3. Encourage employee participation Savings plans and pension plans encourage employees to save towards a financial goal that is greater than their basic EoSB entitlement.

By encouraging employees to save and invest through corporate plans, companies can increase retention rates and differentiate themselves as employers of choice.

Source: Samer Abdel Kader, Head of SEI Investments Middle East

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COMPANY CREDIT CARD

credit where IT IS DUE Andrew Prince, Financial Planner, Acuna and Usman Khakwani, Head of Business Banking, Noor Trade look at if, when and why a business should consider applying for a company credit card

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SHUTTERSTOCK.COM/ HAMIK

The finance limit allotted is to assist the business owner in overcoming shortfalls in payments to customers and day-to-day working capital requirements.”

– Usman Khakwani

A company credit card can offer financial flexibility but has to be managed carefully.

A

business credit card can provide a number of financial perks and flexibility in spending, and applying for a company credit card is one of the most important decisions a business owner can make, according to Usman Khakwani, Head of Business Banking, Noor Trade. The business owner needs to take a look at their business and its needs, and ask if the business really requires a credit limit, how he will use the line of credit, and if they are able to pay back the money responsibly per the payment dates set by the bank.

A company credit card can streamline reimbursement to employees; however, without the necessary precautions in place,

company credit cards can lead to financial mismanagement, theft, or fraud. When looking at corporate financial planning, as with personal finances, a business owner needs to establish what they seek to achieve.

The same is true when considering a corporate credit card for key members of staff. These staff members could broadly be split into two categories; frontline staff and senior executives, according to Andrew Prince, Financial Planner at financial advisory firm, Acuna.

Prince added that the needs for each of these groups are likely to be different in that executives are likely to travel, require foreign exchange services, and hire cars; while the frontline staff is more inclined to require incidental expenses, such as taking a client to lunch or refuelling the company car.

Once the requirement has been established, a company credit card may not be the automatic solution to these needs as the business owner would need to consider whether a simple debit card would suffice or if the needs warrant a company credit card, Prince said.

“While the former is undoubtedly cheaper, it doesn’t help the Financial Director and accounts department budget for cash flow as the money is immediately debited from the account in much the same way as a personal debit card. This is where the corporate credit card could assist greatly both in terms

of cash flow as well as discounts and the accumulation of rewards such as air miles,” he said.

Once a business owner has established that a company credit card would be beneficial, Prince said they need to look at the strength of the company’s balance sheet and cash flow. If the balance sheet is quite strong, a credit card could be beneficial for the business.

However, he warned that if a business owner looks at the credit card as a means to supplement investment capital, then they need to be aware; interest rates, while slightly cheaper than a personal credit card, are still in excess of 20 per cent per annum. There are also numerous penalties for late or missed payments which could place severe stain on the company, especially in its early stages of development.

“The finance limit allotted is to assist the business owner in overcoming shortfalls in payments to customers and day-to-day working capital requirements while providing a business owner with flexible payment options which should be adhered to,” he said.

KEY BENEFITS Business credit cards usually come with discounts and benefits that help reduce business expenses on hotels, rentals, courier services, restaurants, gifts, and much more. cont. overleaf

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COMPANY CREDIT CARD

Usman Khakwani

Andrew Prince

cont. from pg. 27

With flexible payment options, the business owner can decide how and when to pay back the finance allocated to them through a business credit card, said Khakwani.

Prince added that time spent preapproving budgets can be avoided by establishing a code of conduct in conjunction with Human Resources, which will enable the employees entrusted with the corporate credit card to be aware of what is and, more importantly, what is not considered an appropriate or approved expense.

He added that, for example, when travelling on assignment an employee will be aware that a set room rate of AED 500 per night for bed and breakfast plus AED 100 for the evening meal is the cap. Equally, alcohol may be excluded from such allowances.

From an employee perspective, Prince added that many loathe the monthly requirement of filling in of mileage claim forms. Employees are arguably a company’s greatest asset and having them spend valuable time filling in expense claim forms is a drain on that resource. It is much easier to have pre-approved

spending limits and use of a company credit card.

Another option is for the business to acquire supplementary business cards which can be provided to members of staff, added Khakwani.

“Credit limits can be set as a percentage of the overall limit, after which the staff cannot utilise the card any further, to ensure controlled usage.

Besides setting limits, the business owner can also define where the staff can use the card and that can be tracked through card statements and expense reports,” he said.

If a company credit card is managed correctly, it offers another major benefit that business owners may not initially consider.

“Responsible usage of a business credit card can reflect positively on a company’s credit bureau reports, which result in positive ratings which can be beneficial in the next finance request made by the business to any bank or financing company,” said Khakwani.

In some cases the CEO or MD will have provided personal guarantees to the bank on behalf of the company.

What this means in practice is that all company debt, subject to certain limits, is guaranteed by these one or two individuals, said Prince.

He added if an errant employee racks up huge credit card liabilities, the company may face immense financial pressure resulting in the CEO being forced to sell personal assets to cover the liability.

“This is an extreme, but not impossible, situation and the benefit of being able to accurately measure, monitor and manage company expenses by staff is a plus,” he said.

Prince added that Corporate Liability Waiver Insurance potentially protects the corporate against eligible losses that might be incurred through card misuse.

Limits on spend can be assigned, thus reducing unnecessary risk and exposure, but effective controls should be in place rather than relying on insurance.

HOW TO MANAGE A COMPANY CREDIT CARD 1. Request a reasonable credit limit that is manageable to pay back.

2. Establish processes and document them within the employee handbook and HR function which identify what is expected from both parties.

3. The finance department should audit the credit card statement against the actual assignment.

4. Regularly review where expenses are being incurred and consider obtaining corporate discounts.

5. Consider using the air miles to provide incentives to employees.

6. Ensure the outstanding balance is cleared in full each month, as this ensures good credit.

7. Look out for discounts, rewards, points systems and schemes to benefit the business and save on costs.

Source: Usman Khakwani, Head of Business Banking, Noor Trade and Andrew Prince, Financial Planner, Acuna

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BME AD JUNE 13th 2016 AW.pdf

1

6/13/16

12:03 PM

AND AGAIN… THE BEST BANK FOR BUSINESS IN THE UAE Best Corporate Bank Best Commercial Bank Five years in a row as best local commercial bank.

Two years running as best corporate bank in the UAE. At National Bank of Fujairah, we’d like to think that such strong recognition is no mere coincidence, but a reflection of our grit, hard work and, most importantly, the partnerships that we’ve managed to enjoy with our clients.

To all our valued customers, thank you for choosing us as your bank for business in the UAE.

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6/19/16 12:48 PM 14/06/2016 11:37

CREDIT RATING

CALCULATING CREDIT

Ankit Goel, Managing Director at DS-Concept and Steve Armitage, Managing Partner, UAE Business Solutions, look at why SMEs should consider applying for a credit rating

A

s of March 2015 companies are able to get credit rating reports from the Al Etihad Credit Bureau, a DIFC-based Federal Government company established in 2010 to set in place and operate a new credit reporting system across the UAE. These reports are used by a potential lender to determine a loan applicant's creditworthiness, and are issued by the Bureau to provide transparency in the hopes that SMEs will be able to access lending more easily. The reports will give the banks, or other financing bodies, a better idea of company ownership, a record of the business’s current and

previous credit facilities, the business’s payment history over the last 24 months, overdue payments, and record of any payment defaults, which they will take into account when lending money.

New suppliers or financial institutions will be able to assess the liquidity of the SME being reviewed and apply the appropriate credit levels to its account, according to Steve Armitage, Managing Partner of financial consultancy firm UAE Business Solutions.

BENEFITTING SMES There are a number of other ways an SME can benefit from getting their credit

rating report, according to Ankit Goel, Managing Director at trade financing firm, DS-Concept.

The first benefit is that an SME with a high credit rating can approach a wider financial community for funding, such as banks, private equity (PE) firms, private investors, and even suppliers, both locally and possibly even abroad.

“A company with a higher credit rating will be able to get a cheaper cost of borrowing, compared to a company with a lower credit rating. If a company has a higher credit rating, it means most of the boxes have been ticked and a banker or financial institution

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If a company has a higher credit rating, it means most of the boxes have been ticked and a banker or financial institution would have less risk lending to it.”

– Ankit Goel, Managing Director, DS-Concept

Credit reports help to determine a loan applicant's creditworthiness.

would have less risk lending to it,” said Goel.

He added that finally, the credit rating may be used by the SME as a marketing tool for its suppliers, buyers and financial institutions. In order to apply for a credit rating report, Goel said a business needs to follow a number of steps and submit documents, including a copy of the business’s trade licence as well as background information on the shareholders and directors of the company, to apply for membership with the credit bureau or agency.

Goel added that a business would need to provide audited statements

for the last three years as well as target customers and payment terms, target suppliers and payment terms, a business plan that includes company projections, a record of finances currently borrowed, and finally, a history of previous borrowings, payments and delays, if any.

Armitage added that the SME in turn will be able to check the information being held by financial institutions to ensure its accuracy.

IMPACT ON THE SECTOR The performance of SMEs in the region has been directly affected by the price

of oil, which has lost more than 60 per cent of its value after dropping from its peak of more than $110 per barrel in mid-2014; and many SMEs are currently grappling with slow economic growth in light of low commodity prices. SMEs have also continued to be affected by payment collection and difficulties in tapping debt, according to a recent survey by SME financier, Gulf Finance.

While the current economic environment led to many SME owners defaulting on loan repayments and fleeing the country at the end of 2015, in March this year UAE lenders agreed to halt criminal proceedings cont. overleaf

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CREDIT RATING Ankit Goel

Steve Armitage

cont. from pg. 31

for bounced cheques drawn by SME owners under a new rescue initiative. This initiative allows for a 15-day grace period where debtors and creditors can agree to a restructured repayment scheme, and a further 90-day period where banks will refrain from pre-emptive action, which includes prosecution and travel bans.

According to Sami Al Qamzi, Director General of Department of Economic Development (DED), limited sources of funding to start businesses is a major gap in the SME ecosystem, which is underlined by the finding in the report that 80 per cent of the start-ups relied on self-financing as a source of capital.

He added that addressing market gaps and channelling investments into SMEs is critical to Dubai's economy initiative.

As such, a number of banks in the UAE have created banking platforms for SMEs to better cater to their needs and extend substantial support, the report added.

Goel said that if more SMEs apply for their credit rating, it will generate a lot of information and transparency in the economy. This is because investors will make more informed decisions based off the ratings of the companies, which in turn will increase the confidence of all the stakeholders.

“Confidence in the SME sector will increase as external readers of the information are able to assess whether individual businesses have the working capital necessary to deliver orders placed. A reduction in bad debts should hopefully materialise and this should then provide a trickledown effect in relation to cash flow for the SME sector as a whole,” said Armitage.

PREPARE FOR BEING RATED • Be transparent.

• Have a good governance mechanism.

• Keep an accurate record of accounts.

These will allow management to understand their debt profile accurately.

• Pay suppliers, financial institutions or other creditors on time.

• Regularly update credit rating agencies with any major milestones or activities related to the company.

• Ensure loan repayments are made timeously and are up to date and keep the creditor ageing profile within 60 days, ideally.

• Reconcile credit facility statements in accounts to the financial provider’s records on a monthly basis.

• Review debt equity ratio regularly.

Source: Ankit Goel, Managing Director at DS-Concept and Steve Armitage, Managing Partner, UAE Business Solutions

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CASE STUDY

SCENIC SALALAH

James Hewitson, General Manager of Al Baleed Resort Salalah by Anantara, Oman, discusses creating luxury while promoting the country’s landscape and culture

A

James Hewitson

l Baleel Resort, the latest offering developed by the Anantara hotel group was originally the vision of Dr. Mohammed Al Barwani, the Chairman of oil and gas company, MB Holdings, who wanted to give back to Oman. After liaising with the royal court, the government provided the land and 50 per cent of the resort is owned by project developer Omran, Al Barwani invested a portion of the capital and the difference was made up by a small loan from the bank, according to James Hewitson, General Manager of Al Baleed Resort Salalah by Anantara, Oman.

The resort is situated in the middle of Salalah, on the beach, with access to the airport and the town. It is also near the Land of Frankincense, a UNESCO World Heritage site.

Development of the resort, due to open in July 2016, began in 2013 and building has been consistent, in spite of some of the challenges experienced along the way, said Hewitson. He added that the weather had to be taken into account because, while it is great for nine months of the year, the developers still had to factor in the rain, the heat, the humidity, and the wind.

“The winds can pick up and when there is a storm, it really throws things around, trashing the beach. We had to work around that,” he said.

WORKING WITH WEATHER Given Salalah’s temperate climate for the majority of the year, outdoor dining is extremely popular, and it was something that the resort wanted to offer. Seven hundred and fifty palm trees, in heights of three, five and seven metres, provide suitable protection from the elements as well as to provide a pleasing visual effect.

The main building, which has 30 rooms, is higher than the rest of the resort and is surrounded by the taller trees, while the 106 single-storey villas are surrounded by the shorter trees, which will also provide guests with privacy.

Since the surrounding areas have palm tree plantations, Hewitson said the resort had to blend in with its environment, while still providing privacy to the resort guests.

“It was important in the design process how the resort would look when visitors come past by boat or by air. It was essential that it did not look out of place in the vicinity of the palm tree

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We could have imported our work force from overseas and trained people from existing five-star hotels, but they would never have the degree of local knowledge our staff can offer.”

– James Hewitson

plantations or the archaeological site; we did not want the resort to be this monstrosity in the middle of this land with no built up areas,” he said.

Hewitson said that the Government’s drive to push Oman as a luxury destination is a good initiative.

“Sceptics might say we should focus on the mid-market since Oman offers experiences that tourists cannot have in surrounding countries, such as visiting our archaeological site, the grand mosque, and the old town,” he said.

He added that marketing Oman as a luxury destination is sustainable due to three factors.

The first is that generally people who travel a lot tend to be quite successful and they put a part of their incomes aside purely to travel.

Second, people are increasingly exposed to luxury products, so consumer expectations are going up.

Finally, he said accessibility is the key. The Omani government has just invested approximately $6 billion on upgrading the airports in Muscat and Salalah; and as long

The resort is designed to blend in with the surrounding landscape.

cont. overleaf

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CASE STUDY

cont. from pg. 35

as there are flights coming in, and the accommodation is available, the destination can be promoted.

THE RIGHT PEOPLE Hewitson said that the hotel has employed staff of 42 nationalities but wanted to hire a predominantly Omani workforce. As there is no formal hotel school in Salalah, and the resort did not want to ‘poach’ staff from existing hotels, a three-day open event was held where anyone could come to the resort for a round of interviews.

“We were looking for locals who are passionate about the destination. When they are interacting with guests, they will have stories to share about Salalah as they are extremely well-informed about the area; it is natural for them to talk about the mountain, the sea, the museums, and what to do in the destination. Sure, we could have imported our work force from overseas and trained people from existing five-star hotels, and it can be argued that would have been an easier thing to do. But they would never have the degree of local knowledge our staff can now offer,” he said.

Hewitson gave the example of a young man who was unemployed, but he fitted out houses for his family when they were given land to build a house.

With the costs of building going up, he started travelling to China to source the sanitary ware for the kitchens and bathrooms. At first he needed the help of an English-speaking local to take him around and help him communicate, but now he knows where to go and can manage on his own.

“We gave him a job in purchasing. He knows the local market and the prices in China. That is one example of the people who came through over the course of the three days that we have hired. We took on anyone with a useful set of skills, even if they do not have a background in hotels. Hopefully we can inspire and motivate them to be passionate about the industry,” he added.

Al Baleed Resort guests are offered privacy but can still enjoy their views.

There are 88 pool villas at the Al Baleed resort.

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Of the 314 staff members the hotel needs by its July opening, the hotel has 260, 40 of which are internal transfers which Hewitson said is a really big help, as they bring experience and a passion for the Anantara brand with them. They will be able to facilitate the opening of the hotel and guide the new members of the team accordingly.

Hewitson added that with tourist numbers increasing to 2.5 million tourists, up 17.5 per cent from 2015 and the Omani Government’s drive to increase tourism to 12 million by 2020, as an operator the resort needs to develop the local talent to support that initiative.

SUPPLY CHAIN SMES The resort has chosen to use what is available, said Hewitson. Fish and vegetables are purchased directly from the local market, as it makes more sense to use what is locally grown than having a supplier bring everything in.

“There is not a lot of commercial fishing in Salalah, the industry still uses boats and nets and bigger fish are caught by line, and it is some of the best fishing in the Gulf,” he said.

The hotel has a working arrangement with a local fisherman who owns a dhow and four boats, who will operate all the water sports, fishing, diving and snorkelling trips, as well as dolphin watching tours for the hotel. His large dhow will be used for cocktail receptions, dinner, as well as private trips. While the hotel will take a small commission, the revenue will be predominantly his and his business will be able to grow.

“It is a good relationship. If it does not do well, he will not agree to continue operating for us. If he stops operating for us, then I will have to get involved in the marine industry and hire people to take over from him, which is not something I want to do. The hotel is our core focus and what we should stick to, while using the expertise of the people around us,” he added.

Smaller businesses also play a role in both the hotel’s retail outlets as well as the fleet of vehicles. Hewitson said that while the hotel could have run the shops, it made more sense to charge a small rent and have local retailers come in and run the stores properly.

The same principle applied to cars. The hotel-branded four-wheel drives, and the drivers, are supplied by a local transport company. These cars will be used exclusively for the hotel transfers and any private taxi services the guests may require. The hotel will take a small commission and the bulk of the revenue will go to the transport company. Each driver will be given a resort uniform as well as the same orientation as the rest of the new members of staff, to ensure hotel standards are met.

KEY FEATURES–AL BALEED RESORT SALALAH • 30 rooms with sea or garden views • 106 villas, including 88 private pool villas • Private 250 metre beach • Outdoor temperature-controlled infinity swimming pool • Anantara Spa with Salalah’s first Hammam and Razul treatment rooms • Three restaurants, including a signature Asian restaurant • Gym • Library with Apple PCs •Tennis court, volleyball court, basketball, table tennis, badminton court, petanque, beach soccer, billiard table and foosball • Water sports–motorised and nonmotorised • Diving centre • Children’s and teens’ clubs, children’s pool, playground and games room • Mixology cocktail classes • Local excursions • Spice Spoons Thai and Omani cooking classes • Flexible meeting and event space • Weddings Source: http://salalah.anantara.com/

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FACETIME

HIGHER LEARNING David Thomas, Dean of the McDonough School of Business at Georgetown University, discusses introducing real world context in to business education

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ost small businesses are started as entrepreneurial ventures by people who have a vision and turn out to be right about the market, but often at the start of that venture they lack some of the requisite skills to grow and manage their business most effectively. Those are the skills people gain through business education, according to David Thomas, Dean of the McDonough School of Business at Georgetown University.

He added that leaders of mediumsized enterprises often return to university or college to study at a later age than the average MBA student to get those business skills, because they see they need them in order to grow their business, regardless of the size of their business.

“I think the fundamentals of business education apply to businesses of every size. One aspect where I can give an example is accounting. The larger your organisation, the more money you have to account for but, at

the end of the day, accounting matters.

The more sophisticated understanding you have about accounting, the better you can report on and manage money,” said Thomas.

He cited another example of how business education can benefit a business owner by providing a better understanding of supply chain management. As a company grows, a business owner can often find new efficiencies in the supply chain if they know what to look for.

“When a business is still small, it usually has to depend on a middle man because it isn’t producing enough volume. But if the owner understood supply chain management the way it is taught at most business schools around the world, they will be able to look for ways to improve efficiency which will increase the business’s ability to increase earnings and provide customers more value,” he added.

Thomas said that generally, entrepreneurs can start a business

and only grow it to a certain point where it will stall, which is when a private equity firm usually steps in. In many cases these firms will insist on replacing the management team with members from the firm, because they have the knowledge and the skills to run certain areas of the business.

Then five years later that business is three or four times its original size.

Thomas said that private equity firms do not want to disrupt a company any more than they think they have to. In some cases, private equity firms will invest in a business because they feel the management is strong, and they can see the business simply needs more capital to fund growth.

Other times they see a great product, a great idea, and an executive team that has essentially outgrown its knowledge base.

“If a business owner has gone out and gained that knowledge that will help them take their business to the next level, their business is more than likely going to end up

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I think the fundamentals of business education apply to businesses of every size” – David Thomas

David Thomas

in the former category. Most entrepreneurs would probably like to be in that first category because they are emotionally invested in the companies that they are creating and growing,” he said.

BACK TO SCHOOL Thomas said there is no ‘right’ time for a business owner to look at studying for a management qualification, but suggested they start to consider it when they get to a point in the growth of their business where they start to realise there are things they do not know.

“For instance, they may not know how to expand their market, or they are starting to have production difficulties that they did not anticipate, and when they start to see those signs, it is a good time to begin to think about further study,” he said.

He added the advantage to further study is they will be in an environment teaching them the skills

they may lack as well offering them a chance to engage with other, similar students in the learning process.

Executive MBAs, for example, often provide very good opportunities for SME owners because they can be in the classroom with people who have some management experience or functional knowledge.

He added that one great thing about management education these days is that institutions take into account that students studying qualifications, such as an MBA, are firmly entrenched in their careers and unlikely to be able to take the time off to study full time, making distance learning the most feasible way to go.

There is the often-heard statement, ‘If I don’t know how to do something I’ll pay somebody who does’. While a business owner doesn’t have to do their own accounting, it helps to know what questions to ask their accountant. Otherwise they can become a prisoner to the expert, he said.

“The supply chain, again, is a good example. A business owner can call in a consulting firm and tell them that costs are rising faster then revenues, even though the market is growing. That firm will come back and say the problem lies with the supply chain, and that the business relies too much on the middle man–every time the business uses them they’re laying down a layer of cost to the business. In the same way, a business owner could then be captive to these middle men who are doing brokering for them,” said Thomas.

But the business owner will get a lot more out of that consulting engagement if they at least know the language and mechanics of supply chain management. They do not have to be the person who goes in and does the analytics but at least they would know they have a supply chain problem, and can ask where they can take the cost out of the supply chain and how to do it, he said.

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FRANCHISE

WELCOMING WENDY’S TO THE WIDER REGION

Phil Broad, Vice President Food and Beverages at Alghanim Industries, talks about the growth of the franchise in the region as well as the overall outlook of the F&B inustry Alghanim Industries has an agreement to open a minimum number which it can exceed, however royalties and a store opening fee have to be paid for each store.

“We are in negotiations to buy a plot of land to build a large drive-thru, which will be the flagship store in Dubai, and we will open another in one of the malls which will bring us up to 19 in the Dubai and Abu Dhabi region. We will continue to look for more locations and hopefully by the end of Q1 2017 we will have two or three locations in Kuwait,” said Broad.

STICKING TO STANDARDS Phil Broad

K

uwait-based conglomerate Alghanim Industries purchased the Wendy’s franchise in February 2015, and currently has 16 restaurants in Dubai and Abu Dhabi and will soon open its 17th in Burjuman, according to Vice President of Food and Beverages, Phil Broad.

Broad added that Alghanim Industries is the master franchisee for the MENA

region, which for their purposes includes Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebabnon, Morocco, Oman, Syria, Tunisia, and the UAE. Presently the company is focusing on Dubai and Abu Dhabi as the locations with the core group of restaurants. He added that hopefully by the end of this year or early next year, the flagship store in Kuwait will open, along with two more in Dubai.

Broad said that the Wendy’s franchise has its specific brand standards and colour palettes which have to be used in the restaurants: such as the kitchens, since all the food has to be cooked to standard, but a local team of architects and project managers were brought on board to run the projects. He added that while amendments can be made, a sign off is still required from the head office in the United States.

One of the factors in making amendments to tailor the restaurant to

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We are in negotiations to buy a plot of land to build a large drive-thru, which will be the flagship store in Dubai.”

– Phil Broad

HIRING GOOD PEOPLE One of the factors in the growth of the franchise in the region under Alghanim Industries, according to Broad, is the recruitment of good people into the business. The company hires nationalities from all over the world, but the hiring team looks for people with the right demeanour who want to be in the hospitality industry and then trains them from there.

“We are now bringing in more experienced managers, and we have just recruited one who will go to the US for four weeks’ training to make sure they have the full Wendy’s induction, and then will potentially go to Georgia, which is a more mature market before coming back to the restaurant here,” he said.

He added that the company is really trying to invest in the right people who can understand the brand and grow it in the right way, because Wendy’s is going to get very busy in the short term and the company needs a team that is fully trained and ready to go when that happens.

On the whole, Broad said the market has become quite value focused, and although the company perceived the

business to have a good product with appropriate price points, it still had to implement a ‘four for 14’–that is four products for AED 14.

“That’s probably the lowest price for a meal on the market, and something we didn’t think we would have to do as we thought we were a cut about the rest.

We had to come in and put in a lower price point because consumers want to see where the value is. Once we get them through the door we can upsell some great products to them,” said Broad.

He added that the company also launched breakfast, something that was never planned to be on the menu; even Wendy’s in the US does it in very few locations. Four stores in Dubai offer breakfast, which has been very well received.

“There were no major curveballs in establishing the franchise as the team has been in the industry so long, so there is very little that catches us out. But seeing Dubai need that value offer is not something we thought we would have to do so early on,” he said.

STANDING OUT Broad said what makes Wendy’s stand apart from other brands is small details like the salads being prepared fresh every day, while other brands bring theirs in pre-packed.

“We also have fresh buns made by a local baker and we don’t start making your sandwich until you order it, so the product is never sitting on the shelf waiting. Our chicken breast is pure white muscle, so our chicken sandwich is probably one of the best on the market and we use Australian beef,” he said.

INDUSTRY OUTLOOK

I think across the region the F&B industry has a strong outlook.

The really strong operators who consistently deliver their brand at the right price point with the right people will always do well, and I think everybody has to up their game.

At the moment we are seeing the fluctuating oil price having an impact on the industry, but I think the confidence in the Middle East is still very strong, and people are still continuing to open up both in Kuwait and Dubai.

Tourists are still coming to Dubai because it is still very popular, being so close to Europe. Expo 2020 is coming, theme parks are opening, so there are reasons for people to visit; it will be a bit like Disneyland, but for the Middle East.

I think there is still so much in the pipeline that keeps interest going.

Operators that do not operate well are really going to struggle, because people will look for good value for money and no matter how much they pay, they want to receive good service and product quality.

Source: Phil Broad, Vice President Food and Beverages at Alghanim Industries

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the region was the weather. The Dubai flagship outlet will have a large upstairs terrace where people can sit outside in the sunshine when the weather is fine, he added.

“We also have kids’ play areas in our stores because those are key to the business. Kuwaitis, Emiratis and expats also like to make sure they can go where their children can be entertained. Those are some of the things we are doing differently to what they do in other markets,” said Broad.

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START-UP

TEA TIME!

Richard Smyth, General Manager, Tea Trading International LLC, discusses the business partnership with Chinese tea company, Tenfu, and bringing the Vertea green tea brand to the region

Richard Smyth

T

ea Trading International (TTI) is a partnership between Tenfu, one of the biggest Chinese tea companies listed on the Hong Kong stock exchange, and Abu Dhabibased Rise General Trading LLC, a trading company established in the UAE in 2009. The joint venture is a partnership formed in 2015, according to Tea Trading International General Manager, Richard Smyth.

Smyth added that choosing Dubai, specifically the Dubai Multi Commoditites Centre (DMCC) in Jebel Ali, as the brand’s first location was a clear choice, as it is a free trade zone, giving the company good facilities to produce its own branded teas.

“The DMCC has established a Dubai Tea Centre within Jebel Ali Free zone which allows us to blend and pack within a first-class facility. This means our customers and consumers are provided with fresh-packed tea, unlike a number of other brands

which ship their tea to Europe, pack it, and then ship it back to the Middle East,” he said.

Smyth added that the UAE is the right place to start businesses as the ‘can do’ attitude by the Government is welcoming to new ventures, and the consumers are diverse.

“For example, at the Vertea launch, which took place in the second half of May 2015, we were given constructive feedback, we got to know the media and now, we have a dialogue with our customers through digital media channels, allowing us to build and further develop our brands to satisfy consumers’ needs,” said Smyth.

Although Tea Trading International does not have any of its own retail outlets at the moment, it is not ruled out for the future. Smyth said the product will be introduced to the market in two phases.

The first phase saw an introduction of the Teas of the World range; small-

batch teas from plantations in China, Japan, Kenya and India. Each tea has its own subtle flavour owing to the altitude and conditions in which it is grown, and will be available in certain retailers from June 2016.

“The second phase is to launch an exclusive range for the hotel, restaurant and café (HORECA) industry. At the moment, we are focusing on having the consumers get acquainted with Vertea, and to create awareness of the product through events,” he said.

Smyth added that as with any new brand, the challenge has been for Tea Trading International to drive awareness and brand exposure in a way that builds a relationship with its customers.

“Transparency has always been our priority when approaching the market, and we find that it enables us to build the trust that we need to deliver on our promise to offer a high-quality green tea at an accessible price. In this way, we’ve been building the foundation for brand love and putting together events that allow everyone to appreciate what goes into each cup of tea,” he added.

For the remainder of 2016, Vertea will extend its Teas of the World range to include black teas, herbal teas, and flavoured teas to cater to the increasing demand for more interesting tastes. These will be rolled out throughout the region, with KSA, Qatar and Kuwait all being key markets. Future plans include expansion into the remainder of the GCC and the MENA region.

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14/04/2016 12:04 6/19/16 1:33 PM

TECH FOCUS

WITH THE BIG GUYS Sudarsan Chakravarthy, Director of Small and Medium Enterprises at Gulf Business Machines, looks at how engaging with large technology companies may well be the best long-term IT strategy for SMEs

T

he small– to medium–size enterprises segment makes up a large percentage of companies in the Middle East. According to Abdul Baset Al Janahi, CEO of the Mohammed Bin Rashid Establishment for SME Development, there are at least 300,000 SME firms in the UAE alone.

The necessity for advanced IT amongst SMEs is growing rapidly as we move towards the digital economy.

According to a recent Dubai SME report, advanced IT systems are used by approximately 21 per cent of SMEs in Dubai in their business operations, where the remainder of SMEs deploy very basic IT. As the worlds of business and technology continue to both transform and collide, SMEs face a complex and changing landscape.

While the scale of their business problems differs from those of large enterprises, they face the same kind of business challenges.

IT has become a strategic enabler for business for large enterprises over the past few years. Today, just

like large enterprises, the SMEs too need to leverage CAMSS (cloud, analytics, mobile, social, and security) for their competitive advantage. For a lot of successful small- and midsized businesses, in today’s business environment, technology makes all the difference in getting ahead. SMEs that stay ahead of the mainstream IT adoption outperform their peers in the marketplace.

In this new era, SMEs need to relook at the way they plan, procure, and implement IT solutions. They need solution providers who can take care of their IT needs in order to properly focus on business goals. What they need, first and foremost, is a trustworthy partner who can integrate a range of technologies–on premise, cloud and hybrid technologies, while also offering solutions that tackle business challenges.

When it comes to understanding all of the different ways new technologies can help their businesses, SMEs need IT partners that can serve as their trusted business consultants. Ideally,

they would help them navigate their path to the cloud, opening up new solution areas, new business models, and enabling their business success.

The rise of cloud-based offerings is no doubt gaining attraction in the market for two reasons. First, the acquisition cycle is very short–after a business signs up for what it needs; it can gain access almost immediately.

Second, the cloud promises to reduce the cost of IT as there is no need for local hardware, regular maintenance, or physical space for large kits.

However, the cloud alone is not the answer to all the challenges faced

by SMEs. SMEs need scalable, secure, and cost-effective solutions based on the right mix of cloud and on-premise technologies. The problem is that most SMEs do not have the adequate IT resources and capabilities to tailor the right solution for their particular business requirements. According to a Dubai SME report, 73 per cent of SMEs do not have a dedicated IT employee or department, leaving them with no choice but to acquire their IT from local companies

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SMEs need to take a long-term view when selecting their IT partners.

that provide the technical and industry expertise.

The next question is whether or not SMEs should deal with large IT companies. It is very tempting for SMEs to acquire solutions from small or niche players. Although these companies may have attractive offers to suit their budgets, SME must be very careful in their selection.

Buying IT from smaller players, that may also be SMEs, can be risky. Last November Arabian Business carried a headline titled SME owners flee UAE with unpaid debts exceeding $1 billion in 2015, highlighting the turbulence facing SMEs when the economy shifts as it did in the region over the last few years due to drop in oil prices.

Therefore, when the going gets tough, smaller IT providers may get going, and this can leave those dependent on their services high and dry. In this case, getting a consultant to fix the problem or change the solution may become a very costly exercise; this being exactly the opposite of what the SME aimed to achieve when contracting a small IT provider.

The common misconception that plagues large IT providers is that their services are probably very expensive and that their portfolio of solutions is designed for large enterprises, but is this really true?

Large companies have offerings that can be scaled up or down to suit most firms.

So what is the route that SMEs should take for the acquisition of IT? SMEs should consider their strategies for growth first, and then seek solutions to match that their strategies. SMEs that are seeing aggressive growth, IT solutions should be scalable and adaptable. Complexities of processes may well increase, and there is a need keep an eye on performance and security.

Engaging with large IT companies should be considered as they are likely to offer a range of solutions that may well be suitable for SMEs. Furthermore, large companies are likely to be around even during the toughest economic downturns and will be able to continue supporting at all times.

BEFORE CHOOSING AN IT PROVIDER, ASK: • How many years has the IT company been in business?

This could be a strong indicator of the financial stability of a company.

A company that has been operating for more than 20 years is likely to have a healthy financial base and is unlikely to go bust anytime soon.

• How many people does the IT supplier have?

A company with few resources most likely will have generalist IT people rather than industry experts. SMEs may have complex business processes that require industry expertise to adapt technology products for their specific needs.

• Is the IT supplier based in the city where your business operates?

An SME may need someone to provide support immediately. If the IT supplier is located far away, it is unlikely immediate help will be available due to time zones or travel constraints.

Source: Sudarsan Chakravarthy

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EVENTS

PRIME OIL PRICE IS AT $58 Winners and members of the selection committee of the Abdullah Bin Hamad Al-Attiyah International Energy Awards discuss fixing the oil price, OPEC, and an oversupply “With a weak world economy shale will come back stronger and create another disaster. Inventories are the highest ever at almost five billion barrels with a 1.5 billion barrel oversupply,” he said.

He added that while the low oil price is affecting the whole industry, it affects the consumer first. If the price gets too low, producers will stop producing which impacts the consumer.

When prices go up, some producers will increase production. But if too much is produced, there will be an oversupply.

Al Attiyah said that the Organisation of the Petroleum Exporting Countries (OPEC) could not defend the price or market share without support from producers. He referred to the failed freeze talks in Qatar in April 2016 and said that in 2008 production was frozen; but that was when there was no shale, deep water drilling or any other alternatives.

Nasser Khalil Al-Jaidah, CEO of Qatar Petroleum International added that OPEC cannot fix the oil price as in any monopolistic economy one plays like a cartel by cutting down on cheaper oil and pushing expensive production.

“2016 is a year that will mark the ability of OPEC and the oil producing countries to adjust to the oil price

cycle by promoting continued market vigilance and cooperation with other stakeholders to bring back stability to the oil market and by taking the necessary country reforms for such adjustment,” said Dr. Majid A. Al-Moneef, Advisor to the Royal Court of the Kingdom of Saudi Arabia.

He added that the next half of 2016 will witness a gradual market recovery to a new and more sustainable equilibrium, the beginning of which is already underway.

RENEWABLES Even though hydrocarbons will remain essential to the global energy mix for the foreseeable future, the use of renewables in mainstream energy markets is gaining momentum, with the cost of solar panels having fallen by 80 per cent since 2010, according to research by the International Renewable Energy Agency (IRENA). Furthermore, increasing the global share of renewable energy to 36 per cent by 2030 could save up to $4.2 trillion annually–15 times more than the cost.

“The business case for renewable energy is stronger than ever. Renewable energy capacity grew at its fastest rate ever in 2015, while investment reached a record $284 billion,” said Adnan Z. Amin, Director General at IRENA.

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f oil is more than $58 per barrel, then it is greed not need driving the price, according to Narendra Taneja, Chairman of Energy Security Group and the Federation of Indian Chambers of Commerce and Industry, Energy Advisor and Spokesperson of BJP, India’s ruling party, speaking at the fourth Abdullah Bin Hamad Al Attiyah International Energy Awards, held in Qatar in May. Taneja added that if the oil price is between $40 and $50 per barrel it is good for the Indian economy as the country’s reliance on hydrocarbons is at 80 per cent; and that in spite of India’s investment of billions of dollars into renewables, there will not be an alternative to oil for a long time. He said if the oil price goes beyond $60 per barrel it will not support growth and be bad for the global economy.

H.E. Abdullah Bin Hamad Al Attiyah, President of the Qatar Administrative Control and Transparency Authority said that everyone in the sector is concerned, as billions of dollars of oil projects have been cut and thousands of jobs have been terminated. He added that even the oil majors could not predict what will happen to oil and gas in the current climate.

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BEHIND THE SCENES

Behind the scenes Sarah Jones, CEO, Mini Exchange

SARAH JONES, CEO

“My staff is really intelligent; we probably get 800 applicants per advertised position. I interview every one and we get a lot of people who have to go through a lot of psychometric tests, which I’m very big on. We have got smart minds here. We don’t wait two years to promote people and pay rises are given every three months if they’re doing well.

I started this business when I was 26, so I want young, hungry people, who are going to work hard and are going to deliver, and they will be rewarded for that. I look for that twinkle in their eye and I consider they are somebody I want in the office. Everybody here is positive; there is no bad energy in the office and nobody has any personal issues. Everyone is thoroughly enjoyable to be around. I’m lucky. I get to work with great people. Being able to come to work every day and enjoy my team is worth any pay cut I took from leaving the world of finance.”

Sarah Jones

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MONIKA KABBARA, OPERATIONS LEAD

ALEXANDRA SNOW, DIRECTOR OF BRANDS AND PARTNERSHIPS

“The UAE has definitely been the spearhead in e-commerce evolution in the Middle East, which is how we have managed to be as successful as we have. Some of the products in the Middle East have manufacturing plants in Saudi. Challenges we faced included issues the volume we could purchase in. But it is nice we can show suppliers how quickly we ramped up in the UAE, and how we can represent their brand online, as well as the reach we have. Once we overcome any logistical learning curves, they are very receptive. It’s nice to have proof of our concept so we can show them how we represent brands online as well as the conversion that we are achieving. Then they are usually quite keen to work with us.”

DONNA VAN DER MERWE, CREATIVE DIRECTOR

“We do the graphic design for everything from our social media posts, the daily newsletter that we send out, and all our web banners–anything that requires some kind graphic, even for our corporate documents or our roll up outside the office, we handle that. I also manage the social media content, so we have a number of trackers in place. I’m now building my team and training them to schedule our social media posts, particularly as we are expanding into Saudi Arabia it is going to get a lot busier. I’m training my team to do everything so they can improve their skill sets and it’s always good to have a backup where more than one person knows how to do things.”

“We were looking for a different partner for the business outside of the UAE. It is really difficult to find good partners.

We started doing our research looking for referrals for companies to do our data outsourcing and we put together a short list of suppliers, we sent them a test case, and they went through it. We narrowed our selection down to our new partner based on their costs and the potential of a longterm partnership. The company we are going to work with was willing to set up a third shift for their staff so we could have 24-hour access to their customer supprt, and they are willing to work in English and Arabic.”

MIA GRACE, OPERATIONS ASSISTANT

“I focus on dealing with suppliers and processing orders.

I make sure goods get delivered on time and if there are any issues with the orders then that’s when we intervene.

We are different from other e-commerce platforms. We operate on a marketplace module as we partner with warehouses, we don’t have our own. We have to rely on the warehouses to pack and send out the goods properly.

Sometimes there will be issues like the wrong product being delivered, but with proper communication on how we work and how our business module is designed, our suppliers are getting more familiar with how we do things.

Sarah is always telling us how we communicate with other people is important, so if there are any issues, I will talk to them and try to resolve the issues.”

KAYE GRAVOSO, BRANDS AND PARTNERSHIPS EXECUTIVE

“I’m part of the brands and partnerships team. I work with sellers to make sure we get the right images and data for product listings, and I handle any queries that they have, either before or after we go live. The team is growing every day so we upload about 1,200 products onto the site on a weekly basis. I make sure everything is completed on time.

I also have to deal with the different personalities of the sellers. If there is a situation that I’m struggling with, Sarah and Alex are very helpful making sure that our team gets all the support we need.”

TO SEE MORE FROM OUR DAY ‘BEHIND THE SCENES’ WITH THE MINI EXCHANGE TEAM, VISIT WWW.CPIFINANCIAL.NET FOR OUR VIDEO INTERVIEW WITH SARAH JONES. WE ALSO LIVE TWEETED THE DAY USING #FMEBTS AND WE ARE ON INSTAGRAM, @FINANCE_MIDDLE_EAST WWW.FINANCEMIDDLEEAST.NET

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LAST WORD

Partnering art and law

Giovanni M. Rossi

Giovanni M. Rossi, Managing Partner, Bonnard Lawson (Dubai Branch), talks about balancing his work between Switzerland and Dubai and introducing art law to the Gulf region WHAT DOES YOUR CURRENT ROLE INVOLVE ON A DAY TO DAY BASIS? My current role is twofold; I am the founder and managing partner of Bonnard Lawson’s Dubai office while still heading the corporate transactions, and banking and finance groups in our Geneva headquarters. My day-to-day legal activity is focused on advising individuals, companies and financial institutions. My daily managerial tasks involve coordinating the whole of my practice and, of course, coping with the challenges of a growing office in Dubai.

WHAT PLANS DO YOU HAVE FOR THE BUSINESS OVER THE NEXT 12 MONTHS? As a firm, we do not want to expand.

Rather, our strategy is to concentrate and consolidate our strengths by building on our competitive advantages in our four pillars of activity: corporate, banking, international arbitration and private client services.

We are one of the few Swiss firms with offices outside of Switzerland. My plan for the next 12 months is to further expand our Dubai-based legal activities with reference to new geographic areas of interest to our clients, such as Africa, India and Iran, and to better promote some of our expertise such as art law among art professionals, collectors, galleries and museums in the UAE and greater Gulf area.

HOW DO YOU PREPARE FOR THE DAY AHEAD? I like to keep up with daily economic news while enjoying a good espresso.

Being informed on global legal and business issues is essential for my work, and much appreciated by clients who rely on my advice.

WHAT IS THE MOST CHALLENGING ASPECT OF WHAT YOU DO? Negotiation on behalf of my clients, which requires great interpersonal abilities and particular physiological skills as well as technical and cultural knowledge.

HOW DO YOU STRIKE A WORKLIFE BALANCE? My work-life balance is not a status but is it a target, a mindset, to be constantly readjusted with the help of my wife and three children.

WHAT IS YOUR FAVOURITE ART? My family and I have been art collectors for generations. I truly cherish our unique collection of what in Italy is called the ‘arte musiva’ or ‘pietra dura’ technique. It is created using cut and fitted, highly polished coloured stones, juxtaposed with a technique similar to marquetry. This technique dates back to the renaissance and flourished in Florence, where my family comes from, therefore is also known as ‘mosaico

fiorentino’. The result is extraordinary as the images are composed in such a way that are beautiful and exquisitely refined to the extent that each and every shade and detail looks as if it was painted in colours.

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What is the best advice you were ever given?

My father’s advice: it is better to live with remorse than regrets. Trust yourself, set clear goals, and do not be afraid to try.

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What is your favourite travel destination?

The next country I have not yet visited. The world is big, and I am a very curious traveller.

What are your hobbies?

Besides playing tennis, golf and skiing, I enjoy good Italian food.

I am the chair of the Dubai Chapter of the Italian Academy of Cuisine that is a cultural institution of the Italian Republic.

What book are you currently reading?

Outliers by Malcolm Gladwell. I subscribe to the theory that it takes roughly 10,000 hours of practice to achieve mastery in a field.

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