The CFO Middle East | Issue 14 by The CFO Middle East

Vol. 2 ISSUE 14

TALENT MANAGEMENT

PG 30

Iran: oPEN FOR BUSINESS PG 26

clean slate Pramod Kumar Chand on RAK Ceramics’ fresh value drive

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Lift-off MANAGEMENT Dominic De Sousa (1959-2015) Founder, CPI Media Group Nadeem Hood Group CEO Rajashree Rammohan Publishing Director EDITORIAL Group Editor Jeevan Thankappan jeevan.thankappan@cpimediagroup.com +971 4 375 5678 Editor James Dartnell james.dartnell@cpimediagroup.com +971 4 375 5684 Contributing Editor Annie Bricker annie.bricker@cpimediagroup.com +971 4 375 1643 Online Editor Adelle Louise Geronimo adelle.geronimo@cpimediagroup.com +971 4 375 5683

It seems we’ve constantly been talking of ‘change’, ‘crisis’, and ‘downturn’ when it comes to the Middle East’s economy in recent times. I’m not for one second saying that this talk wasn’t justified, but it seems we may now be on the cusp of serious economic transition in this region. While non-oil producing countries around the world will be licking their lips at the lifting of decade-long economic sanctions against Iran, the same cannot be said for the GCC’s nations. At the centre of this is, of course, the oil price, which has fallen from $110 per barrel to $28 today. This is expected to plummet further in the coming months. These sanctions have cost Iran more than $160 billion in oil revenue alone since 2012, and this is an aspect that adds increasing intrigue to the tale. Now, according to Iranian government sources, Iran will be able to increase its oil production and exports by around 500,000 barrels per day on average. While certain sectors in the GCC may have suffered in the GCC in recent months, this, combined with the US’s increased production of shale oil, spells political tension at the very least.

ADVERTISING Commercial Director - Business Division Chris Stevenson chris.stevenson@cpimediagroup.com +971 4 375 5674

This certainly brings an interesting time for an organisation’s treasury department, which takes on the complex role of overseeing financial risk management, as well as dealing with key external stakeholders – an important role against the current backdrop.

Group Sales Director Kausar Syed kausar.syed@cpimediagroup.com +971 4 375 1647

In this issue we look at how the lifting of the sanctions will affect certain markets in the region – technology, in particular, as well as hearing from the Association of Corporate Treasurers Chairman Matthew Hurn.

DESIGN Neha Kalvani neha.kalvani@cpimediagroup.com Analou Balbero analou.balbero@cpimediagroup.com Photographer Charls Thomas Production Manager James Tharian

What’s more, I had the pleasure of meeting RAK Ceramics’ CFO Pramod Kumar Chand, who told CFO Middle East about the financing of operations in China, India and Bangladesh. His story holds loose parallels to the Iranian oil case, and the UAE’s role in that narrative. International events and markets have certainly brought their tests, but enduring quality and diversity stand it in good stead for the hurdles ahead.

Data Manager Rajeesh Melath

James Dartnell Editor

Printed by Printwell Printing Press © Copyright 2016 CPI. All rights reserved. While the publishers have made every effort to ensure the accuracy of all information in this magazine, they will not be held responsible for any errors therein.

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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 Fraud fight Kurt Ramin, CFE, gives his take on the Association of Certified Fraud Examinersâ&#x20AC;&#x2122; recently held Middle Eastern conference on best practices for fraud mitigation.

10 News The latest developments in the local finance indsutry.

15 Digital priorities The recently held IDC Middle East CIO Summit, featured a CFO workshop focused on IT and business trends. We bring you the highlights of the event.

16 Top performance Gary Cokins, CEO, Analytics-Based Performance Management, shares his views on the importance of tailoring KPIs for specific purposes.

20 Capital security Aruba, a Hewlett Packer Enteprise Companyâ&#x20AC;&#x2122;s Jacob Chacko discusses the challenges faced by the banking and finance industry in the mobile age.

26 22 Clean slate RAK Ceramics’ CFO Pramod Kumar Chand shares how he ensures that he gets the best from the company through smart financial decisions.

26 Iran: Open for business As the GCC braces itself for changes to its economic climate, how can CFOs exploit changes to one of the region’s most important emerging industries – technology?

The talent agenda

As the finance function’s influence in the enterprise continue to grow, having the best talents in the finance team is high on every business’ agenda.

34 Audit automation We take a look at the issues CFOs need to be aware of when opting for artificial intelligence solutions.

38 Rules vs. principles

Whatever walk of life you’re in, rules and principles are a must. But which one reigns supreme in accounting? Experts from ACCA and ICAEW state their cases.

Insight

Kurt Ramin

Fraud fight Kurt Ramin, CFE, gives his take on the Association of Certified Fraud Examiners’ recently held debut Middle Eastern conference on best practices for fraud mitigation.

n February 14th and 15th, more than 300 anti-fraud professionals from across the world descended on the Palm Jumeirah’s Atlantis Hotel to exchange ideas and best industry practices on fraud detection and prevention. The topics discussed included some of the most pressing issues in fraud-fighting today, from virtual currencies and e-banking fraud, to fraud risk, money laundering and cybersecurity. They all came in the name of the Association of Certified Fraud Examiners’ (ACFE’s) first ever Middle East regional event, hosted by the Financial Audit Department (FAD) of the Dubai Government, under the patronage of His Highness Sheikh Maktoum Bin Mohammed Bin Rashid Al Maktoum, Deputy Ruler of Dubai and Chairman of FAD. Founded in 1988, the ACFE is the world’s largest anti-fraud organisation and premier provider of antifraud training and education. Together, with more than 75,000 members, the ACFE is reducing business fraud worldwide and inspiring public confidence in the integrity and objectivity within the profession on a global scale. FAD conducts regular financial audits, performance

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Insight

Kurt Ramin

audits and information systems audits for ascertaining the extent of legality, adequacy of financial prudency and management of financial operations. International expert on organised crime and fraud issues, Jeffrey Robinson, said, “Insiders in corporate fraud steal from the company because they feel entitled to, because the company has done them wrong, or because they feel the company owes them.” He continued with tips for consumers. “Fraud can only happen if the victim cooperates. The only way you can really protect yourself is to stop at every turn and say to yourself: “Why is this happening to me? Is it too good to be true? If it is too good to be true, it’s not true.” If you get a suspicious e-mail or phone call, just get on Google and check what had been said or written about it. The incidence of fraud increases during a slowdown, or recession, said Hamed Kazim, a senior advisor to the Government of Dubai. Quoting a recent study, he said, “About 70 per cent of the frauds were committed by people who they should not have hired in the first place.” Companies need to introduce steps to increase scrutiny for entry level employees regarding their competencies, background checks and references to define critical positions. “There needs to be a culture of awareness in the organisation,” Kazim added. Professor Dr. Marco Gercke, Director of the Cybercrime Research Institute, Cologne, Germany, an independent global think tank dealing with legal aspects of Internet crime, gave a presentation on international aspects of strategy, policy and laws related to cybersecurity. He discussed international law and tried to answer which involvement with cyber activities should be defined as ‘criminal’ in the law. He also outlined an effective system and priorities in fighting cybercrime. In a segment of his speech he described the inefficient semantics and inconsistencies of various local legal frameworks and procedures.

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In his forecast on the advancement of information technology, he predicted that lawyers could be replaced by robots in the future, but that judges could not be. This, of course, as an interim solution, would require the consolidation of laws, controlled language use and building structures like the financial reporting sector has done with XBRL taxonomies. In a panel discussion on ‘Global challenges for fraud examiners’ I took the opportunity to share my thoughts on the subject. Following on from what Dr. Gercke said, I described the rule of law index 2015 prepared by the World Justice Project, and raised the question whether there is a “global legal profession” to assist fraud examiners in cross-border cases. The panel discussed skill set requirements for the new fraud-fighting professional, who is faced with electronic payment and fintech software, inventory tracking systems, identify verification, machine translation and similar technological advances. In terms of my concern on currency fraud, I mentioned my recently published article , ‘The impact of fraud in fluctuating currencies’, describing fraud on currency reference rate fixing by large banks and employees cheating on their expenses reports using inflated currency exchange rates. I feel the need to stress that I believe it to be wise for CFOs to enhance their professional capacity by keeping up to date on fraud fighting technologies, Internet security and related enforcement laws. One efficient way to do this is to take the examination leading to the Certified Fraud Examiner (CFE) designation. This accomplishes two things: In addition to improving soft skills such as interviewing techniques and speedy Internet searches, candidates become familiar with most modern computerised learning techniques, testing and re-testing their knowledge. When I took my CFE test recently, to my surprise “de-learning” (determined through psychometric testing methods

“

Insiders in corporate fraud steal from the company because they feel entitled to, because the company has done them wrong, or because they feel the company owes them.” Kurt Ramin, CFE

online) was more difficult than covering completely new subjects. My mind had become used to old concepts, which I had to disregard in order to pass the test. This runs parallel to legacy systems and procedures which are so difficult to overcome in many organisations. A range other topics of relevance to the financial community were discussed throughout the day, including: fraudulent financial statements, fraud in the microfinancing sector, virtual currencies, leading the revolution in the internal audit profession, e-banking fraud investigations and using fraud analytics tools to mine financial data. The large accounting and consulting firms were well represented at the conference; PwC helped to organise the conference and presented as well, while Deloitte had a demonstration on fraud analytics. They are developing resources to be able to help their clients solving fraud related problems and more importantly, on how to prevent them.

News

Deutsche Bank expands equity research team in Dubai

Deutsche Bank recently announced the expansion of its equity research operation in the Dubai International Financial Centre (DIFC) as three equity analysts mainly focusing on emerging markets equity research join the team. Pascal Moura, Head of Equity Research, Emerging EMEA and Latin America, said, “We are pleased to announce the expansion of our leading emerging markets research platform from our office in DIFC. We now have nine analysts covering twelve sectors in nine markets across the EM complex, providing a unique coverage platform for high quality equity research, further enhancing our position as one of the leading and most comprehensive research platforms in the region.” The scope of equity research from Deutsche Bank’s research hub for emerging markets in the DIFC has increased and now covers banks, oil and gas, telecom, media, metals and mining, utilities, healthcare, consumer discretionary, consumer non-discretionary, transportation, chemicals and real estate sectors, in addition to existing coverage of equity markets across the Middle East and North Africa region.

KPMG launches‘Variables for Sustained Growth’ index KPMG has ranked the UAE as the leader of its variables for sustained growth (VSG) index. Developed to assess countries’ longterm economic performance prospects, the VSGI measures countries’ productivity potential to illustrate where governments should be focusing their efforts. The index considers 21 areas which have been shown to have a significant impact on a country’s future economic growth and wealth, such as transport infrastructure, education and strength of public institutions. The UAE was the leading country in the MENA region and scored better than a number of developed economies, such as France. Education has recently emerged as one of the most effective ways of boosting longterm national growth, giving additional

impetus to the UAE Government’s push to boost education services and systems across the seven emirates. Recently, the UAE cabinet discussed ways of improving education – highlighting this as one of the cornerstones of the government’s strategy. Neeraj Dassani, Partner, KPMG, said, “KPMG’s VSG Index highlights how improvements in transport infrastructure, education and public institutions can significantly impact current and future economic growth and wealth. The UAE has recognised that a key pillar of economic diversification is a strong, knowledge-based economy. The Government continues to invest heavily in innovative initiatives, such as declaring 2016 the ‘Year of Reading’ and dedicating increasing amounts of the federal budget to education.”

MoF announces e-connection of Dubai to the federal government

HE Younis Haji Al Khoori, MoF and HE Arif Abdul Rahman Ahli, Department of Finance-Dubai

In a bid to meet the requirement of the International Monetary Fund (IMF) on Government Finance Statistics (GFS) and complete the linking of the federal government financial system of all emirates; the Ministry of Finance (MoF) has announced that Dubai’s financial system has been electronically linked to that of the federal government. The announcement was made during the first Government Financial Coordination Council meeting for 2016, in Dubai. HE Younis Haji Al Khoori, Undersecretary

of MoF and Chairman of the Government Financial Policy Coordination Council headed the meeting in the presence of HE Saeed Rashid Al Yateem, Assistant Undersecretary of Resources and Budget Sector at MoF. The meeting covered a number of elements, including board discussions to improve the foundations of government financial work within the country on a local and federal level. HE Younis Haji Al Khoori said, “The Government Financial Policy Coordination Council is keen to complete all electronic linking of the federal government financial system to local financial systems, to reflect its commitment to meet the requirements of the IMF with regards to GFS. This led the Fund to name the UAE as the first country to set up an electronic gate for GFS reports.” HE Arif Abdul Rahman Ahli, Executive Director of Budget and Planning at the Department of Finance-Dubai stressed the Department’s commitment to cooperate with all federal and local entities that contribute to the development of the financial sector.

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News

QFBA launches new courses and certifications

Qatar Finance and Business Academy (QFBA) in cooperation with international partners and professional trainers has announced the launch of a revamped range of international courses and certifications scheduled to begin at the start of March. These certifications and courses include AGI (award in general insurance) by the Chartered Insurance Institute, courses for the ACI dealing certificate by the Chartered Institute for Securities and Investment, a course in corporate credit risk analysis as

well as a course in Financial modeling using spreadsheets. QFBA aims to help talented youths stay on top of the changes within the market, as well as promoting innovation and creating new opportunities in the market’s vast sectors, in line with the Qatar National Vision 2030. Currently, QFBA is focusing on five key areas, including Qatar public finance, Islamic finance, competency framework development via Kafa’a, customer service, and training and development solutions. The Academy has recently partnered with Adnar Group for the establishment of the first edition of the “Global Management Challenge” competition, based on the simulation concept as well as a broad bundle of training modules and tools built on strategic thinking.

Infoblox appoints new CFO Infoblox, the network control company, recently announced that Janesh Moorjani has been appointed as its new Executive Vice President and Chief Financial Officer. In his role, Moorjani will be responsible for managing the company’s worldwide finance operations. He joins Infoblox Janesh Moorjani, Infoblox from VMware, where he was SVP of Finace, responsible for corporate, field, and global business unit finance functions across all of the company’s product and service lines. Prior to VMware, Moorjani had a successful finance and sales career at Cisco, where he started in finance in

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the US and rose through management positions across APAC, ultimately to Managing Director of India sales. Previously, Moorjani worked at Goldman Sachs, rising to Vice President in the firm’s merchant banking division in Silicon Valley. “I’m incredibly excited to join an outstanding management team that’s ready to address very attractive growth opportunities,” said Moorjani. “This is an unprecedented time in the networking industry when, more than ever before, we believe customers need the control, reliability, security, and scalability provided by Infoblox.”

Saxo Bank enhances SaxoTraderGO Platform Saxo Bank, the multi-asset trading and investment firm, has enhanced its investment in FinTech following the Christian Hammer, Saxo Bank latest upgrades to its proprietary online platform, SaxoTraderGO. The latest updates include an Android application that supports push notifications for trade and order confirmations and, on the iOS side, a revamped app for iPhones and iPads that now offers Touch ID login. Live client chat will also soon be incorporated across desktop, mobile and tablets. An automated investment service called SaxoSelect has also been launched in selected countries. For desktop, SaxoTraderGO now also supports two screen set-ups. Clients can utilise pop-out charts that can be opened in separate browser windows and viewed on a second screen. “Saxo Bank has been implementing innovative FinTech solutions since before the term Fintech entered the industry vocabulary,” said Christian Hammer, Head of Platforms, Saxo Bank. “Technology is at the heart of our business and our long term strategy is to focus on disruptive technologies that give independent traders and investors, white labels and financial institutions more choices to trade and invest.” The new upgrades follow Saxo Bank opening access to its trading infrastructure to third-party developers with the launch of its REST (representational state transfer) based open API (Application Programming Interface) last year. The open API model allows Saxo Bank’s White Labels and external developers to integrate the bank’s trading and investing capabilities directly into their own applications and systems, or build solutions on top of existing trading and investment infrastructure.

The

Transformational CFO The role of finance is expanding

45% 54%

of business managers take a forward looking approach in quarterly planning - using leading indicators or predictive analytics of organisations use sales pipeline to drive finance decisions

finance is a powerful change agent that helps line of business managers

The finance department is the information hub of organisations

MARKETING

CUSTOMER CARE

LEGAL

It regularly collects data from every business unit and consolidates that information to drive financial and management reporting

FINANCE DEPARTMENT

HUMAN RESOURCES

OPTIMISE PROCESSES

REPORTING

ACHIEVE GOALS

AVERT PROBLEMS

MAKE DECISIONS

collaboration

BUSINESS TRANSFORMATION CFOs are expected to play a larger role

Planning beyond finance

70%

62%

have seen the CFOs influence increase

OVER

think their finance team has a collaborative relationship with operational roles

excel is still everywhere

57% 56%

are using Excel for operational planning at the department level

donâ&#x20AC;&#x2122;t feel existing financial systems will meet future business and reporting needs, but the majority have clear roadmap to improve

expect CFOâ&#x20AC;&#x2122;s impact on biz transformation to grow

industry and analytical knowledge have become increasingly important

FEWER THAN

1/4

Consider market, operational, and analytical knowledge important

Rank technology knowledge as a crucial skill

MORE THAN

1/2

As finance executives become more influential and drive organisational transformation, analytical and industry skills are becoming more highly valued. Source: Argyle Executive Forum

EVENT

IDC Middle East CIO Summit

Digital priorities During the 2016 edition of the IDC Middle East CIO Summit held in Abu Dhabi recently, IDC hosted a CFO workshop that shed light on the latest IT and business trends.

eld under the patronage of H.E. Sheikh Nahayan Mabarak Al Nahayan, Minister of Culture, Youth and Community Development, the two day event and addressed the changing demands of ICT in enabling business transformation and success in an increasingly tough financial climate. The workshop focused on helping CFOs and business line managers understand the importance of embracing technology to enable them to provide strategic guidance and insights on risk, growth, efficiencies and effectiveness. “While the CIO remains the prime mover and shaker when it comes to making technology decisions, it is becoming increasingly difficult for organisations to ignore the rise of LoB influence,” says Jyoti Lalchandani, Vice President and Regional Managing Director, IDC Middle East, Africa, and Turkey. “And among the most influential boardroom voices are those of the CFO and CMO, particularly in relation to critical business disruptors such as cloud, mobility, social, and Big Data analytics.” As their eighth consecutive participation at the IDC Middle East CIO Summit, EMC this year joined the summit as a CFO partner, lending its insight to the CFO workshop that was aimed at enabling both IT and finance leaders optimise budgets and leverage intelligence driven solutions to fuel the business. According to a recent study by consulting firm, Protiviti, this year will continue to see CFOs lay utmost emphasis on maximising margins and earnings

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performance. The 2016 Finance Priorities Survey further revealed that 2016 will also see CFOs focus on enabling the business to protect itself against cybersecurity risks in addition to achieving a single, real-time version of the truth through more accurate and real-time data collection to improve decision-making and forecasting abilities. At the event, Elliott Young, Head of Transformation Work Group, EMEA, EMC presented a session focused on enabling CFOs lead business transformation through a core ICT foundation. Through his presentation, CFOs got first-hand knowledge on the new digital transformation investment cycle expected for 2016 and the key drivers behind emerging business models that enterprises and business units may need to adopt and turn around to achieve a sustained competitive advantage. Young also elaborated on the methods and best practices that can help CFOs leverage the four pillars of technology transformation to support not just their own business strategies but also help business spot,

identify and leverage new opportunities. The Summit also featured a discussion chaired by Joseph Pucciarelli, IDC’s Group Vice President and IT Executive Advisor, during which the assembled experts explored the ways in which finance leaders can drive greater synergies with their CIOs. “With the goal to balance total cost of ownership and ensure resources are performing efficiently, CFOs are increasingly becoming major influencers when it comes to enterprise technology adoption plans,” said Pucciarelli. “It is indeed prudent for CFOs to become actively involved in approving IT investments to ensure that the solutions benefit the organisation’s strategic direction and overall goals. But for this to work effectively, they must develop a clear understanding of the inherent technology benefits and align themselves more closely with the CIO so as to enable the development of a coherent and mutually agreeable ICT adoption roadmap.”

opinion

KPI

How many types of KPIs are there? Determining the right key performances indicators is crucial for any business to set itself on the path to success. Gary Cokins, CEO of Analytics-Based Performance Management LLC, shares his views on the importance of tailoring KPIs for specific purposes.

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here seems to be one major question that organisations really are determined to answer – ‘What should our key performance indicators (KPIs) be?’ At the heart of selecting KPIs should be their linkage to the executive team’s strategy. However, there are different stakeholders in an organisation, such as internal managers and investor governance boards. Each stakeholder has different needs. Hence there should be different types of KPIs for different purposes. Performance measures reported in scorecards and dashboards are one of the core components of integrated enterprise and corporate performance management (EPM/CPM) rivalling other improvement methods such as customer relationship management and managerial accounting in their importance. Regardless of the type of KPI, analytics (such as segmentation, correlation, regression, forecasting, and clustering) should ideally be imbedded in each method, and they are critical for employees to achieve and exceed KPI targets. Author Brett Knowles, founder of the consulting firm PM2 and a veteran of the balanced scorecard thought leader community, has given much thought to the topic of different KPIs for different purposes. In Volume 4, Number 6 of his firm’s Performance Measurement & Management newsletter, Brett describes different types of KPIs in an article titled ‘Five distinct views of scorecards – and their implications.” With Mr. Knowles’ permission, here they are, abbreviated with minor edits:

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Financial valuation – A scorecard view is needed to describe what the organisation does in a way that the financial world can understand: monetary currency. All activities need to be financially valued, including tangible assets (such as buildings and inventories) and intangible assets (such as brand equity, employee retention, and customer loyalty). Several methodologies exist that grapple with this need, including economic value added (EVA) and activity-based costing (ABC). The challenge is that more than 80% of value is created by intangible assets, yet traditional accounting systems do not do a good job of capturing intangibles. The balanced scorecard has proven to be a great tool for making intangible assets visible and valuable. Information in this area needs to be: • Centred on outputs, outcomes or deliverables • Closely related to existing valuation mechanisms • Standard, repeatable and reliable

Navigation – Internal managers need to make informed decisions on a frequent basis that are consistent with the medium and long-term strategy. Strategy, cascaded downward into the organisation through a strategic balanced scorecard and into operational dashboards, dictates both what should be done and how important it is. This view of performance measures creates alignment of employees’ actions and priorities across all functional and regional boundaries and consistency across time. This is where the EPM/ CPM methods with imbedded analytics play a critical role. Information in this area needs to be: • Very responsive to shifts in the work activities • Process based • Related to overall effectiveness and efficiency Incentive compensation – Scorecard frameworks lend themselves to rewarding employees for contributing to the success of the organisation. Over-performers

“Many organisations neglect to first construct a strategy map from which to derive their KPIs. A strategy map is far more important than balanced scorecards and cascaded operational dashboards.”

opinion

KPI

should be distinguished from underperformers. A key to this view is for the executive team to assign aggressive yet achievable target measures. Information in this area needs to be: • Related to the value that the team can control and create • Output and outcome related • Accurately measurable and repeatable across locations and time

Benchmarking – An effective way to determine whether an organisation is making progress is to compare it to other ‘things’ (‘comparatives’). There are many comparatives available: competitors, best-in-class, worldclass. In the true sense, even target, forecast and revised-forecast are all comparatives too. The challenge with the benchmark view of scorecards is that the data is sparse and with ‘dirty’ quality. Also, there can be apples-and-oranges inconsistencies (such as including or excluding data, measuring different start-and-end times of processes). Comparatives do not typically go into enough detail to provide operational insights into diagnosing any identified issues and root causes, nor do they cover the full breadth of the executive team’s strategy. Information in this area needs to be: • Available from other sources • Understandable and relatively comparable • Strategically related to the organisation Evaluation – Periodically, there is the need to get an accurate measurement of how the organisation is performing. Periodically the organisation needs to undertake such activities as customer surveys, employee surveys, supplier assessments, etc.

The various and numerous stakeholders need to initially develop some confidence that the scorecard model adequately describes their view of the organisation.

These activities are too expensive and time consuming to be conducted often enough to be useful for navigation, but can be used to underpin selection and validation of navigation indicators, support incentive compensation models and be used in reporting performance to outside stakeholders. Information in this area needs to be: • Survey based • Comprehensive and rigorous • Closely related to overall deliverables Knowles summarises his five views by stating that most organisations need to consider their organisation’s performance in two or more of these views. For example, a shared service IT department may need to prove and measure its contribution to the organisation’s overall valuation, provide monthly navigational information for the project managers (and service level agreements for their internal customers), and develop a compensation package for use around the globe. They may also

need to compare themselves to industry benchmarks. The various and numerous stakeholders need to initially develop some confidence that the scorecard model adequately describes their view of the organisation. Consider building the various views as a way to speed up implementation of a pilot scorecard. A simple way to do this is to create a single enterprise-wide strategy map, but link different indicators to it for each of the views. My feeling is that Knowles is on to something important. As I have previously written, there is confusion and a lack of consensus as to what a balanced scorecard is. There is ambiguity. Furthermore, many organisations neglect to first construct a strategy map from which to derive their KPIs. A strategy map is far more important than its companion balanced scorecards and cascaded operational dashboards. They are simply feedback mechanisms. Understanding that there are multiple scorecard views can bring clarification.

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‫‪ECTED‬‬

‫‪ON‬‬

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‫‪I G N AT‬‬

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‫منتجات قيمة وفريدة‬

‫‪GI‬‬

‫قامت ثالث مؤسسات تعاونية هي ‪( Chios Mastiha Growers Association‬جمعية‬ ‫مزارعي المصطكي في خيوس) و‪( Agricultural Cooperative of Kimi‬جمعية كيمي‬ ‫التعاونية الزراعية) و‪ Mediterra S.A.‬بتوحيد جهودها وطاقاتها ومواردها الديناميكية بهدف‬ ‫الترويج لمنتجاتها القيمة الشهيرة‪ Chios Mastiha :‬و‪.Kimi Figs‬‬ ‫على مدار التاريخ وهي تنتج منتجات تجمع بين الجودة والنكهة الذكية‪،‬‬ ‫كما أنها تحظى بحب منتجيها ورعايتهم‪.‬‬

‫الحدث ممول تمويالً مشتر ًكا من قبل اليونان واالتحاد األوروبي‬

‫‪eu‬‬

opinion

Jacob Chacko

Capital security Jacob Chacko, Business Lead, SMB and Commercial, Middle East and Turkey, Aruba, a Hewlett Packard Enterprise Company

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? The finance sector tends to be more susceptible to having data security problems, however, it goes beyond external threats from hackers and more often than not also faces insider threats. Key players in the finance industry are in agreement that there are major global threats to the success of the banking and finance industry. One that ignores boom and bust cycles, doesn’t care much about stock market fluctuations and wouldn’t bat an eyelid if interest rates suddenly jumped ten points. But this threat is also an essential and highly successful ingredient in the revival of the finance industry’s fortunes.

What is this unwitting, non-malicious threat? It’s your mobile-tech carrying employees themselves. You’ve heard of Generation X (you might be one yourself), Generation Y (you probably employ a few of these), and Generation Z (the Internet’s digital natives), but there’s another category to add to the list: #GenMobile. Brought up in a world where mobile devices are an integral part of everyday life, #GenMobile is defined by a productivity-focused attitude that finds it as easy to share a status update as it does a password or mobile device with a colleague. And this is why your #GenMobile workforce is both an asset and a threat to your business. To identify the true nature of this new type of employee, Aruba Networks recently surveyed 11,500 workers in 23 countries, asking them detailed questions about their work, their approach to data and their take on corporate and personal security in a technological landscape dominated by mobile devices. #GenMobile are generally between the ages of 18 and 35, highly-effective and mostly indifferent to computer security. Given the finance sector’s risk-averse take on data security, you’d be forgiven for dismissing the idea of a ‘threat’ from your own highly trained staff. However, an alarming four out of every ten finance organisations admitted to having lost data through the misuse of a mobile device, which is 25 percent higher than other industries. Professionals in the #GenMobile, as the name suggests, are 100 percent comfortable with mobility, flexible working and using multiple mobile devices to get the job done. They will stop at nothing to get their work tasks completed, and 51 percent say that mobile technologies enable them to be more productive and engaged at work. This fervent need to get things done means 56 percent has a tendency to disobey their managers to complete

a task — while three-quarters are happy to take IT issues into their own hands without getting in touch with their IT department. Sharing is also a risk factor, as 60 percent of respondents reported being happy to let others use their work mobile devices at least once a month, while a fifth don’t have passwords on their mobile devices at all, in part to make sharing easier. You won’t be surprised that security only limps into the top five of office tech concerns for #GenMobile.

Five tips to turn a threat into a safe bet So what do you do? Lockdown all mobile devices? Implement a highly restrictive password policy? Don’t throw the baby out with the bathwater just yet — this new generation is already contributing to the overall health of the finance sector. They bring big-thinking creativity, better collaboration and new ways of doing things. These are all beneficial for organisations, especially in an era when consumer behaviour is changing at an incredible speed. Yet, the impact of a security breach is both seismic and often irreparable. Here are five ways to make sure your organisation is prepared for #GenMobile: Over a third of businesses don’t have a basic mobile security policy in place. Make sure you have a policy covering roles, devices, locations and other contextual attributes. Create enforcement rules that extend from applications to devices to the network. Make sure your security measures and policies map back to your organisation’s business objectives. Training is vital: all staff should have needs-assessed training to help them understand why policies are in place and how they can help. Take heed of feedback — it may improve your IT workflows and performance.

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www.thecfome.com

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‫قامت ثالث مؤسسات تعاونية هي ‪Chios Mastiha Growers‬‬ ‫و�‪Agricul‬‬ ‫في خيوس)‬ ‫هيهيالمصطكي‬ ‫مزارعي‬ ‫(جمعية‬ ‫‪Association‬‬ ‫‪Chios‬‬ ‫‪Growers‬‬ ‫تعاونية‬ ‫مؤسسات‬ ‫ثالث‬ ‫‪ChiosMastiha‬‬ ‫‪Mastiha‬‬ ‫‪Growers‬‬ ‫تعاونية‬ ‫مؤسسات‬ ‫قامتثالث‬ ‫قامت‬ ‫الزراعية)‬ ‫التعاونية‬ ‫(جمعية‬ ‫‪tural‬‬ ‫‪Cooperative‬‬ ‫‪of Kimi‬‬ ‫و�‪Agricul‬‬ ‫خيوس)‬ ‫المصطكيفيفي‬ ‫مزارعي‬ ‫(جمعية‬ ‫و�‪Agricul‬‬ ‫كيميخيوس)‬ ‫المصطكي‬ ‫مزارعي‬ ‫‪(Association‬جمعية‬ ‫‪Association‬‬ ‫بهدف‬ ‫الديناميكية‬ ‫ومواردها‬ ‫بتوحيد‬ ‫‪Mediterra‬‬ ‫الزراعية)‬ ‫التعاونية‬ ‫كيمي‬ ‫(جمعية‬ ‫‪tural‬‬ ‫و‪ofofS.A.‬‬ ‫‪Kimi‬‬ ‫الزراعية)‬ ‫التعاونية‬ ‫وطاقاتهاكيمي‬ ‫جهودها(جمعية‬ ‫‪turalCooperative‬‬ ‫‪Cooperative‬‬ ‫‪Kimi‬‬ ‫‪Chios‬‬ ‫‪Mastiha‬‬ ‫الشهيرة‪:‬‬ ‫القيمة‬ ‫و‪ S.A.‬لمنتجاتها‬ ‫الترويج‬ ‫بهدف‬ ‫ومواردها‬ ‫وطاقاتها‬ ‫جهودها‬ ‫بتوحيد‬ ‫‪Mediterra‬‬ ‫الديناميكيةبهدف‬ ‫الديناميكية‬ ‫ومواردها‬ ‫وطاقاتها‬ ‫جهودها‬ ‫بتوحيد‬ ‫‪Mediterra‬‬ ‫و‪S.A.‬‬ ‫‪I G N AT‬‬ ‫‪ES‬‬ ‫‪I‬‬ ‫‪Mastiha‬منتجات‬ ‫الشهيرة‪ :‬وهي تنتج‬ ‫التاريخ‬ ‫مدار‬ ‫لمنتجاتهاعلى‬ ‫الترويج ‪- Kimi‬‬ ‫و‪Figs‬‬ ‫‪Chios‬‬ ‫القيمة‬ ‫‪D‬‬ ‫‪Chios‬‬ ‫‪Mastiha‬‬ ‫الشهيرة‪:‬‬ ‫القيمة‬ ‫لمنتجاتها‬ ‫الترويج‬ ‫‪IGN‬‬ ‫‪E SE S I GANTAI T‬‬ ‫بحب‬ ‫تحظى‬ ‫أنها‬ ‫كما‬ ‫الذكية‬ ‫والنكهة‬ ‫الجودة‬ ‫بين‬ ‫تجمع‬ ‫منتجات‬ ‫تنتج‬ ‫وهي‬ ‫التاريخ‬ ‫مدار‬ ‫على‬ ‫‬‫‪Kimi‬‬ ‫و‪Figs‬‬ ‫‪D D‬‬ ‫‪I‬‬ ‫و‪ - Kimi Figs‬على مدار التاريخ وهي تنتج منتجات‬ ‫ذات‬ ‫منتجات‬ ‫تسجيل‬ ‫يحمل‬ ‫ورعايتهم‪.‬‬ ‫منتجيها‬ ‫بحب‬ ‫تحظى‬ ‫الذكية‬ ‫الجودة‬ ‫تجمع‬ ‫بحب‬ ‫أنهاتحظى‬ ‫كالهماكماكماأنها‬ ‫والنكهةالذكية‬ ‫والنكهة‬ ‫بينبينالجودة‬ ‫تجمع‬ ‫األوروبي‪.‬‬ ‫االتحاد‬ ‫قبل‬ ‫من‬ ‫محمية"‬ ‫منشأ‬ ‫"تسمية‬ ‫ذات‬ ‫منتجات‬ ‫تسجيل‬ ‫كالهما‬ ‫يحمل‬ ‫ورعايتهم‪.‬‬ ‫منتجيها‬ ‫منتجيها ورعايتهم‪ .‬يحمل كالهما تسجيل منتجات ذات‬ ‫األوروبي‪.‬‬ ‫االتحاد‬ ‫محمية"منمن قبل‬ ‫"تسمية منشأ‬ ‫األوروبي‪.‬‬ ‫االتحاد‬ ‫الدولية حيث يروج‬ ‫المعارض‬ ‫قبل في‬ ‫محمية" الفريدة‬ ‫منشأالمنتجات‬ ‫"تسميةهذه‬ ‫تقدم‬ ‫‪GI‬‬

‫‪N • •• P•RP‬‬ ‫‪G IG I N‬‬ ‫‪R‬‬

‫إلى أنشطة ذات‬ ‫باإلضافة‬ ‫والمطبوعة‬ ‫التلفزيونية‬ ‫اإلعالنات‬ ‫هذهخالل‬ ‫تقدممن‬ ‫لها‬ ‫يروج‬ ‫حيث‬ ‫الفريدةفيفي‬ ‫المنتجات‬ ‫يروج‬ ‫الدوليةحيث‬ ‫المعارضالدولية‬ ‫المعارض‬ ‫الفريدة‬ ‫المنتجات‬ ‫هذه‬ ‫تقدم‬ ‫وروسيا‬ ‫واإلمارات‬ ‫والسعودية‬ ‫هي‪ :‬تركيا‬ ‫اإلعالناتمختلفة‬ ‫أسواق‬ ‫خالل ‪5‬‬ ‫خاللفي‬ ‫منمنتقام‬ ‫صلة‬ ‫ذات‬ ‫باإلضافةإلىإلى‬ ‫والمطبوعة‬ ‫التلفزيونية‬ ‫لهالها‬ ‫أنشطةذات‬ ‫أنشطة‬ ‫باإلضافة‬ ‫والمطبوعة‬ ‫التلفزيونية‬ ‫اإلعالنات‬ ‫وروسيا‬ ‫واإلماراتوروسيا‬ ‫والسعوديةواإلمارات‬ ‫تركياوالسعودية‬ ‫هي‪:‬تركيا‬ ‫مختلفةهي‪:‬‬ ‫أسواقمختلفة‬ ‫وبيالروسيا‪.‬في‪55‬أسواق‬ ‫تقامفي‬ ‫صلةتقام‬ ‫صلة‬ ‫وبيالروسيا‪.‬‬ ‫وبيالروسيا‪.‬‬

‫‪Chios Mastiha‬‬ ‫‪Chios‬‬ ‫المصطكي إال في خيوس ويكمن تفرده وتميزه في خصائصه ‪Kimi Figs‬‬ ‫‪ChiosMastiha‬‬ ‫‪Mastiha‬‬ ‫إنتاج‬ ‫ال يتم‬ ‫‪Kimi‬‬ ‫‪Figs‬‬ ‫في‬ ‫وتميزه‬ ‫تفرده‬ ‫ويكمن‬ ‫خيوس‬ ‫في‬ ‫إال‬ ‫المصطكي‬ ‫إنتاج‬ ‫يتم‬ ‫‪ Kimi‬هو منتج فريد يتم إنتاجه حصريًا في كيمي إيفيا‪ ،‬من‬ ‫‪Kimi Figs‬‬ ‫خصائصه ‪fig‬‬ ‫منذ‬ ‫الشعبيةفيوالشهرة‬ ‫ويكمنحقق‬ ‫خيوس مما‬ ‫ورائحتهفيالمميزة‬ ‫إنتاج الفريدة‬ ‫العالجية‬ ‫خصائصه‬ ‫تفردهله وتميزه‬ ‫المصطكي إال‬ ‫الاليتم‬

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‫إيفيا‪،‬منمن‬ ‫حصريًا‬ ‫إنتاجه‬ ‫فريديتميتم‬ ‫‪fig‬‬ ‫الشعبية‬ ‫ورائحته‬ ‫الفريدة‬ ‫العالجية‬ ‫المتنوعة‪.‬‬ ‫أشجار‬ ‫هو من‬ ‫شجرة‬ ‫‪25000‬‬ ‫واسع‪.‬‬ ‫نطاق‬ ‫الصحيةلهعلى‬ ‫بفوائده‬ ‫االعتراف‬ ‫حينما تم‬ ‫قديمة‬ ‫أزمنة‬ ‫كيميإيفيا‪،‬‬ ‫فيفيكيمي‬ ‫المحليةحصريًا‬ ‫التينإنتاجه‬ ‫منتجفريد‬ ‫منتج‬ ‫‪Kimi‬هو‬ ‫‪Kimi‬‬ ‫والشهرةمنذمنذ ‪fig‬‬ ‫والشهرة‬ ‫الشعبية‬ ‫حققله‬ ‫مماحقق‬ ‫المميزةمما‬ ‫المميزة‬ ‫ورائحته‬ ‫الفريدة‬ ‫العالجية‬ ‫المتنوعة‪.‬‬ ‫المحلية‬ ‫التين‬ ‫أشجار‬ ‫من‬ ‫شجرة‬ ‫‪25000‬‬ ‫واسع‪.‬‬ ‫نطاق‬ ‫على‬ ‫الصحية‬ ‫بفوائده‬ ‫االعتراف‬ ‫تم‬ ‫حينما‬ ‫قديمة‬ ‫أزمنة‬ ‫‪ 25000‬شجرة‬ ‫محفور واسع‪.‬‬ ‫على نطاق‬ ‫الصحية‬ ‫استخداماتهبفوائده‬ ‫في االعتراف‬ ‫حينما‪E S‬تم‬ ‫ً‬ ‫قديمة ‪G N AT‬‬ ‫تفرده‪I‬‬ ‫طريقة خاصة في‬ ‫المتنوعة‪.‬هذه‬ ‫المحليةالمتنوعة‬ ‫التينالمحلية‬ ‫أشجارالتين‬ ‫منأشجار‬ ‫خصائص‬ ‫ومتعمق في تتطلب‬ ‫حيث إنه‬ ‫المتعددة‬ ‫أزمنة يكمن‬ ‫كما‬ ‫‪I‬‬ ‫‪D‬‬ ‫ً‬ ‫في‬ ‫خاصة‬ ‫طريقة‬ ‫هذه‬ ‫المتنوعة‬ ‫المحلية‬ ‫التين‬ ‫أشجار‬ ‫خصائص‬ ‫تتطلب‬ ‫ً‬ ‫في‬ ‫ومتعمق‬ ‫محفور‬ ‫إنه‬ ‫حيث‬ ‫المتعددة‬ ‫استخداماته‬ ‫في‬ ‫تفرده‬ ‫يكمن‬ ‫كما‬ ‫كثيرة‬ ‫طريقةطبيعية‬ ‫هذه أعدا ًء‬ ‫المتنوعةكيمي‬ ‫المحليةالتين في‬ ‫تواجه شجرة‬ ‫وتجفيفه‪ .‬ال‬ ‫تتطلب التين‬ ‫ومتعمق في إنتاج‬ ‫المتوسط‪.‬‬ ‫إنه شرق‬ ‫منطقة‬ ‫وحضارات‬ ‫شعوب‬ ‫خاصة في‬ ‫أشجار التين‬ ‫خصائص‬ ‫محفور‬ ‫وبخاصةحيث‬ ‫مختلفةالمتعددة‬ ‫استخداماته‬ ‫تفرده في‬ ‫ثقافةيكمن‬ ‫كما‬ ‫ً‬ ‫كثيرة‬ ‫ء‬ ‫أعدا‬ ‫كيمي‬ ‫في‬ ‫التين‬ ‫شجرة‬ ‫تواجه‬ ‫ال‬ ‫وتجفيفه‪.‬‬ ‫التين‬ ‫إنتاج‬ ‫المتوسط‪.‬‬ ‫شرق‬ ‫منطقة‬ ‫وبخاصة‬ ‫مختلفة‬ ‫وحضارات‬ ‫شعوب‬ ‫ثقافة‬ ‫كثيرةال‬ ‫طبيعيةفهي‬ ‫خاصة‪.‬‬ ‫رعاية‬ ‫أو‬ ‫خاصة‬ ‫زراعية‬ ‫أساليب‬ ‫إلى‬ ‫تحتاج‬ ‫ال‬ ‫ثم‬ ‫ومن‬ ‫مستخلصة إنتاج التين وتجفيفه‪ .‬ال تواجه شجرة التين في كيمي أعدا ًء طبيعية‬ ‫المتوسط‪.‬‬ ‫منطقة‬ ‫وحضارات مختلفة‬ ‫ثقافة‬ ‫شرقراتنجية‬ ‫عصارة‬ ‫وبخاصةعن‬ ‫الطبيعي) عبارة‬ ‫شعوب (في شكله‬ ‫المصطكي‬ ‫بالمخصباتال‬ ‫أساليب‬ ‫تحتاج‬ ‫ومنثمثم‬ ‫رعاية إال‬ ‫التربة‬ ‫زراعيةتتم‬ ‫الغالب ال‬ ‫إلىإلىوفي‬ ‫الرش‬ ‫تتعرضالالإلى‬ ‫فهيال‬ ‫خاصة‪.‬فهي‬ ‫خاصة‪.‬‬ ‫معالجةأورعاية‬ ‫خاصةأو‬ ‫خاصة‬ ‫زراعية‬ ‫أساليب‬ ‫تحتاج‬ ‫مستخلصة ومن‬ ‫الطبيعي)‬ ‫شكله‬ ‫(في‬ ‫ووسط‬ ‫راتنجيةكبير‬ ‫أنواع‪:‬‬ ‫ثالثة‬ ‫عن في‬ ‫ويأتي‬ ‫المصطكي‬ ‫شجرة‬ ‫وفروع‬ ‫جذوع‬ ‫من‬ ‫مستخلصة‬ ‫عصارةراتنجية‬ ‫عصارة‬ ‫عبارةعن‬ ‫عبارة‬ ‫الطبيعي)‬ ‫شكله‬ ‫المصطكي(في‬ ‫المصطكي‬ ‫بالمخصبات‬ ‫تتعرض‬ ‫العضوية‪.‬‬ ‫التربةإالإالبالمخصبات‬ ‫معالجةالتربة‬ ‫الغالبالالتتمتتممعالجة‬ ‫وفيالغالب‬ ‫الرشوفي‬ ‫إلىإلىالرش‬ ‫ووسط تتعرض‬ ‫وصغير‪.‬‬ ‫كبيرووسط‬ ‫أنواع‪:‬كبير‬ ‫ثالثةأنواع‪:‬‬ ‫ويأتيفيفيثالثة‬ ‫المصطكيويأتي‬ ‫شجرةالمصطكي‬ ‫وفروعشجرة‬ ‫جذوعوفروع‬ ‫منمنجذوع‬ ‫العضوية‪.‬‬ ‫قامت ثالث مؤسسات تعاونية هي ‪Association‬العضوية‪.‬‬ ‫‪( Chios Mastiha Growers‬جمعية‬ ‫وصغير‪.‬‬ ‫وصغير‪ Chios .‬أشهر منتجات‬ ‫‪gum‬‬ ‫المصطكي في خيوس) و‪( Agricultural Cooperative of Kimi‬جمعية كيمي‬ ‫مزارعي‬ ‫منتجات‬ ‫أشهر‬ ‫‪Chios‬‬ ‫‪gum‬‬ ‫إنتاجه‬ ‫ويرجع‬ ‫المصطكي‬ ‫‪ Chios gum‬أشهر منتجات‬ ‫إنتاجهالزراعية) و‪ Mediterra S.A.‬بتوحيد جهودها وطاقاتها ومواردها الديناميكية بهدف‬ ‫التعاونية‬ ‫ويرجع‬ ‫المصطكي‬ ‫‪.1958‬‬ ‫إلى عام‬ ‫إنتاجه‬ ‫ويرجع‬ ‫المصطكي‬ ‫‪.1958‬‬ ‫عام‬ ‫إلىإلى‬ ‫عاما ‪.1958‬‬ ‫‪ Chios Mastic‬الترويج لمنتجاتها القيمة الشهيرة‪ Chios Mastiha :‬و‪.Kimi Figs‬‬ ‫وأخيرً‬ ‫الحصول‬ ‫وأخيرً االذي يتم‬ ‫‪Oil‬‬ ‫‪ Chios‬على مدار التاريخ وهي تنتج منتجات تجمع بين الجودة والنكهة الذكية‪،‬‬ ‫‪ChiosMastic‬‬ ‫‪Mastic‬‬ ‫وأخيرً ا‬ ‫الحصول‬ ‫‪Oil‬‬ ‫تقطير‬ ‫خالليتمعملية‬ ‫عليه من‬ ‫الحصول‬ ‫الذي يتم‬ ‫الذي‬ ‫‪Oil‬‬ ‫كما أنها تحظى بحب منتجيها ورعايتهم‪.‬‬ ‫تقطير‬ ‫عملية‬ ‫خالل‬ ‫من‬ ‫عليه‬ ‫الطبيعي‪.‬‬ ‫المصطكى‬ ‫عملية تقطير‬ ‫بخارمن خالل‬ ‫عليه‬ ‫المصطكى‬ ‫بخار‬ ‫الطبيعي‪ .‬على‬ ‫يحتوي‬ ‫‪%100‬‬ ‫طبيعي‬ ‫منتج‬ ‫بخار المصطكى الطبيعي‪.‬‬ ‫يحتوي‬ ‫طبيعي‬ ‫منتج‬ ‫علىالعالجية‬ ‫المكونات‬ ‫‪%100‬من‬ ‫فريدة‬ ‫مجموعة‬ ‫على‬ ‫‪%100‬يحتوي‬ ‫طبيعي‬ ‫منتج‬ ‫العالجية‬ ‫المكونات‬ ‫من‬ ‫فريدة‬ ‫مجموعة‬ ‫والعطرية‪.‬‬ ‫مجموعة فريدة من المكونات العالجية‬ ‫والعطرية‪.‬‬ ‫والعطرية‪.‬‬

‫منتجات قيمة وفريدة‬

‫‪GI‬‬

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COVER

Pramod Kumar Chand

Clean

slate

Following a drive to focus solely on its core businesses, internationally-renowned RAK Ceramics is on the right track. CFO Pramod Kumar Chand has played a key role in devising the firm’s 19-point value creation plan, to ensure he gets the best from the company through smart financial decisions.

or a company founded in 1991, the numbers on RAK Ceramics are impressive by most measures. The firm has a global annual production capacity of 117 million m2 of ceramic and porcelain tiles, 4.6 million pieces of sanitaryware and 24 million pieces of tableware, with a turnover of $1 billion and a distribution network that spans over 160 countries. The company has its headquarters in Ras Al Khaimah in the United Arab Emirates, where 12 production plants occupy a site of 2.5 million m2 and employ over 8,000 people. With additional plants in Bangladesh and India, the firm has approximately 15,000 employees worldwide. In the hot seat for the company’s finances sits CFO Pramod Kumar Chand, who has been at RAK Ceramics since the start of 2014. Prior to joining, he was CFO of RAK Investment Authority, having joined from Indian cement firm Birla Corporation, where he spent the vast

majority of his career. He has since relished the challenge of working for an internationally-renowned firm, where his experience in the cement industry - a market in which RAK Ceramics has an imposing presence - has served him well,. “Joining the company has given me fantastic global experience,” he says. “Our main advantages are the broad range of products we offer and the fact we operate in such a strong range of markets.” The company started out with just one plant which initially produced 903,000 m2 of tiles per year, but the firm’s expansion over the next 20 years created challenges from the finance department, as it faced huge volume growth leading to greater receivables. More pressing still is the “slight downturn” in the ceramics market in the GCC. “When Expo 2020 was announced things certainly looked to be very exciting for us,” Chand says. “Unfortunately things have been

moving down in the UAE and Saudi Arabia, and problems have been occurring. That being said, we have not yet been affected as most customer projects are around 70-80 percent complete, and only if there are many cancellations will the market hamper.” Exporting to more than 160 countries has allowed the firm to “change its market and product mix”. For instance, against the backdrop of the fall in value of the Euro, RAK Ceramics faced increased competition from European firms, spurring a greater focus on performance in the UAE and KSA. Nonetheless, with currency fluctuations in mind, the firm is continuing to import raw materials from Europe, only to export its porcelain products back to the continent. In spite of this local obstacle the firm faces, its transformation into a global player has largely been due to the role of the GCC over the last decade. “The construction sector has seen dynamic growth in the region,

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â&#x20AC;&#x153;

Our product range and diversity of markets in which we operate will always ensure the stability of the firm.â&#x20AC;?

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COVER

Pramod Kumar Chand

“

China was not profitable for us and exported 95 percent of what it produced, so we were not being competitive. The market was not qualityconscious and was driven by volume, which is against the ethos of our brand.” which has obviously spelt success for us,” Chand says. The vertical has seen an average growth rate of 17 percent from 2005-2015, with the value of construction projects in the region in 2015 estimated to have been $395 billion, but there remains room for improvement. Chand concedes the firm has not grown over the last four years – particularly in its tiles range - but a range of promising initiatives are on the horizon. “We need to explore our possibilities in sanitaryware,” he says. “We’re expanding our Bangladesh operations as that is set to be a great growth area for us.” He is conscious of the effect that a sales drive will have on the finance department. “The increase in receivables that is expected, which presented it with a big challenge,” Chand says. The firm’s strategy of operating largely through its distributors presented further difficulties, particularly if they exceed their credit limit, which is often the case. Determined to drive the growth that has been lacking in recent years, and to reaffirm RAK Ceramics’ status

as a global player, the company is now in the midst of a major strategy shift. In June 2014, Samena Capital acquired a 30.6 percent stake in the firm, and together, throughout the course of 2014 and 2015, they have taken a range of decisions that has set the company on this path. “We had to think about how we would deal with our growth in sanitaryware, whilst working on our procurement process and corporate governance,” Chand says. A key aspect of the firm’s new strategy was the decision to dispose of its non-performing assets. The firm is now concentrating solely on its four core verticals – tiles, sanitaryware, tableware, taps and faucets. RAK Ceramics has subsequently focused its production operations – despite the higher costs – in the UAE, India and Bangladesh. The company ceased its operations in Sudan in 2014, and also signalled the end of a 10-year presence in the Chinese market. “We exited Sudan because although the firm was performing well by the standards of the Sudanese market, it did not

contribute enough to justify our presence there,” Chand says. “Currency issues compounded the matter, and we felt it was too big a risk to continue. Meanwhile, China was not profitable for us and exported 95 percent of what it produced, so we were not being competitive. The market was not quality-conscious and was driven by volume, which is against the ethos of our brand.” In line with the cull, RAK Ceramics also ceased its interest in Bangladeshbased RAK Pharmaceuticals, its involvement in the civil and MEP divisions of construction companies, and has also sold its controlling stake in Laticrete Inc. The firm’s executive committee at HQ now meets every 15 days, and has devised a value creation plan consisting of 19 initiatives to accelerate RAK Ceramics’ progress in its core markets. “The plan was designed so that we could target the low-hanging fruit of the organisation,” Chand says. “A lot of the initiatives are intuitive but were all measures that we have needed to take for a while. Each item is being discussed in terms of the steps we need to take. “For example we need to consider ways to reduce the cost of production whilst sustaining the quality of our product, and also looking to remove any non-core assets.” Chand is bullish about the plan’s future success, his enduring faith in the firm driven by the quality and breadth of the firm’s products. “We’re a premium brand, and that will always set us apart from our competition,” he says. “Our product range and diversity of markets in which we operate will always ensure the stability of the firm. We always have the potential to shift our focus to other markets if things don’t go as planned.”

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Iran:

Open for business The news of the end of sanctions against Iran in mid-January has sent the stock markets in the Middle East into a tailspin. As the GCC braces itself for changes to its economic climate, how can CFOs exploit changes to one of the regionâ&#x20AC;&#x2122;s most important emerging industries â&#x20AC;&#x201C; technology?

Feature

Iran

n 17th January, Dubai’s DFM General Index closed down 4.65pc to 2,684.9, while Saudi Arabia’s Tadawul All Share Index, the largest Arab market, collapsed by 7pc intraday, before recovering to end down 5.44pc at 5,520.41, its lowest level in almost five years. While the markets themselves may recover, the technology industry constitutes an increasingly significant portion of the Middle East economy, spelling overall change for the region. Only time will tell exactly what the lifting of Iranian sanctions will mean for GCC markets, but for now at least, the signs do not seem positive. Though the future may be unclear when it comes to the long-term effects of the elimination of sanctions against Iran, the short term fallout is already being felt in every sector. It seems that most industries, at least in the short term, will not escape unscathed. “Markets have already reacted negatively to the downturn. These are challenging times for enterprises in this region,” says Biswajeet Mahapatra, Research Director, Gartner. Megha Kumar, Senior Research Manager, Software, IDC MEA, agrees that the region’s industries will be affected negatively by the drop in the stock market, but envisions a slowdown rather than a halt. The change in industry purchases will underscore the coming change, leading with a change in priorities by the government sector. “We expect a prioritisation of projects but governments will continue their investment around certain core social aspects around infrastructure, education, healthcare and more importantly Smart City initiatives,” she explains. “The commitment to economic diversification will be fuelled

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Feature

Iran

by innovation and technology and will play a major role in driving this vision forward.” The latter is one sector in particular that will lead changes in the Middle East. Technology is one sector in particular to watch, as every industry depends on its solutions to function. Mahpatra sees a cautious path for the technology industry in the Middle East. “Most vendors have reported a slowdown in their sales and have redrawn their plans for 2016,” he says. He compares other industries in regions other than the GCC to highlight the difference. “Other regions which are net importers of oil are actually seeing a boom, as the cost of manufacturing, logistics and operations go down. Hence, they are comparatively doing better than the GCC oil-exporting region.” Though there are obviously hard times to be had, Kumar suggests that they may translate in to a drive to think outside the box that may benefit technology vendors in the long run. “In a way, challenging times push organisation to innovate on utilising IT to meet business goals,” she explains. “Organisations will seek solutions to optimise budgets and streamline operations.” This, she says, may drive sales in the IT industry. “There will major demand in utilising software and IT services to meet the demands of the business,” she explains. “Even infrastructure investment is leaning towards software-defined solutions or converged systems.” Again, Mahpatra takes a more measured look at the fallout, noting expenses that some businesses will simply opt out of in favour of potential upfront cost savings. “Until and unless the technology vendor can show that their tools do not require a huge capital expenditure upfront and, in addition, help in reduction on operating

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We expect a prioritisation of projects but governments will continue their investment around certain core social aspects around infrastructure, education, healthcare and more importantly Smart City initiatives.” Megha Kumar, Senior Research Manager, Software, IDC MEA

expenses in the long run, I don’t see a boon for the tech industry.” Kumar does see a potential upside, however, in terms of the opening up of Iran as a new market. “Iran has a lot of grey market shipments coming in from the UAE. Lifting of sanctions will severely impact ‘grey’ market sales for consumer hardware especially for the UAE which has one of the largest reexport markets in MEA,” she explains. Demand will clearly change, she notes, with a dependency on oil sales in the region. “However, the extent of this demand will largely depend on whether global oil prices will rebound in the coming years.” Mahpatra cautions that the introduction of a fresh market such as Iran may not be entirely positive. “Lifted sanctions will inevitably generate economic impact which is mostly negative, as it will raise competition,” says Mahpatra. While competition may be positive from the point of view of buyers and investors, vendors may not see this as a benefit, as competition will surely drive down costs. While the potential of a fresh new market is undeniable, there are some issues to address before venturing into Iran. “Vendors will need to build out new teams that can focus on the Iranian market,” Kumar says. “Depending on their country of origin, vendors will

need to comply with legal operational requirements both from their country of origin and Iranian authorities.” For example, in spite of the sanction cessation, US companies still need permission to operate in Iran as compared to Asian firms. Regardless of national origin, the channel ecosystem needs to be built out to ensure partners are able to support projects in Iran. There also needs to be skills training within Iran, to provide customers with local support. Mahpatra agrees that prior planning is the key to entering the Iranian market. “Iran will be a virgin market for many vendors. In that sense, they should plan a sales strategy that addresses the Iran market. Any dip in the GCC market should be seen to be offset in Iran.” In short, vendors need to go in with their customers’ unique demands in mind. It is clear that the lifting of sanctions on Iran will have an effect on all industries in this region and globally. Some of these changes may be positive, and some may signal a rocky road ahead. It is a unique situation, with an all but untouched market opening up in this region. No matter the short-term results, in the long-term, planning and caution may ultimately make or break the GCC’s economy in dealing with the changes Iran will bring to the climate.

FEATURE

Talent management

The talent agenda

While the role of a CFO still centres on fiduciary responsibilities, it has undeniably extended to tasks that requires knowledge of various business disciplines. One of these focal points for the finance chief is talent management.

FEATURE

Talent management

s the finance function’s influence in the enterprise continue to grow, having the best talents in the finance team is high on every business’ agenda. With organisations on the look-out for people who are not just scorekeepers but also business partners, finance professionals, are increasingly being asked to manage more comprehensive roles. This results in finance professionals becoming more holistic, strategic and operationally minded. “There are many traits that are common in figures who go on to become CFOs. These include having a sound market insight, business knowledge, analytical skills and adaptability. Accounting and financial competence are core to this role, and will enable future CFOs to lead and manage financial operations of the organisation. However, an aspiring CFO should also have effective communication and leadership skills, coupled with strong integrity, in order for people to trust them,” says Nauman Mian, CFO, Bayt.com. Rohit Rajvanshi, Head of People, KPMG UAE, agrees to this notion, explaining that it is now more important than ever for finance professionals to hone their skills as communicators and strategic thinkers. “Various aspects of the finance role are being redefined to be more business-centric,” he says. “Members of the finance team are now also expected to be more commercially

“

aware and adept in strategic implementation of various organisational initiatives. More importantly, they should be adaptable. The business landscape, regardless of which industry you are in, is continuously changing. So, finance professionals, especially those who aspire to be CFOs, must be agile in adapting to these changes.” Having the right organisational structure and operating model for the finance function are instrumental in maximising an organisation’s business strategy. Finance teams are being challenged to fulfil their core performance mandate while adjusting to greater business complexity. Therefore, finance professionals need to maintain the right mix of technical and business capabilities. According to Mian, adaptability is often the key to keeping the right combination of the two. “Every CFO must be flexible and open to facing adversity,” he says. “Having a grasp of the traditional role, and a deep understanding of the fundamentals, while still having the ability to go beyond the core essentials, such as leading projects and teams, building relationships internally and externally, and, of course have the business and market insight, are necessary characteristics of a successful finance leader.” Organisations today encourage their finance teams to proactively contribute their insights to help the management make better business decisions. “You already expect a finance talent to possess

the right technical know-how, that’s a given,” explains Rajvanshi. “What they need to develop then is their businesscentric capabilities. Now, business-centric aspects such as being commercially aware and having strategic business acumen are those attributes are the value-add capabilities that most organisation’s management is looking for.” Aligning the company’s talent agenda and business strategy demonstrate the will to succeed. Once these two aspects complement each other well, they can ensure that the organisation is well positioned to meet challenges and realise the opportunities of the future. Rajvanshi opines that it is also important for business leaders to make certain that the goals of their HR and learning and development departments are aligned. “These two departments are responsible for facilitating an organisation’s talent strategies, therefore, the agenda of these two functions should be integrated.” Organisational success is strongly correlated with both good talent management and high alignment between HR and business leaders, and as such, will benefit by ensuring they have both. “CFOs and other finance leaders are now increasingly getting involved when it comes to on-boarding new talents and managing the current ones,” Rajvanshi says. “Ultimately, if you want to ensure that your finance team consists the right people, you have to be able to

There are many skills and characteristics linked to successful finance talents who can potentially be CFOs. These include having a sound market insight, business knowledge, analytical skills and adaptability.” Nauman Mian, CFO, Bayt.com

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FEATURE

Talent management

identify them right at the entry level. The people you hired from the beginning will eventually be the ones who will take the reins and lead the team in the future.” As finance chiefs take on more strategic and decision-making responsibilities, their views are crucial when it comes to recruiting finance talents. “CFOs play a key role in aligning business plans and their involvement in developing talent strategies and in creating a company’s annual recruitment plan,” says Mian. “After all, bad recruitment decisions, can cost the company more time and money in the long-run.” Mian further highlights that in order to increase efficiency in hiring, talent management, and retention, as well as to ensure consistency and compliance in the recruitment process, CFOs should be involved alongside the HR department in setting a systematic recruitment plan. “Organisations should have a workforce plan that outlines the hiring volume for the company during the year, taking into account the risk-management scenarios and business scenarios that could spike the volume of hiring,” he explains. “Then, they should also ensure that hiring managers make note of key success factors and key performance indicators for the finance roles.” He further elaborates that costs related to the acquisition of talents through different resources must also be kept on record. This can help the management track the effectiviness and potential return on investment of their recruitment efforts. “This metric also ensures that hiring budgets along with monitoring of resource-allocation and utilisation are kept on check,” Mian says. “Lastly, a good talent management plan includes regular talent review processes, performance and succession plans. This helps the management identify upskilling initiatives that for their finance talents.” As a company focused on facilitating talent recruitment, Mian says that they want to empower organisations with the

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best tools and technologies to align their business plans and talent strategies. “Most of the region’s top employers whom we liaise with are well-equipped to source, attract and retain national talent across career levels and job roles,” he says. “In the GCC, we have introduced Talentera, which is an applicant tracking system. This helps facilitate the entire process of creating recruitment plans by ensuring that companies and employers have access to details recruitment analytics and technology. Organisations can potentially invest in technologies such as this to better their talent management processes.” Meanwhile, Rajvanshi also emphasises on the importance of implementing talent development initiatives within organisations. “It is ideal to keep on coaching and developing the capabilities of each member of your finance team. As an example, in our company, we have a structured mentoring programme. Members of our staff regularly meet up with their counsellors to evaluate their performances and ensure that their skills are being updated. We also have initiatives such as the ‘Emerging Leaders Programme,’ which aims to make sure that we are giving members of our team the environment to progress and grow. “It is also helpful to have programmes that identify and enhance talent at a very early stage. Recently, we introduced our ‘Ace the Case programme,’ which is a competition designed to give university students an experience of real life business scenarios. Activities like these does not only help young finance talents gain more knowledge, it also helps companies find out what capabilities these individuals have. Through initiatives similar to this, organisations can spot the right talents for their finance teams right at the entry level,” he explains. Mian says that current internal trainings are crucial for a more productive and progressive finance team. “According to the Career Development survey we have conducted earlier this year, 85

“

Various aspects of the finance role are being redefined to be more business-centric. Members of the finance team are now also expected to be more commercially aware and adept in strategic implementation of various organisational initiatives.” Rohit Rajvanshi, Head of People, KPMG UAE

percent of professionals state that career development is very important to them,” he says. “Another 82 percent are willing to leave their company for better training opportunities. So once a department head finds the talent they need, it is very important to make sure that this person is given the room to continue learning, growing and developing, to further benefit the company, and to keep the employee fulfilled and motivated to work towards the success of the company.” Organisations should keep in mind that high value-add within finance talents can only happen with the right people, initiatives and strategies in place. Finance professionals will continue to influence enterprises and can further contribute to its growth as their profession evolves.

Audit

automation While many c-level figures will baulk at associated CAPEX, the promise of artificial intelligence in audit is clear. James Dartnell looks at the issues that CFOs need to be aware of when opting for these solutions.

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FEATURE

AI in audit

“

As the expectations and role of accountancy and audit change in time, it’s quite easy to envisage a time where AI is not only present, but prevalent in the profession.”

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elf-driving cars. Facial recognition technology. Innovative drug treatment. For the general public, these are the first things that spring to mind when artificial intelligence (AI) is mentioned. Any old school finance manager or CFO could be forgiven for thinking that these solutions weren’t for them, merely a case of excess CAPEX that will not drive unique value. Nonetheless, while audit may not be able to deliver anything as cutting-edge as life-saving medicine or education services for third-world nations, its automation still stands to bring immense efficiency to an enterprise finance department. High speed, low cost, great agility. All three await those prepared to take the next steps. There is one benefit of AI in audit that will, on the face of it, have the greatest impact on bottom line. The ability to automate services within a finance department – audit included – will inevitably reduce headcount in finance teams. On the face of it, this may seem a highly attractive proposition for any CFO. But potential pitfalls are afoot. True, the technology alone making the necessary calculations is extremely powerful – performing trillions of operations per second – but the staff who are tasked with its operations must have the requisite training to ensure that it is not error-prone. Once the necessary algorithms are in place, however, huge time savings are afoot.

Not far behind on the list of plus points is the capacity to reduce risk. Relieving auditing staff of their manual processing duties will give them the power to give greater focus to using their own analytical abilities, and risk falls under this bracket. This is one of the major selling points that must be used when convincing other senior stakeholders of AI’s potential in fraud. AI’s ability to interact with other entities within an organisation’s IT infrastructure could provide the ability to spot, or even predict, fraudulent behaviour. AI has natural language processing capabilities, which means it has similar intuitive and logical capabilities to humans, giving it the capacity to spot irregularities in contracts and documents. On a more basic level, this ability will also bring greater speed in day-to-day contract reviews. By the same token, while CFOs seeking to reduce operations costs will be keen to make use of AI, they may face an internal struggle to ensure that their audit team remains on side. Naturally, when audit professionals are told that technology solutions are being brought in to essentially replace the manual aspects of their job, they will feel threatened. Who knows, as AI solutions develop once implemented, there’s always the possibility that its responsibility could extend to the more subjective aspects of a finance department. However the principle of effective training is important here. While for some CFOs this may mean

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FEATURE

AI in audit

“

As AI solutions develop once implemented, there’s always the possibility that its responsibility could extend to the more subjective aspects of a finance department.”

hiring new AI specialists who are skilled in using the software, other CFOs will look to their existing team members to adapt their skillsets for the transition at hand. One stumbling block, or indeed great springboard for AI – depending on its existing quality – is an enterprise’s IT infrastructure. As the region’s technology infrastructure matures, the adoption of AI solutions in internal audit is bound to increase. While there is undoubtedly room for improvement in terms of SMEs’ IT infrastructures in the Middle East, the region’s larger enterprises are already offering an increasing number of services powered by cloud and Big Data analytics. Technology vendors are also taking steps to bring AI to the region. In November, IBM’s cognitive computing division Watson partnered with Abu Dhabi’s Mubadala in a deal that will see Big Blue’s solutions brought to the Middle East. The exciting effects of Watson have already been witnessed in a host of partnerships around the globe – largely in healthcare and education – and the benefits translate easily into the role of audit. Examples of effective AI in the region’s enterprises are also not too hard to find. Although not directly involving internal audit, one particular standout use of AI in financial services in the region is Kuwait Credit Bank’s implementation of an automated loan system that can approve a customer’s loan request in just 90 seconds. Having defined an algorithm that interacts with several government entities to verify the applicant’s details, the company is now making vast savings in operations costs from the process, reducing headcount and improving efficiency.

As with any major technology initiative, gaining backing from executive peers will always be an obstacle for a CFO. There will inevitably be figures – even at the c-level – who are skeptical of AI. A number of their concerns will be entirely natural. Although figures are hard to obtain as adoption levels are relatively low, there will always be a fear around the reliability of AI solutions. Although the concept of AI is nothing new, it has so far seen sporadic adoption in the enterprise, and especially in the field of audit. This means that for some, its credibility is lacking. There’s no guarantee that a machine can calculate data with 100 percent accuracy, and so convincing c-level figures must be built around the concept that watertight processes will be in place about those manning AI solutions. An important part of that process is collaborating with the CIO. Audit may not be the first area that springs to mind as being in need of AI, but again, the promise of greater resilience to risk has to be the main sell in this respect. Although skepticism will inevitably prevail in the short and medium term, AI in audit must surely be given serious consideration by CFOs and other senior decision-makers in an organisation. As the expectations and role of accountancy and audit change in time, it’s quite easy to envisage a time where AI is not only present, but prevalent in the profession. Ominously, The Economist predicted a 94% likelihood of there being job losses in the accountancy profession over the next two decades. Although surely not an immediate threat for the average Middle Eastern organisation, the threat of Digital Darwinism is probably best not ignored in this regard.

Analysis

Face off

Andrew Gambier, Head of Audit and Assurance,

ACCA

sk anyone whether they prefer rules or principles and the chances are they’ll choose principles. In practice, however, we want both, and there are several reasons why we might favour rules over principles. Firstly, principles aren’t enough on their own. While general principles are desirable, they are too broad to govern the behaviour of business managers, auditors, investors and other stakeholders. For example, the public expects businesses to pay their fair share of tax. But, without detailed tax rules, businesses would find it hard to establish what ‘fair share’ means in practice. Tax rules are necessary to provide a benchmark of what is fair, so the principle can be complied with. Otherwise, different businesses might have different ideas of what is fair and try to pay different amounts of tax. Rules also allow broad concepts within principles to be shifted to take account of changing public expectations. Such changes can be enacted fairly quickly, rather than waiting for general acceptance of revisions to how principles are to be interpreted to percolate throughout society. So independence requirements within the code of ethics can be changed virtually immediately, and audit firms can be held to account if they don’t follow new requirements. Such swift action would be impossible without the mechanism of rules to provide the necessary clarity for change. Furthermore, this

RULES

reflects the reality that the principles underpinning standards do not change frequently, if at all. In the wake of crises, the public look to legislators and regulators to move decisively to deal with wrongdoing. Rules are popular with the public because they provide the necessary precision and speed. Similarly, rules are popular with regulators because they look sufficiently tough and, vitally, provide a clearer standard for enforcement than broad principles. For legislators looking to rebuild confidence following a financial crisis, rules provide the bite necessary to demonstrate a suitably strong response. Surprisingly, even those subject to regulations often like rules. Principles can take time to understand and apply. One person’s interpretation may differ to the regulator’s. Regulated entities often seek help from the regulator to interpret broad principles and, even if this is not the intention, the regulator’s understanding becomes the de facto law. In this way, a principle often gives

rise to several rules. For example, the SEC’s Staff Accounting Bulletins, which describe how the SEC’s staff interpret certain US accounting standards, are highly influential on companies and auditors, because they know that differing interpretations are liable to be challenged by the SEC. Conversely, interpretations that follow the SEC’s view are less likely to be questioned. Hence, in an environment where companies and auditors are keen to avoid SEC investigations, rules can help avoid misunderstandings on both sides. Perhaps this explains why, despite repeated commitment from standard setters to principles, rules continue to proliferate. From the international code of ethics to IFRS to International Standards on Auditing, collections of principles-based standards have grown longer and more complex, because our expectations of these standards have also grown. Only rules can provide the necessary certainty to users and regulators and can convince the public that regulations serve the public interest.

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Face off

Whatever walk of life you’re in, rules and principles are a must. But which one reigns supreme in accounting? Experts from ACCA and ICAEW state their cases.

PRINCIPLES ICAEW

Michael Armstrong FCA, Regional Director for the Middle East, Africa and South Asia (MEASA)

here has long been debate over whether rules or principles make the best foundation for accounting systems. In the UAE, Europe and indeed anywhere that reports under International Financial Reporting Standards (IFRSs), principles are used as the basis, whereas in the United States, for example, they follow a rules based regime (US GAAP). There are certainly advantages on both sides. Rules-based systems are argued to have greater clarity in application, reduced risk – always so long as the rules are followed – and increased comparability since the treatment between companies and industries is always the same.

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In the US, where accountants and auditors may be involved more often in litigation, these advantages have swayed the balance in favour of maintaining the rules-basis. However, set against this is the problem of driving a culture of compliance. There is a tendency, where there are inflexible rules to apply, to enforce rigorously the letter of the law and the spirit in which it was intended can potentially be obscured. This is particularly relevant in 21st century business, where there is significant international focus on aggressive tax avoidance. Legal tax avoidance relies on the ability of companies to interpret rules in a way that may not result in the originally-intended consequences. A rules-based approach enables companies to maintain that they have fulfilled their obligations so long as they have “ticked the right boxes”. This has serious repercussions not only for the public purse – in the countries where the tax is avoided – but also in public confidence as we have seen in recent news stories around the world.

Principles, on the other hand, are about substance rather than form. This means that under systems like IFRS, clearly defined principles allow account preparers to consider what the best way to account for and report transactions might be. In the modern global marketplace, this is a distinct advantage. Being more flexible, companies can prepare their financial statements in the best way to ensure a true and fair disclosure of their current situation. Modern global finance is complex – prescriptive rules might require a certain treatment to be used regardless of the situation, which could mean that similar transactions are regarded as the same when the circumstances were very different. This does mean that principles-based systems make two demands of finance professionals. The first is the ability to use their professional judgement. This is essential in order to ensure the correct treatment is used – and that they can, if necessary, demonstrate why they chose a certain course. The second is an embedded ethical framework. The freedom to interpret principles can only exist in an environment where those applying their judgement are trusted to operate to the very highest standards of ethics and integrity. It is for these reasons that professional bodies like ICAEW place such emphasis on the continual demonstration of the highest professional, technical and ethical standards. There will always be a debate to be had over which approach will produce the better accounting system, and there are examples of notable successes, and failures, that can be used to support both sides. However, ICAEW believes that a principles-based system does more to underpin trust and confidence in business and markets.

Insight

KPMG

Service to scale Tasneem Lakdawalla, Partner, Advisory Services, KPMG discusses why SMEs shouldn’t be put off by large professional services firms, who can bring a wealth of experience to the table.

MEs aren’t often seen as prime customers for leading professional services firms. But the reticence – on both sides – is difficult to understand. SMEs are the lifeblood of any economy: according to the Dubai Economic Council’s special report on SMEs, they account for 95 percent of the total enterprise population in Dubai and employ approximately 42 percent of Dubai’s workforce. SMEs are critical drivers of private sector economic growth. They contribute to every economic sector, with 350,000 companies across the UAE providing jobs for more than 86 percent of the privatesector’sworkforce.SMEscurrently

contribute more than 60 percent of the UAE’s non-oil GDP, a figure the Governmenthascommittedtoincreasing to 70 percent by 2021. They generate wealth and jobs, both directly and indirectly. And successful SMEs tend to be very good at what they do. They succeed for exactly that reason. But being good at something doesn’t mean that you are good at everything. Professional service firms are good at what they know too, and they tend to be good at many of the things that SMEs aren’t. This begins with basic services like bookkeeping and payroll and builds to more complex ones like succession planning, corporate governance and developing KPIs –

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and the dashboards to monitor them. Professional services firms can help to develop policies and procedures, analyse gaps between the current and a desired future state, set roles and responsibilities, and help select the tools and technologies that effectively and efficiently promote future growth. It’s important that SMEs believe that professional services firms understand the issues and challenges they are facing. All companies have a business cycle. Each stage presents its own set of opportunities and challenges. It’s important professional services firm show they understand what it takes for SMEs to be successful at each stage of the business, from idea creation through growth to exit. SMEs are inherently different to the large organisations, public sector groups and government-related entities that are often seen as typical clients of professional services firms. Professional services firms need to leverage – and show they can leverage - the vast knowledge, skills and experience they have built up servicing these types of clients to help other clients identify and address their most complex business problems with confidence. For example, a common issue identified by SMEs is lack of access to sources of liquidity. So professional services firms need to leverage the knowledge, skills and experience built up working with financial services organisations – whether banks, insurance companies or other financial companies - to help SMEs plan for cash and working capital cycles and align their growth plans to manage liquidity through internal and external funding options. Maybe you are interested in growth. Mergers and acquisitions can be a great way to grow or diversify, but navigating the options can be challenging, especially for entrepreneurial businesses. How can you be confident that the deal

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SMEs are critical drivers of private sector economic growth. They contribute to every economic sector, with 350,000 companies across the UAE providing jobs for more than 86 percent of the private sector’s workforce.”

you’re making will achieve your desired outcomes? SMEs need access to independent, unbiased advice across all stages of the transaction – from strategy development and target identification to implementation. They need assistance in evaluating financing options and structure debt solutions that can give them the financial flexibility they need to deliver on their growth plans. Growth is an essential ingredient to continued business success. Organic growth requires considerable time and effort. Should SMEs be seeking complementarybusinessesforacquisition, potentially divesting non-core businesses, outsourcing functions to increase cost efficiencies and potentially expanding into emerging markets? Again, this is an area where SMEs need the skills, knowledge, contacts and tools that can drive their business forward. When it comes to business costs, many entrepreneurs have challenges understanding their working capital requirements and how they can align their operations in order to maximise cash and reduce debt costs. Larger firms have the manpower and the ‘bandwidth’ to develop proprietary tools and processes that are increasingly a pre-requisite for effectively managing working capital. SME leaders can be

Tasneem Lakdawalla, Partner Advisory Services, KPMG

helped to understand and forecast cash flow streams, optimise processes, and develop reporting policies to support and encourage better cash management. It’s often said that the typical SME goes from rags to riches and back to rags in three generations. Better governance can help improve performance. Establishing a governance framework can help deal with changes in the business constructively. But it requires thinking through important scenarios before critical decisions have to be made. Sometimes, an exit strategy rather than a succession plan is needed as there isn’t a next generation of family members who are ready, willing or able to continue the business. The sale of an SME might be a once-in-a-lifetime transaction, with just one opportunity to get it right. So – it seems that SMEs and professional services firms have the potential to be a perfect match. Rather than shrugging your shoulders and thinking ‘Oh, but I could never afford that’, it might well be worth considering as an option, and could well turn out to be one of the best decisions you’ve ever made.

insight

ACT

Treasure test

ACT Middle East Chairman Matthew Hurn gives his spin on the top challenges facing the regionâ&#x20AC;&#x2122;s treasurers in 2016, and points to five overlapping issues that need to be carefully navigated.

orporate Treasurers in the Middle East face an intriguing challenge in their roles. They have to manage many of the contemporary finance and business issues which treasurers elsewhere in the world live with on operational as well as strategic levels. However, they are also having to find solutions which reflect regional and local nuances to those problems. I hope this short piece goes some way to highlighting their approach. I see challenges in five areas, all of which overlap: credit, regulation and markets, technology, people and politics. Itâ&#x20AC;&#x2122;s quite clear that across the region - but especially in the GCC - a low price

regime for hydrocarbons is having a number of effects. One in particular that affects corporates is liquidity in the banking system. Governments are looking to support their budgets by reducing cash balances. When thatâ&#x20AC;&#x2122;s added to the impact of Basel III banking regulations on bank balance sheets, it becomes obvious that the price of corporate credit is rising. Easy money is long gone and if banks change their lending behaviours, it might be gone whatever happens to the price of crude. Banks are also looking more closely at their lending books and the type of business their balance sheets will support. That applies to international banks who will potentially look to use

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local alliances to bolster their product offering - or even withdraw from regional business altogether - and to local banks looking for income from fee-based services or annuity type ones. Unfortunately for local treasurers, they may have to make some tough choices about where their businesses bank. Consequently, Middle East treasurers managing corporate liquidity – whatever the size of their company – are having to be more inventive in creating and looking after the lifeblood of business - cash. So whether that means some form of supply or value chain finance, bonds, equity, cash pooling or cash repatriation, treasurers are driving cash innovation as never before. The problem treasurers have with raising market-led forms of debt capital investment is that local and regional debt markets are underdeveloped in terms of infrastructure, regulatory oversight and investor appreciation. It seems odd in a region that has been a global trading hub for thousands of years that, whether conventional or Islamic, debt instruments don’t figure that high on investor agendas. We see that change coming however and intend to lend our support to it. Technology will of course play a part in the widening of financial markets as it has in people’s social interaction. In reality, the impact of technology where it’s not been used before on corporate treasuries across the region can be profound across all of a company’s financial operations. Understanding the capital and cash positions, being able to manage financial exposures and looking through procurement and sales to cash inflows and outflows is a huge step forward. In the same way that banks will look to be selective about their product suites, treasurers will look for financial service providers of all types to tailor solutions for them that match those needs and service quality will drive transactional business.

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In their day jobs, treasurers are having to deal with a wide range of unprecedented regulatory change affecting themselves and their financial service providers and in areas such as know your customer (KYC), payments and the digitisation of trade finance. New to many treasurers in the Middle East whose businesses are expanding internationally is the principle of worrying about who and where they do business – counterparty risk and its mitigation requires new skills too. For many regional businesses, even those with a history of cross border trade, the need for treasury and business systems to support contemporary audit and governance standards is demanding fundamental change in treasury as a business function. As a result, and as their profile has started to grow, regional treasurers are having to learn the skills (and occasional dark arts) of taking a seat at the board table, not just talking about bringing financial and business strategy together but influencing and persuading C-suite decision-makers. Knowledge, and the skill to create insight will drive corporate behaviour. Markets will expect information and Investors will place a premium on those businesses that are transparent in their financial aims, and treasurers will need to ensure that financial and business targets are interlinked. Long-cherished privacy may start to be breached. But, and it’s a big but, that also means the capability and skill levels of finance and treasury professionals and the bankers and regulators has to rise substantively. That will place strain on education systems and traditional relationships. It won’t always be easy and at times will create a skills squeeze. Interestingly, FinTech business seems to want to have the cake of relationships with the cream of tech solutions. In a

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Middle East treasurers managing corporate liquidity – whatever the size of their company – are having to be more inventive in creating and looking after the lifeblood of business – cash.” world of transactions, however, it may be that traditional relationships will survive for treasurers willing to foster them. Political uncertainty isn’t confined to the Middle East of course but regional treasurers have perhaps more than their fair share of conflict, cultural and social issues to manage. Having said that, this may be one area in which traditional regional experience has export value for treasurers looking to widen their horizons. Modern treasury sits comfortably at the heart of business and financial strategy. The key of course is knowing how those elements fit together so business can be clear on what they do, how they run and are funded and how they approach risk. I believe the profession has a bright future in the Middle East as we help our countries grow to be sustainable and competitive in the global economy.

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SomersConsult

Remember the QBC rule Fintan Somers, CEO, SomersConsult

“If it ain’t quick, if it ain’t big and if it ain’t cheap then you really have to question whether you should spend the money” Fintan Somers, CFO, SomerConsult

ften, the CEO asks finance and IT people what needs to happen to improve matters but is told, “I know you are unhappy and we agree that things can be improved, but unless you invest $X million in a complete overhaul of the current IT systems then there is little that we can do.” The CEO says: “No way am I spending that much on a system that does not produce revenue.” And nothing changes. You can understand where the CEO is coming from. When I asked a CEO I once worked for how he prioritised investment spend, answered, “I follow the QBC rule.” I asked what it was, and he said, “If it ain’t quick, if it ain’t big and if it ain’t cheap then you really have to question whether you should spend the money.” This philosophy guides me to this day. In all transformations you have to

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deliver something - anything, quickly, to establish credibility; it needs to be something with a reasonably big impact when compared to what other colleagues are delivering; and it cannot come at a cost that allows it to be shot down. So, what if you had answered the CEO’s question as follows? “I think we can make a major improvement in business impact, productivity and effectiveness of our finance function with a relatively small amount of investment. Sure, for optimal efficiency it may be necessary to do a major systems change. But let me make an impact with a relatively small amount of money so that I earn the right to ask for more.” As a general rule, I have found that this approach gets the transformation program off the ground. Most CEOs will give you enough rope. And generally if you deliver phase one well, then you earn the right to ask for more investment. Phasing the investment is key. Generally, the first technology investment I make when leading a transformation is to rapidly create a scalable, modern, efficient data management environment for use by finance and business users in analysing and reporting information about the performance of the businesses. Obviously, the amount of the investment required will depend on the size and extent of the project definition. However, in phase one, I tend to keep the development smaller than ideal and

very much focused on improving the experience of the CEO and my fellow executive committee members. The reason for this is that I want to improve the perception of finance and build credibility with a regular drip-feed of improvement in MI and analytics. I have found that the best way of doing this is to improve the accessibility, timeliness and drill-down capability of current information as quickly as possible: get what they already have automated and reconciled, and ruthlessly replace spreadsheets used in production with the new technology. This creates bandwidth that allows finance to move to the next phase, which is to expand capability and to implement the work programs coming out of the functioneffectiveness and team-effectiveness work programs. With the advent of high impact technologies like cloud and mobile, these days you can also affect this change without the need to procure hardware or involve a large amount of IT resource. The mobile distribution of data also makes this even more effective. Remember there is no such thing as a technology magic bullet. The team and function effectiveness parts of the program are at least as important as the technology part, not least being the need to develop technology competencies in the finance team.

SURVEY

Oracle

Intangibles insight

Arun Khehar, VP, Cloud Applications, Oracle, discusses the importance of collaboration in accurate corporate performance management reporting.

oday, the ability of management to clearly explain the quality and sustainability of corporate performance is vital - and, increasingly, the ability to value and explain the significance of intangible assets is becoming a competitive differentiator. The shift to digitally-enabled business models is clearly influencing shareholder valuation strategies. Investors are paying more for companies with business models that embrace and emphasise intangible assets. In addition to corporate valuation considerations, we are witnessing an increase in global and regulatory mandates around narrative reporting. Corporate and management reporting is experiencing a significant change in today’s digital age. As reported earnings become more volatile, corporate guidance - and the ability of management to clearly explain the quality and sustainability of corporate performance - is more important than ever. The current integration of narrative into performance reporting processes is manual, ad hoc, and highly prone to error. New cloud-based solutions can support streamlined internal and external reporting processes, combining

data plus narrative in a single, secure, collaborative environment. Research by OpenMatters and Deloitte examined the way that value is being created in today’s digital age, and the role that the CFO can play in creating value using digital technologies. The findings are striking. In 1975, tangible assets such as plant, property, and equipment constituted 80 percent of total corporate value on the S&P 500. Today, those tangible assets constitute just 20 percent of corporate value, compared to 80 percent of the value now created by intangible assets such as customers, talent, and intellectual property. The disclosure of non-financial and diversity information by certain large companies and groups is well advanced. A survey conducted by PwC as far back as 2014 found that investors are increasingly seeing a clear link between the quality of reporting, and that of management. Even more significantly, the quality of disclosures can even impact a company’s cost of capital. According to the Corporate Executive Board, the average employee today typically collaborates with 10 or more people just to accomplish their dayto-day work. With performance and management reporting processes, these numbers are even higher, as multiple people across various departments

provide input to multiple reports. Modern tools that provide secure collaboration capabilities can have a significant impact on the speed and effectiveness of your process. A cloud-based reporting system enables business users to participate in the narrative reporting process through the web interface on a variety of devices, including desktops and tablets. In this way, users are not bound to a bulky device or complex document system to monitor, manage, review, approve, or sign-off on content. Collaboration throughout the process is key to getting the most accurate picture possible, and helps shrink the time it takes to define, produce and deliver reports. It is very difficult to communicate things like business strategy, budget justifications, or the cause of certain patterns in the data purely through numbers and graphs on traditional reports. By using a more free-form layout of descriptive paragraphs, narrative reports augment and, in some cases, replace traditional structured content of tables or graphs. Readers find narrative reports extremely useful for understanding not only ‘what’ has happened, but to answer the ‘who’, ‘when’, ‘where’ and ‘why’ questions that provide a deeper explanation of the organisation’s performance.

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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

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