The CFO Middle East | Issue 12 by The CFO Middle East

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Corporate Law fir of the ye m ar

M&A Deal of the Year Venture Capit a Firm of the Ye a l r

Lifetime evement A ch i Award

DIFC CFO Rajesh Pareek Saxo Bank’s Steen Blaafalk

Inaugural CFO Middle East Awards honours region’s high-flyers Download the FREE ‘The CFO ME’ app and explore your favourite magazine

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Opportune overhaul MANAGEMENT Dominic De Sousa Chairman Nadeem Hood Group CEO Rajashree Rammohan Publishing Director EDITORIAL Group Editor Jeevan Thankappan jeevan.thankappan@cpimediagroup.com +971 4 375 5678 Editorial Assistant Adelle Louise Geronimo adelle.geronimo@cpimediagroup.com +971 4 375 5683 Contributing Editors Annie Bricker annie.bricker@cpimediagroup.com +971 4 375 1643 James Dartnell james.dartnell@cpimediagroup.com +971 4 375 5684 ADVERTISING Commercial Director - Business Division Chris Stevenson chris.stevenson@cpimediagroup.com +971 4 375 5674 Group Sales Director Kausar Syed kausar.syed@cpimediagroup.com +971 4 375 1647

These are hard times, and getting through economic turmoil is never easy. With banks tightening lending, especially to small and medium enterprises, managing working capital and cash flow is more important than ever for business owners and management teams. Many organisations in the region expect the credit crunch to worsen over the coming months, which will have a severe impact on supplier-customer relationships and increase exposure to bad debts. In such a turbulent time, the only way to be in control of your business is to accurately forecast cash requirements and anticipate cash flow on a weekly, monthly and yearly basis. While the CFO may not be involved in day-to-day cash management, they will have to get back to basics and ensure there is the right level of liquidity, that they maintain optimal lines of credit and reinvest idle cash in business growth plans. All this requires a strong cash management system, and a mature finance function. Often, companies grow in terms of turnover and employee size, but the finance function and other supporting business processes do not keep pace with this growth. This is an ideal opportunity for CFOs to transform their finance and treasury departments by investing in right technologies and tools, and streamlining systems and processes for improved liquidity and cash management structures. This edition of the magazine features the winners of our first- ever annual awards, which was held last month. Spanning 12 categories, these leaders of the regional financial world were chosen after a rigorous judging process conducted by our independent judging panel, comprising industry experts, former CFOs and independent consultants. The winners we selected for this yearâ&#x20AC;&#x2122;s CFO Awards have showed an outstanding aptitude for financial strategy, leading change, and driving projects and innovations. We hope the tales of exemplary financial leadership inspire all of you.

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tHE CFO MIDDLE EAST

Advisory Panel The CFO Middle East’s Advisory Panel comprises a dynamic group of experts and leaders in various aspects of finance. As industry captains arriving from world-leading organisations and specialising in financial strategies, accounting and management, these key personalities will play a vital role in ensuring the delivery of relevant and accurate analyses of the latest trends and issues in the business community.

Ahmad Darwish Ahmad Darwish is a Board Member and Secretary General of the UAE’s Accountants and Auditors Association (AAA), an organisation tasked with the promotion and development of the accounting profession in the country. He is also the Senior Manager for Financial Accounting at DP World UAE and oversees the management accounting, treasury and asset management divisions of the company. With his extensive financial expertise Darwish is also the first Emirati to chair the UAE Members Advisory Committee of the ACCA. Hanady Khalife Hanady Khalife is the Director of Operations, Middle East and Africa, of the Institute of Management Accountants (IMA). She is responsible for training providers, business partners, universities, governmental entities, amongst others. Khalife is also an expert consultant specialising in assisting clients develop and implement strategic business plans and build partnerships with key industry stakeholders. Michael Armstrong Michael Armstrong, FCA is the Regional Director for the Middle East, Africa and South Asia (MEASA) of ICAEW. He is responsible for the ICAEW’s work across the MEASA region, collaborating with key stakeholders, engaging with businesses across the region, supporting ICAEW members and working with both public and private sectors on raising awareness of the relevance of chartered accountancy catalysing

economic growth. Armstrong has extensive experience advising financial institutions and energy and natural resources companies in addition to having held several leadership and advisory positions in business and government. David Thomasson David Thomasson is the founder and Managing Director of Phoenix Financial Training. David is a fellow of CIMA and worked in the accountancy industry for many years before moving into training in the 1990s. PHOENIX offers courses leading to Professional Finance Qualifications in ACCA, CIMA and ICAEW in Dubai and India. Offering a range of bespoke financial courses in Financial Awareness Building and Corporate Treasury Phoenix’s student body ranges from independent students to practitioners of private companies and sovereign wealth funds. Lindsay Degouve de Nuncques Lindsay Degouve de Nuncques is the UAE Head of the Association of Charted Certified Accountants (ACCA). Her role entails spearheading discussions with regulators, business leaders and important stakeholders to strengthen the ACCA’s network and profile in the region. Degouve de Nuncques has spent more than eight years with ACCA in various senior roles. Geetu Ahuja Geetu Ahuja is the Head of GCC for the Chartered Institute of Management Accountants (CIMA). Responsible for

developing the growth of operations and positioning the global brand of CIMA across the GCC region, Ajuha establishes strategic partnerships with global and regional entities. She is also responsible for overseeing the launch of various region specific CIMA nationalisation programmes in the GCC. Paul Gyles Paul Gyles is the Regional CFO and Board member for all ISG Group companies – an international construction services company delivering fit out, construction, engineering services and a range of specialist solutions. He is responsible for the finance, HR, IT, admin and legal functions for ISG’s Middle Eastern outfit. A key aspect of the role is project funding and raising external financing by working with both Arab and international banks. Gyles is also the Chairman of the Steering Committee of the MECA CFO Alliance, the largest CFO networking group in the Middle East. Amer Khansaheb Amer Khansaheb is the president of the CFA Society Emirates. He is the Managing Director of Khansaheb Investments, an investment company with investments in construction, real estate and infrastructure. His expertise includes real estate management, construction management and financial analysis. Amer graduated from the American university in Beirut with a degree in Civil & Environmental Engineering. In 2009, he received his MSc in Project Management from the British University in Dubai. He has been a CFA charterholder since 2009.

CONTENTS

8 News The latest developments in local finance

12 The CFO Middle East Awards We bring you the highlights of our inaugural ceremony that honoured the regionâ&#x20AC;&#x2122;s top finance talent

26 Ease of exchange Saxo Bank CFO Steen Blaafalk shares his thoughts on the potential of high-tech forex trading in the region.

28 Time is money DIFCâ&#x20AC;&#x2122;s Rajesh Pareek opted for a fresh financial reporting solution to bring his team accurate, real-time data.

30 Internal inquiry New research from the UAE IIA sheds light on internal audit practices in the country

30 33 The sustainable SME Strategies 4 Sustainability Founder and Managing Partner Volker Soppelsa underlines the importance of support and strategy for sustainability initiatives.

34 On your Mark How far is the GCC from implementing its Trade Mark Law? Is further legislation needed to push it through?

36 Acute analysis The CFO Middle East partnered with SAP and PwC to deliver an enthralling roundtable discussion on customer analytics.

40 Nest egg

Lux Actuaries & Consultantsâ&#x20AC;&#x2122; Susan Turner gives her take on the importance of pension schemes being introduced to the GCC.

42 Accounting analytics Gary Cokins highlights the benefits of using analytics for management accounting.

News

DIFC launches online client portal Dubai International Financial Centre (DIFC) has launched the third phase of its upgraded DIFC client portal, offering a range of tech services to further enhance its overall client and tenant experience. The new portal offers online services, which include company registration, licence renewal and company amendments. In addition, users can access employment services, such as the application, renewal and cancellation of visas, all with an online payment facility. By facilitating single platform access and coverage of departmental services, the client portal reduces processing time by almost 80 percent for certain types of applications, from the time of submission of the application to receiving approval. The portal also eliminates the need for hard copies for all employee services. Servicing the requirements of all clients more efficiently, the Centre’s enhanced services have facilitated improved accessibility and responsiveness, with an almost 50 percent reduction in client waiting time. Alya Al Zarouni, Senior Vice President, Government and Registry Services, DIFC Authority, said, “We acknowledge the importance of providing a simple and streamlined client portal for the wider benefit of customers and companies alike. As a leading financial centre, it is critical to ensure the implementation of cutting-edge technologies and to provide single platform access to all government services.” In line with the Dubai leadership’s ‘Smart City’ initiative, the DIFC client portal “indicates the Centre’s forward momentum to building a unique financial ecosystem supported by an efficient, simple and streamlined technological and physical infrastructure.”

Deloitte hosts partner meeting

Michel Sleiman, President General, Lebanon

Deloitte Middle East hosted its annual partners meeting in mid-November in Beirut with over 150 partners from the Middle East practices, who were joined by Deloitte global, and other memberfirm leaders from Europe and the US. In his keynote speech at the event, Lebanon’s President General Michel Sleiman discussed the current geopolitical and strategic environment in the Middle East and its impact on the region’s economy. In addition to Deloitte Middle East leaders, other speakers and panelists

included Karim Souaid, CEO of Growth Gate Capital, as well as Deloitte global executives Roger Dassen, Managing Director, Risk, Regulatory and Public Policy, Deloitte Touche Tohmatsu Limited (DTTL), Rik Vanpeteghem, Managing Director, Europe Middle East Africa (EMEA), David Sproul, Senior Partner and Chief Executive of Deloitte UK, Timothy Mahapatra, Global and EMEA Financial Advisory Leader, Frank Dubas, SWF LeaderDTTL, and Jens Simonson, EMEA Reputation and Risk leader. “Despite the many challenges faced by the region, a number of countries in the Middle East continue to grow and be attractive for investment,” said Omar Fahoum, Chairman and CEO, Deloitte Middle East. “At Deloitte, we strive to stay attuned to market needs and transform our business offerings in anticipation of any disruptive trends or any complex business challenges facing our clients. Resilience and adapting to change are two of our differentiators as a professional services firm.”

GCC BDI: Risk management a top corporate governance issue According to the GCC Board Directors Institute’s (BDI) recent survey on board effectiveness, not enough board directors in the Gulf region are aware of and have clear visibility on the top risks facing their companies. BDI conducted its ‘Mastering the board’ Workshop in Riyadh in November in partnership with J. P. Morgan. The two-day programme focused on four pillars of high-performing boards: risk management, the role of the chairman, strategy and succession planning. David Beatty, Conway Director, Clarkson Centre for Business Ethics and Board Effectiveness, and Professor of Strategic Management, Rotman School of Management; and Peter Breen, Partner emeritus and Chair of the Middle East Practice and member, EMEA CEO &

Board of Directors Practice, Heidrick & Struggles were among the keynote participants. “With low oil prices and regional instability applying pressure on company profits and performance, risk management is an essential component of an effective board,” said Nathalie Potvin, Executive Director, BDI. “This master class addresses a fundamental objective of the Institute which is to help build board member effectiveness and capabilities through the sharing of best practices and experiences.” The workshop offered directors the opportunity to learn from each other and through the analysis of current case studies. The next Mastering the boardroom workshop will take place in November 2016 in Dubai.

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News

aafaq Islamic Finance, C3 – Edenred sign MoU

aafaq Islamic Finance has announced the signing of a strategic new partnership agreement with C3 – Edenred, a prepaid card service provider company that offers a range of payment products and services. Mujtaba Naseem, Deputy CEO and CFO and Amanda Deykin, Deputy CEO and COO of aafaq Islamic finance said that the new partnership is expected to result in exciting new payment features for aafaq’s Sadad card, particularly for its wages protection system (WPS) services. Under the terms of the agreement with C3 – Edenred, corporate customers

can now experience benefits like faster processing of payroll, minimum processing time and affordable processing fee. Cardholders can use the card to access their funds at ATMs 24/7 worldwide and make purchases at any MasterCard location. They also have access to online services (web portal and mobile application) where they can view their card balance, transaction history, as well as make payments. The new payment features will play a significant role in improving business volume in the UAE with a product that is unique to aafaq’s client base. “The new alliance will further reinforce our Sadad card, especially for our WPS services, demonstrating our commitment towards improving customer experience and convenience,” Deykin said. “In fact, the additional features will help aafaq’s customer service team in handling WPS related enquiries and our move to meet set international quality standards.”

Grant Thornton appoints new partner Grant Thornton have appointed Samer Hijazi to lead its Abu Dhabi practice. Hijazi has extensive experience leading audit engagements for global investment banks, FTSE 100 banks, sovereign wealth funds, investment managers and international banks. He has directed the audit of a number of financial services teams for clients that have multilocation operations, in Europe, Asia, Africa and the Middle East. He was instrumental in the formation of the UK Islamic finance practice and developed new products and solutions for UK Islamic financial institutions, FTSE 100 banks and global investment banks, which saw him becoming de facto UK

Head of Islamic Finance in 2009 and global head in 2013 for a Big Four firm. As Global Head of Islamic Finance, Samer played a key role in the lobbying of the British government which resulted in the launch of the UK government sukuk which was oversubscribed 10 times. Hijazi was awarded ‘Global Islamic Finance Adviser of the Year – International 2014’ by Professional Sector Network. Through the appointment, Hijazi will continue to lead the strategic direction of the Abu Dhabi practice, whilst working to promote and fortify Grant Thornton’s financial services and Islamic finance offering.

GCC equity markets heading for growth A recent Bank of America Merrill Lynch research report titled, ‘MENA and Frontier Observer - Frontier markets screening increasingly more attractive: Focus on quality’, highlighted that GCC equity markets are looking increasingly attractive. In this context, the report suggests that the markets currently represent a buying opportunity, particularly with appealing stock valuations and stronger earnings momentum. “There are broad based buying opportunities, but stock selection is becoming key,” said Hootan Yazhari, Head of MENA & Frontier Markets Equity Research. “We retain our bias for markets with robust macro, attractive valuations, consistent earnings delivery and/or superior earnings growth. These factors make the UAE our preferred MENA market with Kuwait as our preferred GCC Frontier market. The sharp correction across frontier markets since the summer has also yielded strong opportunities across many other markets, including Saudi Arabia. In this context, we believe stock selection (rather than market selection) is becoming more crucial and advocate a focus on quality and mispriced opportunities.” Yazhari also emphasised that as their most preferred attractively valued GCC market, the UAE offers long term potential and healthy earnings momentum.

13%

decrease in M&A deal activity in the MENA region from 104 deals in Q3 2014 to 91 deals in Q 2015 Source: EY

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The CFOâ&#x20AC;&#x2122;s role in cybersecurity Improve cybersecurity and protect against cyber-attacks Often the keeper of cybersecurity strategy, the CFO must make plans to ensure the enterprise is adequately shielded from cyber-threats.

Responsibility for cybersecurity While cybersecurity traditionally has been handled by the CIO and the IT function, escalating risks have driven cybersecurity up the corporate ladder to the desk of the CFO.

CFO

CIO

CISO

Other

38%

36%

19%

Top cybersecurity and data privacy concerns

64% Customer/client data privacy

48% Impact of a breach on bottom line

63%

Potential for undetected breaches

?? 49% Unknown risks

52% Compliance with data security laws

How to optimise a cybersecurity risk management strategy

40%

36%

Assess risks and investments relative to cybersecurity

Align cybersecurity strategy to business strategy

20%

Responding to cybersecurity risks: Steps taken by organisations

21%

Perform vulnerability assessments

20%

Monitor cybersecurity internal controls

Get buy-in from management and board to invest in strategy

16% Determine the location of sensitive data

16%

All of the above

Evaluate cybersecurity insurance coverage

4% Develop incident response plans

Major impediments to developing an enterprise-wide cybersecurity strategy

Lack of understanding of risks 46% Budget constraints 29% Lack of perceived value 11% Lack of consensus on strategy 9%

Source: â&#x20AC;&#x153;The CFOs role in cybersecurity,â&#x20AC;? FERF and Grand Thornton LLP

COVER

The CFO Middle East Awards

Celebrating financial leadership The inaugural CFO Middle East Awards celebrated the achievements of the most innovative, diligent and dedicated financial professionals and teams in the region along with firms that have exhibited outstanding leadership. Held at the Jumeirah Emirates Towers Hotel in Dubai, the event honoured financial professionals who have driven exceptional value for their organisations

through innovative solutions, as well as companies that have been cornerstones in the industry in a number of aspects. The winners, chosen from a pool of more than 150 submissions, had to demonstrate not only that they were able to create new value for their organisations, but also that they did so in uncommon, innovative ways. The awards ceremony was kicked off with a welcome note from CPI

Media Groupâ&#x20AC;&#x2122;s Chairman and Founder Dominic De Sousa. During his welcome address, he mentioned that as a business owner, he greatly values the work that the finance professional undertakes on a daily basis. All of the CFO Middle East award winners were selected after a rigorous application and review process by a panel of judges comprising a range of industry financial experts.

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Ahmad Darwish Secretary General, UAE Accountants and Auditorâ&#x20AC;&#x2122;s Association

Panel of judges

David Thomasson

Geetu Ahuja

Founder and MD of Phoenix Financial Training

Head of CIMA, GCC

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Lindsay Degouve de Nuncques Head of ACCA, UAE

Fintan Somers Founder, SomersConsult

Tamer Bazzari Board member, CFA Society Emirates

CFO of the year Gautam Pradhan, Group CFO and Executive Director, National Marine Dredging Company

Gautam Pradhan, Group CFO and Executive Director of National Marine Dredging Company, is a highly accomplished financial executive with over 20 years of experience in the civil marine and oil and gas industries. He often deputises as company CEO, and is also the chairman of the company’s CAPEX committee. With a keen interest in HR and IT,

Pradhan was involved in change management initiatives when NMDC moved from Cobol-based systems to Oracle and has been a key part of the company’s international expansions in countries outside the UAE. He was also a member of the financial committee that oversaw a $1.5 billion strategic Suez Canal project completion.

Finalists: • Anand Soni, Bafco Group • Asif Keshodia, Souq.com • Nrupaditya Singhdeo, Al Masah Capital • Pramod Kumar Chand, RAK Ceramics •Werner Flaig, Easa Saleh Al Gurg Group • Yuvraj Narayan, DP World

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Young CFO of the year Ghulam Raza Bhojani, Executive Vice President of Finance, Operations, IT and change, Abu Dhabi Finance

At the relatively young age of 34, Ghulam Raza Bhojani, who joined Abu Dhabi Finance as a financial controller, has risen to the position of executive vice president of Finance, Operations, IT and change. He was instrumental in implementing a core lending system at ADF in 2009, and a best-in-class, fully automated IFRS system specific for mortgages along with Oracle Financials during 2010. ADF was one of the first companies in the Middle East to use a fully integrated IFRS

recording and reporting functionality. During 2013, he was given the responsibilities of operations and IT, and in 2014 he started overseeing change management and business strategy as well and his main objectives growing the company and sustaining profitability. He played an active role in revamping ADF’s business strategy and cascading it to the entire organisation. He currently leads the back office operations.

Finalists: • Gagan Lalwani, International Horizons College • Ghulam Raza Bhojani, Abu Dhabi Finance • Jignesh Sanghvi, DMCC • Kartik Shah, Hira Textorium • Nauman Mian, Bayt. com • Vishal Kumar, JBF RAK

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Public Sector CFO of the Year Jignesh Sanghvi, CFO, Dubai Multi Commodities Centre

Jignesh Sanghvi, CFO of Dubai Multi Commodities Centre, is responsible for driving foreign direct investment with a focus on enterprise, trade and commodities. In the last 18 months, he was responsible for revitalising DMCC’s corporate governance and risk management framework, as well as adopting international best practices. Acting as a catalyst for change, Sanghvi has brought about transformation through processes to provide customerfriendly, efficient and cost-

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effective solutions, as well as pioneering an industry-fist revenue recognition model for free zone licences. Sanghvi has effectively implemented a long-term strategy involving robust financial operations, revenue maximisation and cost rationalisation that resulted in record profits for the organisation in 2014 with a year-on-year growth of 35 percent and a strong cash position to augment future growth. As a result of long term strategies and a successful

business model, DMCC, established in 2002, has grown from a membership base of 200+ in 2004 to more than 11,000 in 2015. Sanghvi also spearheaded DMCC’s digital transformation initiative, which has transformed DMCC’s culture - the way it interacts with its members, the way services are offered, and interaction between business teams. DMCC’s members can now apply for all services online on any device, anywhere, anytime – a true transformation compared to a mere 30 percent of services being online in 2013.

Publisher’s choice Rajesh Pareek, CFO, Dubai International Financial Centre Authority

Pareek is a Chartered Accountant with over 16 years of experience advising key clients with the Big 4 accounting firms across a broad range of services. Prior to joining DIFCA, he was a Director at KPMG Dubai, where he worked for more than eight years. He is an Associate with the Institute of Chartered Accountants, India, and holds a Bachelors of Commerce with Honours in Finance and Accounting and has done a General Management Programme from IIM Ahmedabad, India. Pareek joined DIFC in January 2011 as the Chief Financial Officer of DIFC Authority, overseeing the financial performance of the Authority, DIFC Investments LLC and its subsidiaries (‘DIFCI’)

and Registrar of Real Properties among other entities. One of the key milestones achieved by Pareek in 2012 was his role in directing the refinancing of the $1.25 billion DIFCI sukuk and its repayment. This involved high level discussions with various stakeholders, local and international banks, lawyers and financial advisors. The refinancing was achieved through a syndicated facility of $1.035 billion with participation from international and local banks and key divestments. Pareek successfully managed relationships with investors and the rating agencies in order to maintain the sukuk’s rating from January 2011 to June 2012. In 2014, Pareek spearheaded DIFC Investments’ credit

repositioning initiative by engaging with Standard & Poors, which resulted in the company achieving the investment grade rating BBB-, which required the re-anchoring of the rating agency’s understanding of DIFC Investments’ credit fundamentals (given that the Company was previously rated “B+”). Pareek led the sukuk issuance, following the rating exercise, marking the return of DIFC Investments to the international debt capital markets, allowing the company to raise $700m with a 10year tenor. The credit repositioning, along with the sukuk issuance has provided DIFC Investments with an effective capital structure and a platform to implement its growth strategy over the coming years.

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Finance team of the year DP World

The last 12 months have been a very active time for DP World’s finance team since its IPO in 2007, with the $3.5 billion acquisition of Jebel Ali Freezone creating a best-in class port logistics network. DP World also acquired the port of Prince Rupert in Canada for $450 million, beating off significant competition and without paying a large premium. DP World’s finance team has rolled out a new electronic automated reporting system called Hyperion, which is be available to the firm’s management and also the financial exchange to access information electronically. Hyperion is designed to allow the management to access data online instead of through a book or excel spreadsheet, and to manipulate data to seek particular trends. For example, two locations can be selected to analyse how they have performed after a CAPEX cycle. This has allowed DP World to reduce the time taken from days to minutes. Consequently, the management are able to make quicker, more informed decisions.

Finalists: • Easa Saleh Al Gurg • Mediclinic • Souq.com

Treasury team of the Year Easa Saleh Al Gurg Company

Over a 12-month period, Easa Saleh Al Gurg Company created a centralised treasury department – complete with an in-house bank – to consolidate the cash management responsibilities that had previously been dispersed among the 26 different companies within the Group. In addition, the Group’s banking arrangement was rationalised by closing more than 60 accounts. A centralised trade finance processing centre and payment factory were set up, which now makes payment on behalf of all Group entities. The implementation of the treasury management system enables the Group to carry out netting across all its bank accounts on a daily basis. Previously, receiving consolidated daily balances across the Group used to entail major time and effort. At present, it is a smooth, automated process that has effectively eradicated debit balances.

Finalists: • DP World

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Accounting firm of the year KPMG AL Fozan & Al Sadhan

KPMG AL Fozan & Al Sadhan, KPMG’s local arm in Saudi Arabia, has been operating in the Kingdom since 1992, and offers a blend of international expertise and local knowledge to its clients in an increasingly complex, but exciting market. The firm has grown to be one of the largest professional services in Saudi, with more 675 employees based out of three offices in Riyadh, Jeddah and Khobar.

Finalists: • Grant Thornton • Yuga Accounting & Management Consultacy

Audit firm of the year HLB Hamt

HLB Hamt, part of the HLB International Networks, has developed a strong industry reputation in the core area of audit and assurances services since its inception in 1999. The firm offers it clients focused attention to detail, and each audit and assurance team is led by a partner, who is actively involved with assignments. HLB Hamt offers parallel expertise and technology, underpinned by a more cost-effective fee structure.

Finalists: Grant Thornton

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Baker & McKenzie’s Middle East practice, with nearly 100 fee earners, is best known for its expertise in banking and finance, project finance, Islamic finance, capital markets, corporate/M&A, dispute resolution and real estate. The firm has been active in the region since 1975, and as a pioneering firm, was most notably the first to enter both the Saudi Arabian and Egyptian markets. Since then, the firm has made a significant investment in the broader Middle East region, establishing a substantial presence.

Corporate law firm of the year Baker & McKenzie

Finalists: • BSA Ahmad Bin Hezeem & Associates

DP World acquired Jebel Ali Free Zone (JAFZ) for $3.5 billion dollars to create the largest port and freezone logistics centre in region. The port & Freezone combined accounts for 25 percent of Dubai’s GDP and employs 250,000 people. The asset was acquired from DP World’s parent company and given the related party nature, only independent shareholders and board members voted on the transaction. DP World hired Citi Group, Deutsche Bank and Moelis & Co to work on an independent valuation, which provided comfort to its shareholders. In terms of financing the deal, the group raised $1bn through a convertible bond and increased its revolver facility by $2bn in anticipation of closing the deal.

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M&A deal of the Year DP World

Venture capital firm of the year Octagon International

Lifetime achievement award Raju Menon, Chairman and Managing Partner, Morison Menon Group

Any market around the world, whether emerging or developed, needs investment. As a number of the Middle Eastâ&#x20AC;&#x2122;s most influential countries begin to gather steam in their drive for success, financial backing is always needed to ensure contemporary initiatives have the chance to make their ambitions reality. Octagon International was chosen for this award for driving fresh growth in the region and funding some notable start-ups.

Raju Menon, a Chartered Accountant by profession, has almost three decades of post qualification experience in the field of auditing, consultancy, taxation, incorporation, commercial and company law. He is the Founder, Chairman and Managing Partner of the renowned Morison Menon Group, which is part of Morison International. Headquartered in Dubai, the group has offices in Abu Dhabi, Sharjah, Jebel Ali Free Zone, DAFZ and Ras Al Khaimah, as well as overseas operations in India, Oman and Qatar. As well as establishing Morison Menon as as a large and well reputed audit and business consulting firm, Menon has also been instrumental in guiding more than 3,000 investors to set up their businesses in the UAE.

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Bahrain Ruan van Rensburg ruan@luxactuaries.com Cyprus Dimitris Dimitriou dimitris@luxactuaries.com India Yogesh Agarwal yogesh@luxactuaries.com Turkey Seda Ekizoglu seda@luxactuaries.com UAE Shivash Bhagaloo shivash@luxactuaries.com

Interview Interview

Steen Blaafalk

Ease of exchange Saxo Bank’s Group CFO Steen Blaafalk discusses the opportunities for foreign exchange trading in the Middle East and the power of technology platforms in the space.

ow big is the retail forex market in the Middle East, and what are the trends shaping its growth? The Middle East commands approximately 8 percent of the retail forex market at an average daily traded value of $23 billion. Recent figures have also suggested there are in excess of 200,000 active traders in the Middle East and North Africa – a drastic increase from 20,000 a decade ago. We believe that number will only increase. We are witnessing a strong surge in demand both from existing traders looking for a more service-oriented platform and from new entrants keen to explore the forex trading environment. Can you discuss the future of online trading in the region? With increased access to information, which is facilitating informed decisions, a growing number of investors in the region have turned to online trading in the hope of managing their investments by accessing trading opportunities across multiple asset classes. As such, Saxo Bank sees huge opportunities in the region and we have made a significant investment not just in acquiring clients, but also equipping them with the primary tools they need to invest – insights and technology. How do you plan to build out your business in the digital age? Technology is at the core of Saxo Bank’s

operations. Innovation has been one of our cornerstones since we were founded in 1992 – in fact, you could say that we were a FinTech company before the term even entered the mainstream. We have consistently invested heavily in improvements to our trading platform. The result is intuitive, clean and userfriendly technology - with increasingly streamlined platforms offering the tools and functionality to give our clients the edge in the multi-asset investment space. That said, we are certainly not resting on our laurels. We want to shape the future, not follow it. Our technology is not only changing how our retail clients trade, but also how our partners – other banks and brokers – improve their offering to their end clients. The sheer pace of technological change has made it impossible for many institutions to maintain an edge when it comes to innovation. The result is a paradigm shift from a businessto-customer economy to a so-called collaborative economy. As testament to this strategy, we launched SaxoTraderGO in May - our new multi-asset platform. The platform was built from the ground up with a focus on usability and performance, integrating seamlessly between desktop and mobile devices. The development of the platform reflects a key trend: 20 percent of the bank’s overall retail trading takes place through mobile devices. This adoption of technology and the increase in mobile business-tocustomer interaction presents a huge

growth opportunity for both Saxo Bank and its partners. We are also improving access to trading opportunities across multiple asset classes; investors need to be able to trade in markets where there is volatility and to switch between asset classes with consummate ease. In light of this, it is also worth mentioning the depth of our offering. At present, we can provide clients with access to more than 30,000 financial products including FX (spot, forward and options), stocks, CFDs, commodities, futures, contract options and single stock options. What should CFOs know about volatile foreign exchange rates and the risks involved? Broadly speaking, we see volatility as the degree of unpredictable change over time of a certain currency pair exchange rate. Measuring and managing exchange rate risk exposure is therefore integral to CFOs seeking to reduce their firm’s vulnerability to major exchange rate fluctuations, which could, in turn, impact profit margins. Corporations typically protect themselves from foreign exchange rate volatility through forwards, i.e. contracts that lock in the exchange rate for the purchasing or sale of a currency at a future date. In understanding both the positive and negative aspects of forwards, CFOs can decide whether and to what extent their companies should be using them before selecting a suitable hedging strategy for their organisation. For

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companies with multinational operations or supplier and customer relationships in multiple markets, currency hedging is an essential part of their treasury function. What should they keep in mind while choosing an FX provider? Should they look beyond traditional hedging strategies? Access to foreign exchange markets has transformed unrecognisably in recent years and the abundance of providers has resulted in a number of firms providing similar services but, sadly, there has been a lower barrier to entry meaning that not all firms adhere to the highest standards. Where CFOs should pay attention is in ascertaining whether a provider has robust risk mitigation practices and whether it can combine this with superior technology – something that we pride ourselves on. Investors increasingly demand usability, mobility, performance and service when executing trades. We meet these demands through state-of-theart trading tools and features. White label partnerships have become a cornerstone of our business - we offer banks a sophisticated and cost-effective way to replace outdated technology. There are now more than 120 active white label partners using our technology, including banks with cross-border activities. The SaxoTreasurer platform allows corporate clients to hedge their commercial currency exposure at competitive prices. We continue to see a real opportunity in leveraging our heritage in technological innovation, our robust financial position and risk management credentials to become an essential facilitator in capital markets. Is multi-asset trading becoming increasingly seamless across borders? We believe that the most successful trading firms will continue to break barriers between geographies and asset

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“Recent figures have also suggested there are in excess of 200,000 active traders in the Middle East and North Africa – a drastic increase from 20,000 a decade ago.” classes, thereby flattening traditional structures as investors use the abundant information at their fingertips. Our geographic diversification and global network certainly enhances this; we have clients in numerous markets and a physical presence in each of the major financial centres including London,

Zurich, Dubai, Singapore and Hong Kong. Our ongoing commitment is underpinned by our mission to democratise trading and make markets more efficient through innovation – we feel as though we are now entering an era when we can say that there is finally a level playing field between institutional and retail investors.

case study

DIFC

time is money

Rajesh Pareek has a lot on his hands. As the CFO of Dubai International Financial Centre Authority, he demands accurate, real-time reporting information. He opted for a fresh solution earlier this year that could eliminate errors and ensure faster decision-making.

“We always faced a risk of human error in our financial reporting. There were cases where people made mistakes, which is normal. In addition, the process was time consuming.” Rajesh Pareek, Chief Financial Officer, Dubai International Financial Centre Authority

As the largest organisation of its kind in the Middle East and North Africa, Dubai International Financial Centre finds itself in a formidable position. Ranked 6th out of 53 financial centres globally, it holds an advantageous strategic location - between the major international capital markets of New York and London to the West, and Singapore, Hong Kong and Tokyo to the East - and is only gathering steam. Established by the Government of Dubai in 2004, DIFC is the emirate’s financial free zone, and was established to promote the development of financial services in the UAE, serving to diversify the country’s economy. As of 2011, it contributes an impressive an impressive 4 percent of Dubai’s gross domestic product. Sitting in 110 acres, DIFC had a working population of 16,560 and 1,113 registered companies as of June last year, including 17 of the 20 leading global banks and 8 of the 20 leading insurance firms. At the heart of the DIFC model is an independent risk-based regulator, the Dubai Financial Services Authority (DFSA), which grants licences and regulates the activities of all banking and financial institutions in DIFC. The regulatory body was created using

principle-based primary legislation modelled closely on that used in London and New York. The Authority permits 100 percent foreign ownership and makes no restrictions on foreign exchange or profit repatriation. For Rajesh Pareek, DIFC Authority’s Chief Financial Officer, accurate, realtime data is a requisite of success in his job, with quick decisions a must. The organisation’s finance team, is, in short, pivotal in the overall decisionmaking process. “DIFC’s vision is to be a global financial hub capitalising on a range of its strengths,” Pareek says. “We have a fantastic strategic location, an effective and independent regulatory and legal framework, a tax-friendly regime and first-class supportive infrastructure.” Pareek is clear on his division’s duties to DIFC. “Our department aims to deliver service excellence by creating an efficient and seamless platform to support the business,” he says. “This means providing relevant and dynamic business information, and to integrate finance operational processes with all stakeholders in a manner that maximises efficiency while maintaining proper control.” In Pareek’s role, time waits for no man. “In the fast-paced business world, organisations have to make split

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DIFC sits at the heart of Dubai’s economy

second decisions in certain situations which could have a substantial impact on its financial performance,” Pareek says. “As such, turning information around at a fast pace is critical. You need to have data available at the flick of a hand.” As well as satisfying this goal, Pareek also identified two main drivers in opting for a change in the organisation’s processes. “We always faced a risk of human error in our financial reporting,” he says. “There were cases where people made mistakes, which is normal. In addition, the process was time consuming.” Pareek was keen for his team to be autonomous and contemporary in their drive for fast action. “To make relevant and well-informed decisions, instant access to and availability of data was a must,” he says. “This becomes paramount when operating in an environment of Big Data and multijurisdictional operation. Customised reports need to be instantly generated from the system with limited or no intervention of IT.”

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Along with the support of his team, Pareek sought an online analytical application (OLAP) tool, which could be versatile, user-friendly and, most importantly, customisable on-the-go, with limited or no intervention from IT except in the installation process. The OLAP would also have to work seamlessly with the organisation’s backbone SAP ERP system By late 2014, Pareek had decided that GL Wand from Excel4apps , an SAP financial reporting solution, would be the best fit for DIFC. Such was their level of confidence in the solutions presented by Excel4apps and the supporting information provided, that DIFC made the purchase decision without requiring the 30-day free trial, initially purchasing six GL Wand licences and two Reports Wand licences. He says the process of introducing the technology was relatively painless, his only real challenge convincing the IT department that Excel4apps was exactly what the finance department

needed. “Procurement was an initial hurdle, but one that was easily passed,” he says. “Our management team was quick to realise its benefit against the cost, and gave us the green light very promptly.” A month after beginning the project, DIFC had completed all tests on Excel4apps and had the technology in full operation. The implementation has had a vast effect on the day-to-day operations of DIFC, facilitating a number of processes. “It’s been a blessing,” Pareek says. “The procurement process was well worth going through.” He says it has provided a level of automation not seen before at DIFC. “Excel4apps reduces the manual elements of reporting,” he says. “We can now pull and prepare data in a matter of hours, not days.” In addition to the quality of the technology itself, Pareek has also found it extremely easy to integrate into the daily routines of his staff. “Once they all got the hang of it – which didn’t take long – it has started to work wonders,” he says. “It’s been very compatible with our other software and, to be honest, our staff love working on it.” Pareek points to one gain in particular that has proven to be the most eye-catching in the Excel4apps adoption. “The biggest tangible benefit has the time saved in reporting monthly financials, and has dramatically reduced closing time. Man hours are the organisation’s highest expenditure. We have a small team, and the best way to impact their role is to reduce the time they spend on tasks that can be done through technology. “As for its intangible benefits, having the support and satisfaction of top management on the quality of analytics produced, in the shortest turnaround time, has been fantastic.”

RESEARCH

UAE IIA research

Risk: The focus of modern internal auditing

Newly released research shows internal audit’s role in risk is changing both globally and in the United Arab Emirates.

isk is a fundamental aspect of the internal audit profession. It determines annual audit plans, the size of internal audit departments, and the role internal audit plays with respect to major risk categories. As part of its ongoing research, the Institute of Internal Auditors (IIA) has recently released three global reports relating to risk and internal audit. The reports cover the role of internal audit in risk management, responding to fraud risk, and combined assurance. The 3 research reports are: 1. Who owns risk? A look at internal audit’s changing role 2. Responding to fraud risk: Exploring where internal auditing stands 3. Combined assurance: One language, one voice, one view These risk-focused reports are part of the IIA’s 2015 Global Internal Audit Practitioner Survey. The survey was completed by more than 14,500 internal auditors in 166 countries around the world, including more than 350 internal auditors from the UAE Internal Auditors Association (UAEIAA). This article shares highlights of the three research reports from both a global and UAE point of view.

The role of internal audit in risk management The first report covers risk management trends and internal audit’s responsibilities. The results show that the majority of companies in the UAE had some components of risk management in place, however only 38 percent of UAE auditors surveyed said they had formal risk management in place as compared to 53 percent globally. The majority of those with formal risk management were from financial institutions or companies with $1 billion or more in revenue. It is also interesting to learn that when formal risk management is available at a company, internal auditors in the UAE are providing assurance on risk management as a whole. This is a very advanced concept where the UAE seems to be doing well. Another issue that has been discussed globally for several years is whether internal audit and risk management should be merged into one department. The views continue to vary depending on region and industry. In the UAE, internal audit and risk management are separate functions in 71 percent

of cases (80 percent globally). Meanwhile, in 29 percent of cases (20 percent globally), internal audit is responsible for facilitating risk management. In many cases, it is more efficient to have internal audit facilitate risk management in the non-financial services sector and in particular at privately held companies. A properly executed risk assessment by internal audit can be used to build the foundation of a fit-forpurpose risk management process. However, in the financial services sector, risk management is much more complex, and regulation also impacts the way risks are monitored and managed in this sector.

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Selected recommendations on the role of internal audit in risk management: • Regardless of industry, internal audit should advocate the establishment of formal risk management processes. • Internal auditors should strive to give management assurance on risk management as a whole and not just on individual risks. • Make sure that the role of internal audit as it relates to risk management is clear to all key stakeholders.

Responding to fraud risk The second research report covers fraud risk and the how it impacts the internal audit profession. Not surprisingly, globally and in the UAE, around 80 percent of internal auditors have some or more responsibility for fraud detection and prevention and 55 percent of respondents in the UAE said they are “advanced” or “expert” when it comes to supporting fraud risk awareness. Oddly, research showed that around a fifth of internal auditors in the UAE believed they had no responsibility for either fraud detection or prevention. This approach does not make sense as internal auditors cannot wash their hands of fraud detection responsibilities. The IIA’s standards require internal audit to assess the potential for fraud before any audit as well as how well the organisation is managing fraud risk. Furthermore, when it comes to detection, both internal audit and line management have a shared responsibility to ensure that anti-fraud controls are in place and are working properly. Furthermore, survey respondents stated that fraud risk was not one of top five risks that internal audit or executive management were focusing on, either globally or in the UAE. This is not

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unexpected as strategic and operational risks take up more of a company’s focus. Similarly, only 30 percent of chief audit executives in the UAE believe that focus on fraud risk will increase in the near future. While the results are not surprising when things are normal, it is when major fraud occurs that both internal audit and executive management redirect their focus to the fraud incident. Selected recommendations on responding to fraud risk: • Internal auditors should use their skills to educate management on fraud risk and build awareness across your organisation. • Be proactive in addressing fraud risk by carrying out fraud risk assessments and increasing the frequency of audits in high fraud risk processes. • Learn from previous fraud incidents. Made sure circumstances which lead to the fraud are documented as well as how it was discovered. Use these lessons to improve the effectiveness of internal controls across the organisation.

Combined assurance The third research report covers the relatively new concept of combined assurance. Combined assurance involves integrating and aligning assurance processes at a company so that management and the board get an overall and consistent overview of governance, risk and controls at the company. Such an approach is essential for the board or board committee in order for them to exercise appropriate risk oversight based on unified assurance reporting. The concept of combined assurance takes place at 3 levels: 1) Management: Responsible for risk management and internal control and the timely identification and remediation of control deficiencies.

2) Internal assurance providers: Their role is to support management in their risk and control efforts and include functions such as risk management, compliance and internal audit. 3) External assurance providers: Include the external financial auditor and/or regulators who carry out audits or assessments at the company and report results to management and the board. When we look at the research results, we see that only 22 percent of companies have adopted a combined assurance model in the UAE as compared to 40 percent globally. Further, almost 1/3 of internal auditors in the UAE are not even familiar with the concept of combined assurance. Clearly, the knowledge and implementation of combined assurance is not widespread globally or in the UAE. However, once implemented, combined assurance provides a common view of risks and issues across a company. Conclusion The research and corresponding recommendations clearly show that internal audit faces several challenges when it comes to the important topic of risk and, consequently, the evolution of internal audit’s role. Risk is the foundation of modern internal auditing around the world and in the UAE. Internal auditors need to continue to provide assurance around not just individual risks but risk managed as a whole. They also need to make sure that fraud risk is adequately addressed by management and that the role of internal audit is clearly defined. Finally, although the implementation of combined assurance remains relatively low, this is an area that internal auditors will address over the coming years. Despite these challenges, internal auditors will continue to work hard in order to meet the new mission of internal audit by adapting themselves to the time in order “to enhance and protect organisational value”.

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Time saving: Excel4apps allows executives to quickly and securely access real-time, meaningful information directly from their Oracle E-Business Suite or SAP ERP. Risk Avoidance: Excel4apps solutions create a direct link from Excel to your ERP eliminating the disconnect between Excel and the ERP and reducing the risk of spreadsheet calculation errors. Time for Analysis: Rapid, error-free and real-time access to vital information directly in Excel allow executives and their teams to quickly and thoroughly analyse the information ensuring timely decision making. 1 Kelly, Susan. For finance planning & analysis, majority still use spreadsheets. CFO Innovation. July 3, 2014. Retrieved Aug. 13, 2014, from http://www.cfoinnovation.com/story/8507/finance-planning-and-analysis-majority-still-use-spreadsheets.

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Interview

Volker Soppelsa

The sustainable SME Volker Soppelsa, Founder and Managing Partner of Strategies 4 Sustainability, discusses why it is important for SMEs to integrate sustainability in their core business.

ell us about your sustainability strategies for SMEs. We believe that in the future, sustainability will be at the heart of most business strategies as the global economy shifts from a fossil fuel-based ‘business as usual’ model to a new stakeholder-based resource efficient model powered by renewable energy sources. Our clients tend to focus on providing a value proposition that considers social, economic and environmental factors as part of the final product or service proposition. The understanding of sustainability in this region is improving but still behind other countries. Too often it is seen as a single dimension problem when in fact it is almost always multi-dimensional in nature. Countries like Germany, Norway and Denmark provide good examples of SMEs capitalising on sustainability trends. We encourage our clients to think about sustainability from a systems perspective considering human, environmental and support systems that are connected and interdependent. It is through a better understanding of these systems that our clients identify their future strategies. What are the biggest challenges faced by regional SMEs? Challenges vary from organisation to organisation and range from a basic lack of commercial and business knowledge to access to capital and managing cash flow. Challenges also vary depending on where in the business lifecycle the SME is, with strategy and access to capital being issues early on and cash flow and business

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continuity being issues later on. Overall, in our experience, SMEs don’t know where to get the best help for the challenges they are facing as the support ecosystem is fragmented and not very transparent. At a practical level, cash flow is a huge problem, but one that could be fixed very easily with huge benefits for a large number of SMEs and the economy as a whole if large organisations settled their invoices with their SME suppliers on time. This would accelerate fund flows in the general economy and help SMEs who may be constrained by capital, releasing cash for expansion. Are they often lack hamstrung by a lack of support and experience? Support for inexperienced entrepreneurs often still comes from personal connections rather than a clear institutional support process and this is a problem for those who have a good idea but are not well connected. You can compensate for a lack of experience through support mechanisms but these need to be targeted appropriately and the client must see the value. Often, this value lies simply in the new perspective an experienced consultant can provide to an entrepreneur who has an idea; constructive challenging is very important to ensure ideas are robust enough to make it in the market. For a more established business, support is often required to effectively manage the business once it is up and running as the skills needed to be an entrepreneur and those needed to be a successful business manager are not necessarily the same. Entrepreneurs are

not always the best business managers and need to recognise when to separate these two functions. What is needed for successful strategy development? You need to understand what strategy is and what it is not. Too often strategy development gets confused with strategic planning but they are not the same. Strategy development is a problem solving process that tries to identify how and where you can compete and win. It is able to very clearly demonstrate a value proposition and requires stakeholder involvement and a sense of honest introspection to challenge well established assumptions and misconceptions. The most successful strategies tend be quite radical and applied at scale. What experience and market knowledge do you draw upon for your advisory services? I have been advising organisations for over 30 years and these have ranged in size from a single owner to global multinational corporations. Regionally I have helped to launch commercial and not-for-profit organisations and supported clients in most major sectors. Our consultants come from a ‘Big 5’ background and have many years of experience in the region and internationally.

opinion

GCC Trade mark law

The GCC Trade Mark Law:

Moving closer, in different ways Rob Deans (Partner) and Carl Fennessy (Associate), Clyde & Co

hen will the GCC Trade Mark Law be implemented in member states? Is further legislation required prior to implementation? Are member states planning local modifications to the Law? Following the publication of the GCC Trade Mark Law in 2013, attention has turned to the implementation of this Law, in particular when it will come into force. This article examines this question, within the framework of the GCC legislative system. In particular, we consider when the GCC Trade Mark Law may come into force in each of the GCC states, and the extent to which it will still be necessary to look at national legislation in order to confirm the position in each GCC state. Legislation in the GCC States

The implementation of legislation on a regional basis requires an agreed structure between the relevant sovereign states to bring the legislation into force in each jurisdiction. In the European Union (EU), this result is achieved either through a regulation - which is self-executing and implemented automatically in each EU member state - or through a directive, which directs the EU member states to implement the terms of the directive into national law. The implementation of legislation on a GCC-wide basis is similar to the EU concept of directives. In the case of the GCC Trade Mark Law, the Supreme Council of the GCC (the highest decision-making body of the GCC) issued a resolution during the 33rd GCC Session held in December 2012, requiring member states to implement the GCC Trade Mark Law into their respective national laws “within a period of six months as from the date on which the commercial cooperation committee approves the implementing regulations of the [Trade Mark] Law” (the implementing regulations). The need for Implementing

regulations to be prepared is set out in Article 52 of the GCC Trade Mark Law itself, which states that the commercial cooperation committee - a division of the GCC General Secretariat - is responsible for issuing the implementing regulations. Current status At present, it appears that we are reaching the final stage of the implementing regulations being drafted, and they may well be ready for publication in early 2016. It will then be necessary to refer to the national law of each GCC state in order to confirm when the GCC Trade Mark Law will come into effect in that jurisdiction, and in what form. At present, the position is as follows: • Bahrain - Law No. 6 of 2014 (issued on 17 February 2014) ratifies the GCC Trade Mark Law, and provides that the provisions of the GCC Trade Mark Law will come into force in Bahrain six months after the issuance of the implementing regulations. At the same time, the current Trade Mark Law in Bahrain (Law No. 11 of 2006) will be repealed as from the date on which the GCC Trade Mark Law comes into force. Accordingly, the GCC Trade Mark Law will come into force automatically in Bahrain, without amendment, six months after the Implementing Regulations are issued.

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• Kuwait - Law No. 13 of 2015 (issued on 11 March 2015) ratifies the GCC Trade Mark Law in Kuwait. Law No. of 13 of 2015 itself is expressed to come into force immediately, with any provisions of current legislation which contradict the GCC Trade Mark Law being repealed. However, the Law also envisages that the minister of trade and industry will issue implementing regulations in accordance with the provisions of the GCC Trade Mark Law We therefore anticipate that, once the implementing regulations have been published in the GCC Official Gazette, the minister of trade and industry will issue corresponding implementing regulations at a national level in order to bring the GCC Trade Mark Law into force in Kuwait within six months. It is also worth noting that Law No. 13 of 2015 also anticipates the payment of official fees and fines under the GCC Trade Mark Law in local currency (Kuwait dinars) rather than in Saudi riyals (as set out in the GCC Trade Mark Law). • Qatar - Law No. 7 of 2014 (issued on 8 June 2014) provides that the GCC Trade Mark Law will automatically become effective in Qatar, six months after the implementing regulations. In addition, Law No. 7 of 2014 repeals Law No. 18 of 2007 (which ratified the previous version of the GCC Trade Mark Law from 2006). The Law also states that provisions that contravene the current version of the GCC Trade Mark Law are repealed, although no specific mention is made of the Law No. 9 of 2002,which deals with trade marks, trade names, geographical

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indications and industrial designs. It therefore remains to be seen whether Qatar will at some stage repeal specific provisions of Law No. 9 of 2002 in order to avoid potential disputes as to whether or not a provision has been repealed on the basis that it contravenes the provisions of the GCC Trade Mark Law or whether it is still in force. Interestingly, Law No. 7 of 2014 attaches a copy of the GCC Trade Mark Law, which differs to the position in Bahrain and Kuwait where the implementing laws refer to the text of the GCC Trade Mark Law as published in the GCC Official Gazette. In practice, the result is the same (all countries have adopted the same version of the GCC Trade Law), but the mechanism used is slightly different. • Saudi Arabia - Royal Decree No. M/94 (issued on 23 May 2014) states that the cabinet agrees to ratify the GCC Trade Mark Law and that a royal decree has been drafted (but not published) to complete this ratification process. Royal Decree No. M/94 does not set out when the GCC Trade Mark Law will be implemented in Saudi Arabia, whether it will be implemented without amendment or how the implementation of the GCC Trade Mark Law in Saudi Arabia will affect any existing conflicting Saudi laws. In addition, no mention is made of repealing Saudi Arabia’s current Trade Mark Law. We therefore anticipate that further legislation will be enacted in Saudi Arabia in due course in order to enable the GCC Trade Mark Law to come into force and to repeal the current Saudi Trade Mark Law.

• Oman / the UAE - At present, neither Oman nor the UAE have published any legislation with regard to the 2013 version of the GCC Trade Mark Law. It therefore remains to be seen how or when the GCC Trade Mark Law will be implemented in each of these states. Summary At present, it appears that the implementing regulations may be published in early 2016. If this is the case, then the GCC Trade Mark Law should come into force six months later, in the second half of the year. However, the flexibility of the GCC legislative system means that the timing of the implementation of the GCC Trade Mark Law in each of the GCC states may vary, and there may be some local modifications in the text of the Law as shown by the table below. With further legislation pending in Oman, Saudi Arabia and the UAE, it is not yet possible to assess whether there will be any significant local variations to the GCC Trade Mark Law as it applies in each of these states. However, it is clear already that it will not be possible to rely on the version of GCC Trade Mark Law as published in the GCC Official Gazette in order to confirm the position of each of the GCC states, without looking at national legislation to identify any variations which apply at a country level.

EVENT

SAP Roundtable

Analytics for a new era of customer Developing favourable costing and pricing strategies while catering to market demands is a crucial task for CFOs. In partnership with The CFO Middle East, SAP and PWC organised an exclusive roundtable on leveraging customer analytics to develop pricing models that are adaptive to target markets, while identifying ways to lower costs and increase profitability.

ome of the Middle East’s biggest end-users in corporate finance gathered for an engaging discussion on the prospects of digitalisation. A mixture of excitement and constructive skepticism were displayed in a one-of-its-kind forum. The discussion, which drew on the experience of a clutch senior finance leaders from various industry sectors, was led by Manoj Shah, Partner Consulting, PwC, who set the ball rolling by asking the participants on their views on current economic challenges in the region. “We believe that several market players will feel the impact of the main challenges in the next three to five months,” said Shah. “However, as finance leaders, we should always be prepared to face various outward and inward challenges brought by changes in the market. These challenges can significantly affect various costs for businesses, so it is imperative that we find an effective approach to drive cost efficiencies.” Throughout the discussion, the participants deliberated on various

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EVENT

SAP Roundtable

cost optimisation and profitability approaches, and the majority of participants agreed that cost-to-serve is one important methodology that could reveal true customer profitability. “Costing is an area that needs utmost attention from finance leaders,” said Shah. “Activity-based costing is a somewhat a resource-intensive approach. The cost-to-serve method gives finance leaders a comprehensive understanding of various stages in the supply chain and can enable a fact-based view for both long and short-term decision-making.” Adding to this, BAFCO Group CFO Anand Soni reiterated how costing is a key enabler in business decision-making. “It is not always a matter of finding out where you’re making money, therefore, it is also crucial to know where you’re losing money,” he said. Soni added that there are companies that look at cutting overheads as a way to optimise costs. “Previously, we have opted to try some cost reduction methods, however, we found that it can be an irrational exercise and will not always provide organisations with a positive outcome.” The ever-important topic – the impending digital era - was also discussed by the panel. Participants of the forum recognised that a number of organisations are utilising digital platforms to increase their visibility in the market. These businesses are showcasing services and products they offer through online platforms, which in turn can contribute to their profitability. “A lot of investments are being made to take advantage of digitalisation,” said Rajesh Pareek, CFO, DIFC. “However, it all boils down to understanding what your customers need. Here in this region, there’s a race for leveraging digital platforms, but in some countries, it is just not a norm.” He further discussed that while investments in areas such as this present

“You need to ensure that your finance people are able to manage the systems set in place and are on board with the regulations that surround them. Only then can they be effective in driving profitability within your business.” countless benefits, they can also be very costly. Therefore, it is crucial to keep in mind if a certain system or platform will enable an organisation to service more people before implementing it. “You also need to ensure that your finance people are capable enough to manage the systems set in place and are on board with the regulations that surround them. Only then can they be effective in driving profitability within your business,” Pareek added. Sharing the same sentiments, Raj Jit

Singh Wallia, Deputy CFO, DP World, said that while ERP systems and other digital tools are advantageous for driving profitability strategies; having the right people to do analysis and planning are just as important. “Moreover, listening to the needs of your clients and understanding ‘who’ they are is paramount,” he said. “Because in doing so, you can create an efficient business model, leveraging both customer analytics processes and technologies which will allow you to better serve your customers.”

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Interview

Susan Turner

Nest egg Is the introduction of pension schemes in the GCC overdue? Susan Turner, Head of Employee Benefits Services at Lux Actuaries & Consultants, gives her spin on why countries like the UAE are making progress towards implementing this important safety net.

ow does the typical reward package of a non-national in the UAE compare to that in other developed regions, such as the UK? There are enormous differences in the typical design of a reward package in the UAE, compared to that in the UK, not least the fact that in the UK, pensions have been a mandatory requirement since regulations were introduced in October 2012. As of then, all employees not in a workplace pension scheme and who earn above a certain threshold are now ‘auto-enrolled’ into one, on a phased basis. The biggest employers have already conformed to the legislation, with the smaller employers required to follow suit by February 2018. Where an employer does not offer a pension scheme of its own, they need to enrol their employees into a third party scheme such as the UK governmentrun National Employment Savings Trust (NEST), a defined contribution vehicle. Employers are required to pay contributions, as are the employees, and the government offers a further incentive by way of tax relief. The only group exempt from this pensions reform is the self-employed. However, employees are not obliged to remain in the scheme they are enrolled into, and can ‘opt-out’, if they have a heavy debt to pay off for instance. A similar arrangement operates in New Zealand – The KiwiSaver.

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The concept of pensions, as provided for in the UK and New Zealand, is completely different to the End of Service Gratuity Benefit (ESGB) we have here in the UAE. There’s no denying that the ESGB is insufficient to fund someone’s retirement and therefore those UAE employers who offer an ESGB ‘enhancement’, such as a supplemental employee savings plan (ESP), are to be commended. ESPs are seldom offered to UK employees which is not surprising when you consider that pensions are a form of long-term saving. I was reading a survey recently from a leading employee benefits consultancy (EBC) and what was heartening to learn is that, of the respondents surveyed, 25 percent offer a supplemental retirement or long-term savings plan. Where this is a defined benefit (DB) scheme, the benefits tend to be generous, for example an accrual rate of 1/30th. In stark contrast, DB schemes in the UK are almost extinct, and were far less generous, with 1/60th being the most common accrual rate. The vast majority of such schemes were closed to new entrants many years ago, then later closed to future accrual and more recently wound-up, to be replaced by a far less generous defined contribution (DC) alternative. A further difference between the reward package in the UAE and the UK is how they are structured. In the UAE, it will typically be made up of a number of allowances, in addition to basic salary, such as educational allowance, air travel or housing allowance. These allowances will rarely form part of a UK reward package. A benefit common to both regions is group medical insurance. However, in the UK, this is not compulsory. I guess the reason for not making it a mandatory requirement is the fact that in the UK there is the National Health Service which is free to everyone resident in the UK and is funded from national insurance contributions paid by all employees.

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Do you think it is only a matter of time before pensions are introduced on a mandatory basis? Absolutely. We have all heard the rumours, but these are gaining traction now. Public inertia, and the government’s and regulators’ joint objectives all add up to the inevitability of pension compulsion. They include developing the capital market to contribute to national economic growth, protecting investors, raising financial awareness and providing opportunities for investing funds and savings according to a fair system that ensures the safety and accuracy of transactions. What do you see the opportunities being for employers and employee benefit consultancies such as Lux, if this were to happen? The are many benefits of pension reform to employers. Compensation and incentive design are crucial in increasing productivity and morale, while reducing staff turnover, recruitment and training cost. UAE firms are scratching the surface in terms of employee benefit and pensions considerations, but there’s a fine line between turning the imposed cost of pension schemes to benefits for employers and employees. Pension reform in the UAE has the potential to revolutionise EBCs. Of course, pension products and associated consultancy and advisory services are already provided in the region. However, the amount of pension business currently being written is comparatively small when compared to other markets such as the general and life insurance businesses. Whilst EBCs are making every effort to encourage companies to offer pension vehicles for their employees – I personally know a number of consultants who have been ‘banging the pensions drum’ for years now - take-up is relatively low. Group medical compulsion has brought only narrow profit margins to healthcare insurers and medical providers. When you consider the rigidity of the law and the

competition in the marketplace this is no surprise. In contrast, pension compulsion, if introduced under a more flexible legal framework, will offer more scope to develop new products and innovative solutions, tailored to meet individual company requirements. What do you see as the major challenges employers face in providing a pension scheme to their employees? There are multiple challenges, but these differ in nature depending on whether a DB or DC scheme is offered. It’s widely known that, for DB arrangements, the major concern is their sustainability, due to the following factors: i) People are living longer ii) Salaries are rising iii) Employees are remaining with their employer for longer periods iv) Contributions are insufficient to meet the liabilities as they accrue For DC plans, the challenges are fewer but still significant: i) Poor investment performance ii) Employees’ lack of investment knowledge, leading to unsuitable investment decisions being taken. More effective member communication can help here. Challenges common to both DB and DC include: i) Economic and demographic pressures ii) Pensions administration – some providers are better than others It’s easy to understand why there is some reticence amongst employers to provide a pension plan to their workforce. Notwithstanding this, corporate pension schemes are an essential pillar to any developed or developing region’s economy. State assistance and meanstested benefits are unaffordable for most governments in the long-term and should not be relied upon.

opinion

Management accounting

Can accountants grow the beans too? Gary Cokins, Founder of Analytics-Based Performance Management, North Carolina

anagers are increasingly shifting from reacting to after-the-fact reported outcomes to anticipating the future with predictive analysis and proactively making adjustments with better decisions. Despite some advances in the application of new costing techniques such as activity-based costing, are management accountants adequately satisfying the needs of managers and employee teams for decision-based cost information? Or is the gap widening? That is, are accountants still just counting the beans, or are they helping to grow them? There is a difference between what management accountants report and what managers and employee teams want. This does not mean that information produced by accountants is of little value. In the last few decades, accountants have made significant strides in improving the utility and accuracy of the costs they calculate and report. The gap is being caused by a shift in managers’ needs – from needing to know what things cost (such as a product cost) and what happened – to a need for more purposeful information about what their future costs might be and why – what can happen? What is the purpose of management accounting? Contrary to beliefs that the only purpose of managerial accounting is to collect,

validate, transform and report data, its primary purpose is first and foremost to influence behaviour at all levels – from the desk of the CEO down to each employee – and it should do so by supporting decisions. A secondary purpose is to stimulate investigation and discovery by signalling relevant information (and consequently bringing focus) and generating questions. The widening gap between what accountants report and what decisionmakers need involves the shift from analysing descriptive historical information to analysing predictive information, such as budgets, cost estimates and what-if scenarios. There is much that can be learned and gained from historical information. Although accountants are gradually improving the quality of reported history, decisionmakers are shifting their view towards better understanding the future. This shift is a response to a more overarching shift in executive management styles to an anticipatory, proactive style where organisational changes and adjustments, such as staffing levels, can be made before things happen and before minor problems become big ones. An accounting framework and taxonomy The large domain of accounting has three components: tax accounting, financial accounting, and managerial accounting. There are two types of data

sources. One source is from financial transactions and bookkeeping, such as purchases and payroll. The other source is non-financial measures such as payroll hours worked, retail items sold, or gallons of liquid produced. The financial accounting component is intended for external reporting, such as for regulatory agencies, banks, stockholders and the investment community. Financial accounting follows compliance rules aimed at economic valuation, and as such is typically not adequate or sufficient for internal decision-making within an organisation - the tax accounting component is its own world of legislated rules. Our area of concern – the management accounting component – can be broken into three categories: cost accounting, cost reporting and analysis, and decision support with cost planning. To oversimplify a distinction between financial and managerial accounting, financial accounting is about valuation, whereas managerial accounting is about value creation through good decisionmaking. The three managerial accounting categories are all recipients of inputs from the ‘cost measurement’ procedure of transforming incurred expenses (or their obligations) into calculated costs. They are: • Cost accounting represents the assignment of expenses into outputs,

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such as the cost of goods sold and the value of inventories. It primarily provides external reporting to comply with regulatory agencies. • Cost reporting and analysis represents the insights, inferences and analysis of what has already taken place in the business in order to track performance. • Decision support with cost planning involves decision-making. It also represents using the historical cost reporting information in combination with other economic information, including forecasts and planned changes (e.g., processes, products, services, channels) in order to make the types of decisions that lead to financial success. The last two categories offer diagnostic support to interpret and draw inferences from what has already taken place and what can happen in the future, respectively. Cost reporting and analysis is about explanation. Decision support with cost planning is about possibilities. What? So what? Then what? The message here is that the value and usefulness of the information increase, arguably at an exponential rate, from the cost accounting to decision-making. Cost reporting displays the reality of what has happened, and provides answers to ‘What?’ That is, what did things cost last period? However, an obvious follow-up question should be “So what?” That is, based on any questionable or bothersome observations, is there merit to making changes and

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interventions? How relevant to improving performance is the outcome we are seeing? This leads to the more critical need to propose actions – to make and take decisions – surfaced from cost planning. This is the “Then what?” question. For example, what change can be made or action taken (such as a distributor altering its distribution routes), and what is the ultimate impact? Should we internally make a product or deliver a service, or should we purchase it or outsource it? Business analytics and cost modelling Of course, any proposed changes will lead to multiple effects on customer service levels, quality and delivery times, but the economic effect on profits and costs should also be considered. This gets to the heart of the widening gap between accountants and decision-makers who use accounting data. To close the gap, accountants must change their mindset from managerial accounting to managerial economics which we might describe as “decision-based costing.” This is where business analytics, especially predictive and prescriptive analytics, come into play. The ultimate way that managers can test the outcome of decisions is to deploy robust methods of forecasting combined with valid cost-estimating techniques based on reliably measured past-period ‘calibrated’ per-unit-level cost consumption rates, such as from an activity-based costing system. Then they will be more confident that what they want to change will have the effect that they expect and desire.

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SomersConsult

Developing team effectiveness “To be successful, teams need to be very clear on the goals of the game, the roles of the various players in the game, the processes used by the team and the players to achieve the goals, and the quality of the relationships - including the behaviours and values of the team.” Fintan Somers, CFO, SomerConsult

ome time ago I was invited to participate as a potential change leader in a Global Leadership and Performance (LEAP) program that Shell Oil was rolling out across the Group. One part of the program was a very useful team effectiveness questionnaire. I have subsequently used this questionnaire in several successful finance function transformation assignments that I have completed around the World, most recently in Qatar What I like about the questionnaire is its simplicity. My experience is that teams respond very positively when given the opportunity to self-diagnose risks and

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issues impacting their effectiveness and to develop solutions. I generally spring the questionnaire on the team as part of the launch workshop of the change program. Responses are anonymous - to assure honesty - but I generally attempt to differentiate between manager and staff responses. The philosophy underpinning the questionnaire is that great teams manage themselves within boundaries set by the rules of the game the team is playing. To be successful, teams need to be very clear on the goals of the game, the roles of the various players in the game, the processes used by the team and the players to achieve the goals, and the quality of the relationships - including the behaviours and values of the team. Great teams also take ownership of their effectiveness and work consistently to improve effectiveness; management becomes the servant of the team. Once the team has completed and returned the questionnaire, I compile the results and provide feedback to them in a subsequent team effectiveness workshop. At this workshop the team is challenged to develop solutions for improving effectiveness. The workshop is also used as an opportunity to introduce some of the function and technology effectiveness proposals as part or whole solutions to the team’s diagnosis of what needs to happen to become more effective.

Empowering concepts such as the ‘self-managed team’ and ‘management as being the servant of the team’ often come as a big surprise to team members. Often they are shocked or surprised at how consistently people feel about issues and solutions. Team managers can be shocked at the difference between their perception and their staff’s perception of how things are - and sometimes that management is a bigger part of the problem than they think or are prepared to admit. But even with well managed teams, I have found that the questionnaire and workshop is a useful tool for improving team performance. Function transformation generally involves revised team goals and objectives, changes to or a completely new operating model and organisation design, and changes to technology. The team effectiveness program’s overall objective is to get the team to take ownership of the change program in its entirety, flushing out and resolving the obstacles to successful execution. The team ends up owning the responsibility for implementing the team, technology and function effectiveness solutions identified in the program design and by the team itself. This considerably enhances the likelihood of successful execution. But, most importantly in my experience, it enriches and energises the team and the individuals within the team.

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CIMA

Mastering Finance Business Partnering

he business environment we currently operate in has challenged organisations to rethink the way its functional areas work together. Tough economic conditions, volatile markets, intense competitive pressures and the disruptive impact of the digital world are all factors that have forced organisations to break down silos and form stronger synergies between functions to become more agile and improve performance. Strategic guidance and decision-making no longer lies with a single leader; both call for a more collaborative effort between all functions to provide effective strategic oversight, performance and risk management that ensure longterm and sustainable success of the organisation. With the opportunity to gain a stronger voice at the table, finance teams have had to re-evaluate their roles so as to enable them to demonstrate higher levels of influence across all functional areas of the business. ‘finance business partnering’ is increasingly viewed as the most effective way for in-house finance teams to add value. Some high-performing firms already fully embrace business partnering - in finance, HR and other functional areas - and some elements of partnering are seen in many companies. The occurrence of ‘pure’ finance business partnering models are rare, reflecting the complexity and scale needed for a specialist approach. Although hybrid and evolving models are more common with a drive towards achieving greater purity. Yet organisations can still find partnering

difficult to incorporate into their business model in a comprehensive or sustainable way. Mastering finance business partnering is a report based on research done by the Chartered Institute of Management Accountants (CIMA) and KPMG to provide clarity on the nature of the business partner’s role and how business partnering can be delivered. The research suggests that ‘learning through doing’ is the best way of developing the broad range of skills necessary. A finance business partner (FBP) is a finance function professional who works alongside other business areas, supporting and advising their strategic and operational decision-making through insights that drive better business performance. FBPs take a different approach from the conventional finance team’s focus on historical numbers. While the core finance function continues to handle reporting and management activities, the FBPs look forward, providing strategic insights based on industry and macro-economic trends and competitor dynamics. They examine operational performance through different lenses to bring new perspectives, using tools such as shareholder value analysis, return on capital, customer profitability, channel profitability and zero or activity based costing. They introduce benchmarks, consulting techniques, and frame discussions using structured methodologies to ensure rigour in evaluating options. They use examples from other organisations and sectors to

“Finance business partnering is increasingly viewed as the most effective way for inhouse finance teams to add value.” Geetu Ahuja, Head of GCC, CIMA

inform the debate. With good soft skills, they provide rounded opinions and clear recommendations. However, before implementing a FBP model, the finance team should have reached a level at which other functions already look to them for support. While giving professionals the room to focus on the FBP role, it should not be given more importance than the operational requirements of a finance team, without which the model will fail. They need to be co-dependent without cannibalising each other – built on strong working relationships between the core finance team and the FBPs. One of the main challenges with establishing an FBP team is aligning them with internal customers and finding a balance between what internal customers want to focus on and where the FBP team itself believes it can add most value. As credibility and trust grows, FBP teams will find that their advice is sought after by other functions bringing them closer to all aspects of the business. In order to achieve superior financial performance, organisations must invest in finance business partnering, prove effective in developing skills, target the right level of business partnering resources in the right places, anticipate business demands, develop an organisational understanding of the FBP’s role.

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