The CFO Middle East | Issue 9

Vol. 1 ISSUE 9

GOING PUBLIC

UAE AED 15 | Bahrain BHD 1.5 | Qatar QR 15 | Oman OR 1.5 | Saudi Arabia SR 15 | Kuwait KD 1.2

PLANNING FOR AN IPO

sealing the deal drivers of m&a success

Building bridges Union Properties CFO Murtaza Chevel prizes formidable networking skill

Download the FREE The CFO ME app and explore your favourite magazine

ACCOUNTING FOR EXCELLENCE THE MIDDLE EAST ACCOUNTANCY AND FINANCE EXCELLENCE AWARDS WEDNESDAY 25 NOVEMBER 2015 AT THE JUMEIRAH BEACH HOTEL, DUBAI

Once again, the very best talent in the world of accountancy and finance will be celebrated by ICAEW at a stellar awards ceremony.

ICAEW is a professional membership organisation supporting over 144,000 chartered accountants around the world. And, on Wednesday 25 November 2015, at the Jumeirah Beach Hotel in Dubai, we’ll be recognising excellence in ten categories featuring: Business Leader of the Year, CFO of the Year, Excellence in Innovation Award.

With an impressive line-up of speakers, special guests and entertainment, it all adds up to a truly memorable evening.

Don’t miss your chance to be among the elite of the accountancy and finance profession for a night of celebration and networking.

Reserve your place before 10 November via icaew@daboandco.com For more information, visit www.icaew.com/middleeastawards

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

The introduction of corporate tax and value-added tax is on the horizon in the GCC. Many would argue that it is inevitable given the current global financial volatility and slump in oil prices. To state the obvious, the GCC countries are heavily reliant on oil and gas revenues, which make up 46 percent of their GDP and three quarters of total exports. Many of these countries have undertaken large-scale infrastructure projects. The fall in oil prices has made it necessary to boost revenues and sustain socio-economic development.

At a recent meeting of the GCC’s Financial and Economic Cooperation Committee, officials adopted a draft agreement to push forward with the introduction of corporate tax and VAT, which is likely to be introduced over the next two to three years. In fact, countries such as the UAE are already moving in that direction and draft tax laws are said to be in the final stages of completion, including the establishment of a federal tax authority. IMF, a vocal proponent of tax introduction in the GCC, has advocated a broader base for corporate tax, covering both foreign and domestic companies.

What does this impending tax regime mean for you as a CFO? When it comes to taxes, traditionally CFOs have stayed clear of the details. In fact, a recent Grant Thornton survey suggests that less than 34 percent CFOs are involved in their company’s tax strategies.

Corporate income tax will take a big bite out of a company’s bottom line and increase the cost of doing business and compliance. CFOs will have to ensure that they work closely with tax departments or tax advisors, and get up-to-date with tax rules in local countries. The technicalities may not be a top priority for a CFO, but it is important for them to have strategic conversations with their tax executives, given it will have a significant impact on profitability. As Deloitte points out, this will help enhance the tax literacy of the CFO and broader finance organisation, and offer a window into the operation of the tax function.

Corporate taxation is always a highly contested issue with a profound impact on a company’s capital structure. Forward-thinking CFOs need to understand this and create a strong partnership between finance and tax.

Photographer Charls Thomas Production Manager James Tharian Data Manager Rajeesh Melath

Jeevan Thankappan Group Editor Printed by Printwell Printing Press © Copyright 2015 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.

Head Office PO Box 13700, Dubai, UAE Tel: +971 (0) 4 440 9100 Fax: +971 (0) 4 447 2409

TALK TO US: E-mail: jeevan.thankappan@cpimediagroup.com Facebook: www.facebook.com/theCFOme

Twitter: @theCFOME LinkedIn group: ae.linkedin.com/in/thecfome

REACH THE HIGHEST

PEAK OF YOUR BUSINESS CAREER

CIMA Awarded Accountancy Body of the Year

UPGRADE YOUR TEAM COMPETENCIES TOWARDS BUSINESS AND FINANCE y y y y y

Fast track routes available for BBA, B.Com, MBA, ICWAI, ACCA and CA holders CIMA Professionals speak three languages Business, Finance and Management Direct membership and designations with CPA Australia, CMA Canada & AICPA USA Top up options for masters and bachelor degrees with UK ranked universities Special pricing and exemption fee waivers up 100%

To discuss on talent competency development programme for your team, connect with our CIMA consultant on +971 (0) 52 790 0754

For individual consultation, contact: T: +971 (0)4 368 9432 E: middleeast@cimaglobal.com www.cimaglobal.com

tHE CFO MIDDLE EAST

Advisory Panel The CFO Middle East’s Advisory Panel comprises a dynamic group of experts and leaders in various aspects of finance.

As industry captains arriving from world-leading organisations and specialising in financial strategies, accounting and management, these key personalities will play a vital role in ensuring the delivery of relevant and accurate analyses of the latest trends and issues in the business community.

Ahmad Darwish Ahmad Darwish is a Board Member and Secretary General of the UAE’s Accountants and Auditors Association (AAA), an organisation tasked with the promotion and development of the accounting profession in the country. He is also the Senior Manager for Financial Accounting at DP World UAE and oversees the management accounting, treasury and asset management divisions of the company. With his extensive financial expertise Darwish is also the first Emirati to chair the UAE Members Advisory Committee of the ACCA.

Hanady Khalife Hanady Khalife is the Director of Operations, Middle East and Africa, of the Institute of Management Accountants (IMA). She is responsible for training providers, business partners, universities, governmental entities, amongst others. Khalife is also an expert consultant specialising in assisting clients develop and implement strategic business plans and build partnerships with key industry stakeholders.

Michael Armstrong Michael Armstrong, FCA is the Regional Director for the Middle East, Africa and South Asia (MEASA) of ICAEW. He is responsible for the ICAEW’s work across the MEASA region, collaborating with key stakeholders, engaging with businesses across the region, supporting ICAEW members and working with both public and private sectors on raising awareness of the relevance of chartered accountancy catalysing economic

growth. Armstrong has extensive experience advising financial institutions and energy and natural resources companies in addition to having held several leadership and advisory positions in business and government.

David Thomasson David Thomasson is the founder and Managing Director of Phoenix Financial Training. David is a fellow of CIMA and worked in the accountancy industry for many years before moving into training in the 1990s. PHOENIX offers courses leading to Professional Finance Qualifications in ACCA, CIMA and ICAEW in Dubai and India. Offering a range of bespoke financial courses in Financial Awareness Building and Corporate Treasury Phoenix’s student body ranges from independent students to practitioners of private companies and sovereign wealth funds.

Lindsay Degouve de Nuncques Lindsay Degouve de Nuncques is the UAE Head of the Association of Charted Certified Accountants (ACCA). Her role entails spearheading discussions with regulators, business leaders and important stakeholders to strengthen the ACCA’s network and profile in the region. Degouve de Nuncques has spent more than eight years with ACCA in various senior roles.

Geetu Ahuja Geetu Ahuja is the Head of GCC for the Chartered Institute of Management Accountants (CIMA).

Responsible for

developing the growth of operations and positioning the global brand of CIMA across the GCC region, Ajuha establishes strategic partnerships with global and regional entities. She is also responsible for overseeing the launch of various region specific CIMA nationalisation programmes in the GCC.

Paul Gyles Paul Gyles is the Regional CFO and Board member for all ISG Group companies – an international construction services company delivering fit out, construction, engineering services and a range of specialist solutions. He is responsible for the finance, HR, IT, admin and legal functions for ISG’s Middle Eastern outfit. A key aspect of the role is project funding and raising external financing by working with both Arab and international banks. Gyles is also the Chairman of the Steering Committee of the MECA CFO Alliance, the largest CFO networking group in the Middle East.

Amer Khansaheb Amer Khansaheb is the president of the CFA Society Emirates. He is the Managing Director of Khansaheb Investments, an investment company with investments in construction, real estate and infrastructure. His expertise includes real estate management, construction management and financial analysis. Amer graduated from the American university in Beirut with a degree in Civil & Environmental Engineering. In 2009, he received his MSc in Project Management from the British University in Dubai. He has been a CFA charterholder since 2009.

CONTENTS 8 News The latest local developments in finance.

10 Hot property Union Properties CFO Murtaza Chevel explains how diplomacy can be the best instrument in forging strong business relationships.

14 Think responsibly Corporate social responsibility reporting is an opportunity for a company to showcase its core values.

18 The C-suite shift Savvy senior management members appreciate the value that the CFO can provide beyond finance.

22 Taking the lead Anand Soni, Group CFO, BAFCO Group of Companies, takes us through his professional journey and shares his philosophy to success.

24 The changing role of audit Grant Thornton, together with ACCA, recently hosted a roundtable discussing developments within the audit industry.

10 18

22

30

28 Infographic Top challenges plaguing investment banks.

30 The numbers game Increasing competition in global markets calls for effective cost management.

34 Going public HK Financial’s Bobby Morse and Anca Cighi discuss what needs to be considered when planning for an IPO.

34

36 Agents of change Hanady Khalife on the role of CFO’s in Middle Eastern family businesses.

39

36

Choose wisely

40

The CFO ME shares a few tips to help you choose the right corporate performance management software for your business.

40 Sealing the deal What can finance chiefs do to guarantee M&A success?

Column

45

Fintan Somers discusses the need for a strong enterprise financial management culture.

46

Geetu Ahuja, Head of GCC, CIMA, on managing responsible business.

News

DS-Concept acquires DFSA licence DS-Concept Intelligent Trade Finance Limited (DS-Concept Factoring UAE) has been granted a Category-2 licence by the Dubai Financial Services Authority (DFSA).

The licence will enable DS-Concept Factoring UAE to provide credit, advise on financial products or credit and arrange credit or deals in investments. DS-Concept has moved their Dubai location to the Dubai International Financial Centre (DIFC), UAE. “As we are based in DIFC, one of the largest financial centres in the world and regulated by DFSA, one of the most prestigious financial service regulators, we have all the right ingredients for continued success in the Middle East,” stated Ankit Goel, Managing Director, DS-Concept Factoring UAE. “Obtaining this Category-2 licence from the DFSA in Dubai, is certainly a milestone for DS-Concept as a group and a major milestone in our company’s history.”

63%

of Certified Management Accountants (CMA) globally receive higher compensation than non-CMAs. Source: IMA

8

Deloitte: Declining oil prices impacting CFO optimism According to Deloitte’s latest report “Global CFO Signals: CFO Sentiment Q2 2015 – Staying focused; remaining vigilant,” the continuation of low energy prices is impacting both optimism and risk appetite in the Middle East.

With oil at $53 a barrel at the time of the survey, CFO optimism fell to one of its lowest levels in recent years, with only a net 26 percent of finance chiefs across the Middle East reporting positive prospects for their company. That is down from 47 percent in the previous survey, which was conducted just before the fall in oil prices.

The Deloitte report also includes results of the second-quarter 2015 CFO surveys from Deloitte CFO Programmes across the Americas, Middle East, Europe and Asia-Pacific. Risk appetite in the Middle East curbed, with only 33 percent of CFOs believing it is a good time to take greater

risk onto the balance sheet. For now, the favoured strategies are cost reduction and improving internal economics. However, CFOs are optimistic about one thing: they expect oil prices to be higher in a year.

“In response to challenging market conditions and decreased risk appetite, Middle East CFOs appear to have concentrated their efforts toward performing as financial stewards and operators of their organisations rather than as strategists or catalysts,” explains James Babb, Partner and CFO Programme leader, Deloitte Middle East.

“The pivot is evident as high-priority business strategies over the next 12 months aim to protect and preserve the organisation’s financial position via cost reduction (net 86 percent), organic growth (net 73 percent) and increased cash flow (net 66 percent).”

Kerzner International appoints new CFO Kerzner International Holdings Limited has appointed Saif Al Yaarubi as the Chief Financial Officer for Kerzner International.

Ali Tabbal, who has served as the CFO for the past three years, will take on the COO role. In their new roles, both executives will be reporting to the company’s CEO Alan Leibman.

“As we continue to grow, we are more focused than ever on developing and inspiring our people to innovate and create amazing and memorable experiences for our guests,” Leibman said. “I am pleased to have a strong senior executive team ready to take the company to the next level and am thrilled to have Ali lead the operational side of the business at

this exciting time of growth for the company and to have Saif step into the CFO role.

“Ali has been instrumental in his role as CFO delivering outstanding financial performance, as well as steering all divisions of our company to align with our overall strategy.

He is the perfect fit for the new role of COO. I am also very pleased to have Al Yaarubi join us as CFO. His vast experience over the past 25 years in banking and finance plus his commitment to corporate governance will ensure we exceed the expectations of our owners and stakeholders as we move forward with development projects currently in excess of $4.5 billion,” he added.

www.thecfome.com

News

CIMA to certify University of Dubai MBA graduates University of Dubai and CIMA (Chartered Institute of Management Accountants) has recently announced that MBA students enrolling Geetu Ahuja, Head of GCC, CIMA in the MBA programme at the University of Dubai will be automatically certified by CIMA as a passed finalist upon their graduation.

Students will be taking a maximum of three CIMA exams along with their MBA studies. Qualified students with three years relevant experience will be entitled to a dual award and designation, CIMA’s globally accredited

membership and designation that is powered by AICPA (American Institute of Certified Public Accountants) and CIMA. The certification includes all MBA majors and not the finance and accounting major alone.

Dr. Eesa Bastaki, President, University of Dubai, congratulated the MBA faculty members and students stating that this prestigious certificate

by CIMA is another milestone in UD’s plan to become one of the top universities in the world.

Geetu Ahuja, Head of GCC, CIMA, said, “It is a privilege for CIMA-UK to join efforts with the University of Dubai in order to serve the MBA students and alumni professionally.

CIMA will ensure that their members and students become the first choice for employers who are recruiting professionally trained business leaders.”

IL&FS Securities Services signs MoU with eHDF IL&FS Securities Services (ISSL), a Securities Services firms based in India, and managed hosting and cloud infrastructure services provider eHosting DataFort (eHDF), have recently signed a partnership to provide managed services covering IT infrastructure, remote disaster recovery and back office operations support for financial brokerage firms operating within UAE’s financial exchanges.

The partnership will allow users to choose from a range of solutions including primary IT infrastructure hosting, disaster recovery services and back office solutions.

An MoU was signed by Yasser

www.thecfome.com

Zeineldin, CEO, eHDF, and Anil Somaiya, CTO, ISSL at an event that was also attended by senior member representatives of Dubai Financial Market (DFM), Dubai Gold and Commodities Exchange (DGCX), Abu Dhabi Exchange (ADX), as well as members of a range of leading UAE financial brokerage firms.

“We are absolutely delighted at starting this relationship with eHosting DataFort,” Somaiya added.

“We believe that the managed services solution, as a combination of IT infrastructure and back office services, is value accretive and will lead to ease in business for brokerage firms.”

Emaar Properties records 12% growth in H1 2015

Mohamed Alabbar, Chairman, Emaar Properties

Global developer Emaar Properties recorded a net profit of AED 2.205 billion during the first half of 2015.

The figure is 12 percent higher than the first half 2014 net profit of AED 1.977 billion. Revenue for H1 2015 was AED 6.497 billion, 13 percent higher than the H1 2014 revenue of AED 5.730 billion.

Mohamed Alabbar, Chairman, Emaar Properties, said, “The positive performance of Emaar is led by our deep-rooted commitment to create sustained value for our stakeholders.

It reflects the success of our strategic approach of building value by monetising core performing businesses and international operations as well as strengthening our high-performing subsidiaries. Our credentials in quality project execution and timely delivery have been our strong-points, especially with the maturing of our home market in Dubai driving end-user demand towards Emaar projects as the most trustworthy in the market. Emaar’s success also mirrors the ambitious strides made by the UAE, under the leadership of His Highness Sheikh Mohammed bin Rashid Al Maktoum, UAE Vice President and Prime Minister and Ruler of Dubai.”

Emaar’s international revenue during H1 2015 was AED 1.171 billion.

International revenues during H1 2015 were 36 percent higher than the same period last year.

9

Interview

Murtaza Chevel

Hot property For Murtaza Chevel, diplomacy has always been the name of the game. From forging strong business networks across a diverse range of cultures to appeasing powerful financial institutions when they have seemingly lost faith, the Union Properties CFO is adept at getting the best deal for all parties.

“

You’re only as good as your last transaction.” As a seasoned finance professional, Murtaza Chevel appreciates the wisdom and weight of these words for many reasons. From keeping up appearances with influential allies, upholding his own integrity and – most importantly – ensuring his employers remain in the black, Chevel knows never to take his eye off the ball.

Born into a finance background in Karachi – his father and grandfather were both stockbrokers – Chevel’s family moved to Kuwait when he was a child. He was always clear that he wanted to work in the industry. “Accounting always seemed a good option,” he says. “I knew a CFO would never go hungry.” After getting his high school education in the Gulf state, he moved to Toronto, Canada to join Ernst & Young in 1989 and achieve his accountancy qualifications. He would go on to spend 14 years at the firm, amassing diverse experience in the US, the UAE and Bahrain across a range of projects.

Following his stints on a number of projects across the Gulf, Chevel decided to move back permanently once offered the CFO job at Dubai Investments – one of his clients whilst at EY - in January 2004. During his tenure at the company,

10

the number of programmes they were working on doubled from 18 to 36. “It was an exciting period of growth,” he says.

“Dubai Investments was growing through its own start-ups and acquisitions. The company had its own private equity and investments arms, and shareholder value was always our objective. The progress the company has made is amazing – just like that of Dubai as a whole.”

Next up was a two-year stint at Habib Investment, until 2007, when Chevel was headhunted by Palm Utilities to become its Chief Financial Officer. However, towards the end of 2009, with Dubai suffering the effects of the financial crisis, Chevel was made redundant. Fortunately for him, his strong relationship with his former Dubai Investments chairman Khalid Kalban – who by now concurrently held the same position at Union Properties – enabled him to make a seamless transition to being the company’s CFO. Arguably the greatest achievement of Chevel’s career came after he joined the company, but it would take years for his efforts to come to fruition. Still reeling from the effects of the crisis, Union had AED 7.5 billion of unpaid loans with over 20 banks, who were threatening

to pull the plug. Exacerbating matters were a number of unfinished property developments within the company’s portfolio, including Motor City and Index Tower in DIFC. Although the company was in dire straits, Chevel and his peers refused to see Union go under. “I told the banks that it wasn’t enough for them to simply say ‘you’re in debt and need to foreclose.’ I negotiated hard. Sometimes things were pleasant, sometimes they weren’t. I made it clear that progress wouldn’t happen overnight, and that our main assets – our developments – would be worth much more once complete.”

Despite the banks’ initial reluctance, Chevel and Union Properties’ neversay-die attitude paid off. The company struck a series of complex deals, in which approximately a third of its property would go to presold buyers, a third to the new market and a third to the banks themselves. The banks initially allowed Union to complete its projects over the next three years. By 2014, the company’s shares finally paid dividends, and Union had no legacy debt. Looking back on the long-running saga, Chevel draws immense pride and has learned valuable lessons from the experience. “The whole process was challenging, interesting,

www.thecfome.com

Interview

Murtaza Chevel

“I told the banks that it wasn’t enough for them to simply say ‘you’re in debt and need to foreclose.’ I negotiated hard and things weren’t always pleasant. I made it clear that progress wouldn’t happen overnight.”

www.thecfome.com

11

Manage sales forecasts, measure marketing effectiveness, integrate your financial accounting systems. www.tenacre.ae

Tenacre helps businesses to customise and implement Salesforce.com, the world's leading CRM system. Then we train your staff and provide support to your team as you get up and running, all from our office in Dubai.

Sell better. Market better. Provide better customer service.

Visit our website to see our fixed - cost implementation packages.

04 313 2064 www.tenacre.ae

Interview

Murtaza Chevel

“Cultivating an environment of trust within my network gives my more unusual ideas greater credibility.” intense,” he says. “A lot happened from financial, legal and operational perspectives. It was exhausting and adrenaline-filled, but most importantly, it was an interesting challenge.”

Chevel’s handling of Union’s debt difficulties was not the only time he has been adept at managing sticky financial situations. Throughout his career, he has always held dear the notion of forging durable working relationships that allow all parties to emerge in credit throughout any given rough patch. “I’ve always believed that having a strong network of contacts in the finance industry is absolutely key,” he says. “It goes without saying that you need to have other board members onside throughout any given difficulty, but strong relationships with banks and financial institutions are arguably more important.” Chevel believes this gives him greater bargaining power when it comes to thinking outside of the box. “Cultivating an environment of trust within my network gives more unusual ideas greater credibility,” he says. “As a CFO, sometimes you need to be creative, but as long as you do your due diligence, these kinds of solutions are what will give your business the best results.”

Linguistic and cultural proficiency have been a cornerstone of Chevel’s career and personal life. His international upbringing and professional experience have given him the perfect leverage to succeed in the competitive and diverse setting of Dubai.

www.thecfome.com

“I view my multicultural background as my greatest strength,” he says. “I operate mainly in English, but speak Urdu, Hindi and Arabic. I think that’s made me equally comfortable with Western, Eastern and Middle Eastern cultures.” However, Chevel is conscious of the pitfalls that come with the territory of being multilingual. “The main challenge in Dubai is that there is no homogeneous ethnic group,” he says. “The subtleties in how you address different nationalities mean you can so easily offend someone. You need to think about how the person you’re engaging with will interpret what you say.”

Chevel sees his biggest daily challenge

as “working backwards” to ensure that finance can support the business. “Aside from obvious things like ensuring the business has adequate liquidity, the financial consequences of operations aren’t always easy to deal with,” he says.

“Different departments often commit to things without considering their financial consequences, but it would be nice if finance was considered first.” Chevel is quick to acknowledge that this is wishful thinking. “My job is to find funds and make the impossible possible,” he says. “If it is to be done, then you have to work in reverse.

There isn’t always a solution, but we have to - and will - find one.”

13

14

www.thecfome.com

FEATURE

CSR reporting

Think responsibly Corporate social responsibility (CSR) reporting is an opportunity for a company to showcase its personality and ethics to its customers as well as the greater community. It highlights issues that are close to the company’s core values through the causes it contributes to, and the way in which those contributions are made.

W

ithout a set of regulations to determine how CSR reporting is presented, even the method itself can tell a story about a company’s philanthropic efforts. Companies need to develop a strategic approach to corporate responsibility and account for their impact on society through reporting that reflects their intentions and efforts.

As CFOs well know, there are myriad reports companies are required to make - but a CSR is not one of them. Yet, the majority of enterprises that participate in philanthropic efforts still file CSR reports annually. In fact, CSR reporting has become a developing trend in recent years,

www.thecfome.com

with some companies taking advantage of the lack of rigid reporting protocol by finding innovative and unique ways to showcase their social responsibility.

Without a push from regulatory bodies to provide this report, CFOs need only look at the benefits of CSR to provide motivation.

“There has been an increased consensus that CSR is significant for the sustainable development of companies and society as a whole. This acknowledgment is increasingly coming from a place of accountability on behalf of the company versus an obligation of any sorts,” explains Geetu Ahuja, Head of GCC, Chartered Institute of Management Accountants.

Accountability and transparency are necessary for any enterprise, particularly in the age of social media. Society’s ability to access and share information instantly, and on a global scale, has created an informal but potent system of checks and balances for the business world. This, along with a company’s responsibility to its stakeholders, has created an unprecedented atmosphere of transparency.

Osama El-Bakry, Partner, Grant Thornton UAE, describes how technology has affected the way companies think about CSR reporting. “The impact a company has on the economy, environment and society has been thrust into the spotlight with the rise of social media,” he says, adding, “This broadens the scope of responsibility a company has from their clients, investors and customers to include the environment in which they live and work.”

There are, of course, benefits to CSR beyond meeting the demands of a globally connected world. Ajay Arora, Head of Internal Audit, HLB Hamt, explains how companies that practice strong CSR reporting can increase revenue of a different kind.

“Part of the challenge is to judge which ideas put forward by stakeholders are realisable, commercially viable and

15

FEATURE

CSR reporting

“The impact a company has on the economy, environment and society has been thrust into the spotlight with the rise of social media. This broadens the scope of responsibility a company has from their clients, investors and customers to include the environment in which they live and work.”

Osama El-Bakry, Partner, Grant Thornton UAE

valuable,” he explains. “At the same time, those external stakeholders can provide an invaluable source of feedback on which actions can encourage customers and clients to connect more favourably with a given brand.” By improving on the company’s image in this way, he goes on, one can expect an increase in the business value in committing to corporate responsibility.

Currently, the GCC does not require CSR reports to be audited, but this may change in the near future. “It won’t be long before regulations require CSR reports to be validated by a reliable independent body, considering the weightage given to CSR and related areas today,” predicts Ahuja.

Arora asserts that these regulations are necessary. “There should be a regulation whereby companies should be obligated to release a quarterly CSR report,” he says. “This will encourage companies to embrace responsibility for corporate actions and foster a positive impact on the environment as well as stakeholders.”

The impact would be felt, he says, by consumers, employees, investors and communities alike.

These potential regulations will be partially driven by investors, according to El-Bakry, who sees them as an opportunity and not an obstacle. “As investors call for greater transparency, companies will look to ensure the report

16

is audited by a third party in order to validate the information and statements made within,” El-Bakry explains. “This will further promote the credibility and integrity of the business, thus impacting its success. However,” he adds, “an audit of the sustainability report should not be deemed as an investigation to legitimise the claim, but rather a chance to verify and highlight the success and sustainability achieved by the company’s efforts.”

The content of a CSR report will vary in terms of format, length and detail depending on the organisation. However, there are a few crucial elements that should not be overlooked. Ahuja explains, “Every CSR report should include, in some form or another, an opening letter from the CEO expressing the company’s commitment of supporting CSR issues, a mission statement of the CSR report, a disclaimer and vision statement, and disclosures addressing the issues most important to each of the company’s key stakeholders.”

Companies looking to capitalise on the benefits of CSR reporting have a wide open road laid out before them. In order to get the most value out of issuing a report, it is important to look to other companies’ CSR success stories. El-Bakry explains how his company utilises existing reporting channels to effectively distribute CSR reports.

“At Grant Thornton, we believe that

integrated reporting can play an important role in communicating businesses’ environmental and social impact to investors and other stakeholders,” he says.

“In December 2013, the International Integrated Reporting Committee launched its integrated reporting framework, which offers a concise communication of an organisation’s strategy, governance and performance; it sets out how organisations can demonstrate the link between financial performance within the wider social, environmental and economic context; and shows how they create value, not just over the short term but also in the longer term creating exceptional value for issuing a CSR report.”

Transparency and trust building between a company and its stakeholders is not the only benefit CSR reporting offers. Done well, a company’s CSR report can also function as an effective marketing tool. According to Ahuja, “A CSR report can be a valuable tool for interacting with both internal and external audiences.” Companies can use the report to encourage employees to take the lead on sustainability initiatives at a local level and support corporate-level initiatives, she says. “If these efforts are showcased effectively through the CSR reports, they have the potential to affect an organisation’s financial performance, its strategic direction and its relationships with a wide range of stakeholders.”

www.thecfome.com

FEATURE

Change leaders

The C-suite shift Savvy senior management members are beginning to appreciate the value that the CFO can provide beyond finance. Clear demonstration of business acumen is needed from the finance chief to convince those who haven’t yet bought into that philosophy.

T

he new charge of the CFO carries with it a more demanding and complex set of expectations and responsibilities, which only promises to expand as time moves on. In order to compete, a CFO must maintain perspective on commercial drivers such as customer behaviour, demographics and consumer trends, as well as communications, sector insights and how to leverage value to support the business. All of this, of course, comes on the back of the financial prowess the role has traditionally required. The modern CFO now finds themselves sharing a leading role with other C-level executives.

Astute C-level executives are realising the untapped potential of their CFOs and taking full advantage.

Geetu Ahuja, Head of GCC, Chartered Institute of Management Accountants,

18

Cima, explains how the new CFO relates to the rest of the company’s executive team. “The CFO is pivotal to an organisation,” she says. “We depend on them for counsel and direction. Typically, the CFO shares and maintains four key relationships in an organisation - the head of HR, the CEO, management team members, and Executive Director of the company. These relationships cement the role of a CFO as a change leader.”

These relationships demand more from the modern CFO, from lending objectivity and integrity in human resource matters, to providing checks and balances for the CEO who is making decisions about a company’s future. As expected, this influx of new responsibilities requires a new skillset for the successful CFO to draw upon.

Much of this change in the expectations placed on CFOs can be

www.thecfome.com

FEATURE

Change leaders

www.thecfome.com

19

FEATURE

Change leaders

attributed to companies recognising the value the role can bring to future channels of growth through analysis of financial data. As a result, the position of CFO now carries much greater influence within a company, and has the potential for a much more direct impact on the overall operation and strategy of the business.

Michael Armstrong, Regional Director for the Middle East, Africa and South Asia, FCA, ICAEW, believes that strategic decision making skills are imperative to the new CFO. “CFOs need to have the vision to see how individual projects fit into the business’s overall mission and how this can be taken to the tactical level,” Armstrong says.

“CFO’s are about measurement and management and this means taking the evidence and being the ‘voice of reason’.”

Strategic sensibility is not the only skill CFOs need in the modern business world. Hisham Farouk, CEO, Grant Thornton, UAE, explains how CFO’s these days need to be, amongst other things, an innovator. “I don’t think CFOs can ignore the importance of innovative thinking, no matter which sector their business operates in. In order to truly capitalise on technology, promote efficiency within the business, and reduce operating costs, CFOs need to take an innovative approach.”

This doesn’t always mean an overhaul of company policy and practice. An innovative CFO can find myriad small changes to make within a company that can culminate in reduced cost, greater efficiency, and happier customers and C-suite executives alike.

These new expectations of the CFO do not replace the core of what the title suggests, which is, of course, finance.

With an increasingly complex job description, it’s imperative for a CFO to maintain mastery of a company’s financial state.

www.thecfome.com

“First and foremost,” says Ahuja, “The CFO needs to ensure that the organisation is financially secure.

Regardless of how financially conservative a company may be, market turmoil can be such that there may be a real prospect that the bills can’t be paid. Financial stability in the shortterm can therefore not be ignored. But it’s also important to work through the longer-term financing issues, such as the management of the most significant liabilities such as pension contributions. To be truly on top of the numbers, the CFO needs to understand what is driving the business.”

In light of all these changes the position of CFO is encountering, it is important to assess where the CFO fits on the board. “This depends on a number of variables such as company size, industry sector, company structure, and where they are located,” Armstrong explains. “The difference between the role of a Group CFO of a multinational company and the CFO of a small family business in a traditional market can be tremendous. What is certainly true is that more and more CFOs are expected to be strategic business leaders. ICAEW is seeing increased demand for knowledgesharing, peer-learning and networking opportunities like the CFO clubs and finance leaders forums that we have been running across the GCC.” Change is not only a central part of how a CFO fits into a company, but how the companies in the region move forward. According to Ahuja, “As the Middle East markets expand and businesses open up to new ventures and investment opportunities, CFOs have a huge responsibility to present an understanding of how parts of an organisation can create value whilst being mindful of the potential pitfalls.”

Hence, the CFO acts change agent for a company.

“Typically, the CFO shares and maintains four key relationships in an organisation - with the head of HR, with the CEO, the management team members, and executive directors of the company.”

Armstrong supports the idea of CFOs acting in this manner, recognising their ability to offer their company great support in facilitating change. “Managing change is dependent on having a clear strategy, a reliable and robust measurement system, recognising the necessary steps to implement and winning the hearts and minds of stakeholders,” he says. “Measurement and management are the lifeblood of any CFO, and the best and brightest will also have the leadership skills to communicate well and take the company with them on the right journey.”

Change seems to be the only constant these days, and as market demands, technology and new regions continue to expand and develop, so does the role of a company’s Chief Financial Officer.

21

Interview

Anand Soni

Taking the lead With 23 years of experience as a finance professional, Anand Soni brings with him a wealth of knowledge when it comes to finance leadership and crisis management. The Group CFO of BAFCO Group of Companies, UAE, speaks to The CFO ME about his professional journey.

C

an you give us an overview of the work that BAFCO does?

BAFCO has been in the market for the last 24 years. We assist and provide consultation to our customers throughout the whole office furniture selection and interior fit-out

22

process, from the conceptualisation and design, up to supplying and installing the necessary items.

I believe we are in a unique position, primarily because we deliver one-stop solutions to our valued customers. We have our own manufacturing facility here in Dubai and we also have trading

and interior fit-out divisions. What’s more, we are also very well-known for what we do in the corporate space.

Can you take us through your journey as a finance professional?

It has been a very interesting journey for me. I worked in Muscat for seven

www.thecfome.com

“I think the biggest challenge a CFO deals with is uncertainty. Other decision-makers within the organisation always expect you to have a solution to any problem.” years with a company called Zubair Furnishings. After that I came to the UAE and worked with several key players including Damac Group, Al Faraa, and Al Baker Group and have been in the UAE for 11 years now. Prior to that I was based in India. During those years in this profession, I can say that I am proud to have worked with organisations that have undergone various growth stages – from survival, acceleration, and restructuring phases.

Before 2008, almost all companies in the UAE were in the acceleration stage. However, when the crisis came, a number of industries were gravely impacted. I have been part of organisations that have gone through difficult stages during the crisis until they have succeeded. I’ve been in the fit-out/furniture industry for a long time, and, coupled with my time in the country, it has given me a broad understanding of the market. I‘m particularly comfortable in the construction, contracting, manufacturing, and retail verticals.

What has been biggest highlight of your career?

There are two highlights of my career that stick out. The first one was something that I accomplished largely alone, and the other was more of a team effort.

A company that I worked with before faced an unexpected financial problem.

The company had some taxation issues, which resulted in a certain legal liability.

www.thecfome.com

When it was brought to our attention, we only had seven days to solve the problem, which entailed having to send a representative to Europe to sort out the issue. The board then decided that responsibility fell on me as the CFO, I met with all the parties involved and dealt with the problem at hand, and when I left Europe we were able to arrive at a solution. This was a major highlight of my career because I managed to resolve the problem in a very short period of time. In these kind of cases companies usually send a whole team to deal with these issues, but in this scenario they put a lot of faith in me in completing it alone.

The second highlight involved me being part of a team that managed to boost a company that had cash flow problems.

As a team, we were able to tackle the cost issues and increase revenue. These experiences were fantastic in developing my skills as a crisis manager.

What are the main challenges you face in your role?

I believe the biggest challenge a CFO deals with is uncertainty. On a daily basis, we face uncertainties and other decision-makers within the organisation always expect you to have a solution to any problem. I certainly believe that there is a high level of pressure on the CFO, as, at the end of the day, anything that needs to be done within the business will be translated to money.

As the finance chief, you are expected to manage the cash-flow, monitor

the integration of the solution and ensure the availability of funds. It is also integral that you get to answer all the questions that both internal and external stakeholders may have.

Aside from the finance function, what do you think is your most important duty as the finance head of your organisation?

I can say that an essential part of my role is ensuring efficiencies within the finance team. Of course, I am in charge of controlling and managing the costs and pricing, and I am also deeply involved in strategic decisionmaking within the organisation. I also work hand-in-hand with the Chairman to help the group achieve its growth vision.

What is your professional philosophy?

Both my professional and nonprofessional philosophies can be summarised into two things - be passionate about life and have intense will-power. Although I follow these maxims in my personal life as well, as a professional I’d like to add a few ideals that aspiring CFO’s can follow. Engagement or forming good professional relationships, believing in your organisation’s goal and being open to learning are important factors in succeeding as a CFO. What fresh challenges do you see in store for the region’s CFO’s in the next five years?

Expectations of CFO’s will grow, because organisations will seek leaders who have good business and financial acumen. I believe finance chiefs are certainly capable of surpassing these challenges, and their knowledge and skills give them the potential to become great CEO’s.

23

EVENT

Grant Thornton

The changing role of audit

Grant Thornton, in association with ACCA recently hosted a roundtable event to discuss the developments in the region’s audit industry.

T

he concept of transparency and rotation has been a longstanding debate in relation to the audit market both within the UAE and globally. More recently, there have been developments globally, particularly in the EU. Recent audit reforms have been introduced to promote transparency and independence. This debate has led to many other emerging economies embracing the notion of the need for such reforms, particularly in countries where commercial decisions are predominately relationship focused.

In many economies, having audited financial statements is mandatory. The auditor is required to be independent from the management team and board to ensure they remain equitable. In this way they can provide a precise, uncompromised and comprehensive view of the company’s financial position.

Over time, a working relationship is established. These relationships can transcend decades, especially within a family-owned business where relationships are passed from one generation to the next. Equally, the same could be said for a corporation where the audit relationship has been established for years, and, therefore, change isn’t seen as necessary.

The recent EU reforms have illustrated the importance of the need for audit

24

rotation and the debate has pushed this topic up the agenda of investors and large company boards. It is clear that some companies have noted the concerns and are already reacting to the EU reform.

More recently, Abu Dhabi Accountability Authority (ADAA) has taken the primary step by announcing that it will be mandatory for any company regulated by the ADAA to rotate their auditors every four years (announced 11 Oct 2014) under the Statutory Auditor Appointment Rules (SAAR). Under SAAR regulations, all subject entities including Abu Dhabi government public entities and stateowned enterprises in Abu Dhabi must comply.

This change has been taken to further promote transparency and accountability in the local market. ADAA announced that “the objectives of the rule are to regulate the process of appointing the statutory auditors across all subject entities, which includes all Abu Dhabi government public entities and state owned enterprises.”

This mandatory rotation is a significant step in the right direction for the Emirate in relation to the current audit market. Given the level of change and the enhanced requirements currently in progress within the audit landscape within the UAE, it is

“It is mandatory for any company regulated by ADAA to rotate its auditors every four years under the SAAR.”

inevitable that the role of audit is set to change. This change will not only effect enhanced economies, but will also be reflective in emerging economies including the UAE. This change has led way to discussions on the topic of the ‘future of audit’ and the increased demands from business stakeholders who seek not only an audit report, but a value addition report.

www.thecfome.com

EVENT

Grant Thornton

Grant Thornton and ACCA took the opportunity to host leading individuals from regulators and banks to highly acclaimed CFOs who represented family owned businesses, SMEs, listed companies and sovereign wealth funds amongst others, to discuss the changing role and ‘future of audit.’

The roundtable discussion found that CFOs in the UAE are looking for and expect the following, further shaping the future of audit: • There is a need for all the regulators and key impacted stakeholders to align in advance of the introduction of the long form audit reports in 2016 to ensure that the market is fully prepared.

• Corporate entities deserve more than just a standard audit report, therefore, the long form audit report is going to consist more meaningful communication. However, there are going to be debates on what needs to be included in these reports.

www.thecfome.com

• Auditors should act as business partners and help the corporate entities in growing their business and identifying possible areas of growth, all within the independence boundaries.

• Innovation was highlighted as a must in auditing techniques and standards to make the audit more productive, practical and trusted.

• Automation of audit was said to be necessary to further promote efficiency.

With the sophisticated tools used by corporate entities, it was said that audit should take advantage of business intelligence and focus on testing IT controls more than going into old style vouching techniques.

• It was found that professionals from the banking sector are more interested in reviewing future business plans and accounts rather than only relying on historical audited accounts. Therefore auditing standards should cover the requirements of the lenders, who are

key stakeholders, to provide comfort over future business plans.

• Audit committees need assistance from the auditors in terms of providing a detailed insight of business, controls, risks, policies and procedures. A standard audit with standard points in the management letter would not suffice in meeting future requirements.

An insightful and detailed management letter would add value to the corporate entities and will raise the reverence of the audit process.

• There is a lack of consistency in the quality of auditing, which risks undermining the case for the value of audit.

The findings from the roundtable were used to create a whitepaper titled ‘The changing role of Audit’ which can be accessed via http:// www.grantthornton.ae/content/ files/the-changing-role-of-audit-uaeperspective.pdf

25

EVENT

Grant Thornton

“Audit has a key role to play as a source of public confidence” We took the opportunity to speak to Lindsay Degouve de Nuncques, Head of ACCA UAE to hear her insights on the future of audit.

What does the future hold for audit?

What is clear is that the role of audit is evolving. The enhanced requirements we are seeing in the audit landscape in the UAE, such as mandatory rotation, are aimed at promoting further transparency and accountability in the local market.

These are positive signs of a move to ensure that audit remains a relevant and valued activity to investors, regulators and a range of other stakeholders. We foresee that audit will become more forwardlooking and broader with attention given to risk, governance and the underlying business model, thus adding more value to the subsequent report and moving beyond assurance of the statements alone. There is also an opportunity for the profession to embrace technological developments and reporting languages as a way of delivering the audit efficiently and cost-effectively.

With 2020 being a key year for the UAE, how much more necessary is a ‘valueadd’ audit?

Audit has a key role to play as a source of public confidence in the financial reporting supply chain. We need to be clear about the benefits that audit can provide to business, the economy and society. An audit can provide evidence of issues relevant to whether a firm remains a going concern. This value of audit in promoting business confidence, combined with the skills which auditors bring to businesses and which underpin economic stability, will be critical to the UAE. This is particularly apt as we move to 2020,

26

and particularly in light of the more challenging economic landscape brought about by volatile oil prices.

What are some of the constraints that CFOs in the UAE are currently experiencing?

One of the factors that came out from our recent roundtables is that there is a way to go for organisations to truly understand and buy into the value of audit. In addition, with the move to longform audit reports in 2016 in the UAE, audit committees will require further upskilling in order to be fully equipped to understand the information they are being presented with. Gaining acceptance of all stakeholders in the auditing process is key to its success. Ensuring that everyone is aligned on what the purpose of the audit is and the value that it can bring can be challenging for a CFO to achieve.

Do you believe that along with audit, the role of the CFO is changing?

Absolutely, ACCA undertakes a wealth of research into the role of the CFO and what we see is that it is a role that has changed significantly over the years.

Where a CFO may once have been perceived as just ‘managing the books,’ now a CFO is increasingly seen as the navigator of business success; the critical support to a CEO. Building on the finance fundamentals, they are increasingly focused on regulation, stakeholder management and the strategic vision of the organisation. This means that other skills are required to excel as a CFO; to gain the 360 degree view of the business they need excellent communication skills but they also need to lead innovation, particularly in more challenging economic conditions, when their insights can be key

to the sustainability of a business. An effective audit can help them with this.

What are organisations like the ACCA doing to aid this change?

As a professional body we ensure that our members and students are equipped with not only the technical skills and expertise to understand the financials but also the business skills essential to help lead organisations. We also work with our members and key stakeholders through events such as these roundtables to help inform and prepare for changes in their regulatory environment. As a global body, we work with governments and regulators around the world to ensure that legislation is in line with best practice and in the interest of business and the wider economic success.

If you were a CFO in a listed company, what would you be doing now for the future?

As a CFO in the current environment, I would be investing in my team, ensuring there is the support and competencies, ideally through professionally qualified personnel, to navigate through more challenging economic conditions. I would also be actively engaging with the various regulatory changes that may be coming, helping to ensure that the organisation is prepared as long in advance.

www.thecfome.com

Investment partnerships for long-term shareholder value creation

Outsourced Accounting Why Should We Outsource Our Accounting?

The Benefits of Outsourced Accounting

Cost effective

Reduction in employer payroll taxes

Expertise

No workers’ compensation insurance

Accuracy

No medical insurance or other benefits to pay

Consistent reconciliation

No retirement plans

Backup

No vacation or sick days to consider

Allows you to focus on core business

No placing classified ads

Fraud prevention

No screening interviews

Confidentiality

No HR issues

Accounting Services Financial reporting (Internal & External) General ledger accounting Auditing (Internal, External, & Statutory) Design and implementation of corporate accounting platforms Accounting software package implementation

Corporate Finance Advisory Corporate acquisitions & divestitures Mergers & acquisitions Management & leveraged buyouts Capital raising (debt & equity) General corporate finance advisory and planning

Grosvenor Business Tower, Office 1911, PO Box 502831 Tecom – New Media City, Dubai, United Arab Emirates Phone:+971 4 456 3401, Fax:+971 4 456 3468 Mob: +971 50 342 1613, E-mail: info@nm-invest.com manager@nm-invest.com, Website: www.nm-invest.com

Infographic

Head or heart?

How do CFO’s make decisions?

A new survey from Epicor Software and Redshift Research reveals how CFO’s make decisions, and how technology supports them in the process. How does your organisation compare?

46%

rely on gut instinct to make

of CFO’s

decisions

25%

IT systems struggle to give them the information they need say their

of CFO’s

CFO’s struggle to get accurate data from their IT systems, forcing them to rely on gut instinct to make decisions that should be made using hard facts, risking performace, profitability and growth.

22% of workers

feel that making decisions

without data could result in loss of revenue

Manufacturing businesses stand to gain the most by changing how they make these decisions:

They’re most likely to have leadership styles...

28

basic IT infrastructure...

of CFO’s

see mistakes occurring as a result of missing or false information

37%

of CFO’s say that

inaccurate data was the biggest cause of mistakes

60%

of CFO’s

pressure-motivated

...a

44%

are still using ...and therefore rely on instinct more than data

spreadsheets alongside other systems

www.thecfome.com

Infographic

33%

CFO’s need IT systems that provide accurate data and help them extract insight from it...

Planning and forecasting

...and tools to help them put their intuition to work driving the business forward instead of filling gaps.

23%

28%

DATA

A top issue

of CFO’s struggle to

extract

of CFO’s

decision-making is hampered by the inability to make effective use of information say

meaningful insight from data

32%

of CFO’s

say their finance systems

need updating

www.thecfome.com

BIG

IT

investment

of CFO’s

say planning and forecasting is a major challenge for 2015

28% of CFO’s

say Big Data will be one of the top issues impacting their department in the next 2-3 years

27% of CFO’s

say investment in new IT is one of the top issues impacting their department in the next 2-3 years

A high-functioning IT infrastructure will help CFO’s embrace new technologies, address the challenges of Big Data and meet growing user and customer expectations in order to stay ahead of the competition.

29

FEATURE

Strategic cost management

The numbers game Financial captains face the pressure of having to manage costs while also improving business performance. Unpredictable changes and increasing competition often call for survival skills critical to the firm’s success, among which is cost management.

A

lthough cost management denotes the need to plan and control the financial lifecycle of the firm, and while it may sometimes even involve cost reduction, this is not its only purpose. Cost management can also be functional in strategically advancing the position of an organisation in the market.

According to Srinivasan Rajagopal, Financial Controller, United Iron and Steel Company, strategic cost management can be instrumental in increasing revenues, improving productivity and boosting customer satisfaction.

“Aside from all of these, it can also be important in giving the company a competitive stand in the market as it is considered one of the success drivers of an organisation’s growth,” says Rajagopal. “It assists finance leaders in getting a clear view of the current and future cost structure of the business. Doing so makes it an important tool for the C-suite, as this can guide them in planning, communicating, and realising business strategies.”

Strategic cost management can also assist businesses in identifying practical approaches to benchmarking initiatives, total quality management, and continuous improvement, among others.

30

www.thecfome.com

www.thecfome.com

31

COMPLEXITY

© 2015 SAP SE or an SAP affiliate company. All rights reserved.

IS A PROCESS-ORIENTED PROCESS.

SIMPLE

PUTS PEOPLE FIRST.

The larger you grow, the harder it is to take care of the people who brought you there. SAP’s HR solutions are integrated with your business, making it easier for you to hire, engage and empower your people. So you can all succeed together. That’s running simple.

Find out more at sap.com/runsimple

FEATURE

Strategic cost management

“While its most conventional focus is, ‘which products and functions are most profitable?’

SCM aims to answer, ‘Which combinations of cost drivers and different types of business functions can produce the greatest overall contribution to profits?”

Muhammad Faisal, General Manager, Finance and Procurement, Al Mostajed Group of Companies, shares this viewpoint, reiterating the strategic value of cost management. “While its most conventional focus is, ‘which products/functions are most profitable?’ its strategic approach aims to answer, ‘Which combinations of cost drivers and different types of business functions can produce the greatest overall contribution to profits?’” explains Faisal.

By implementing a strategic cost management programme, businesses can control their costs and at the same time maximise value creation within the firm.

However, while it can be beneficial to all areas of the business, its role may still vary depending on the company’s business nature and strategy.

Faisal highlights that strategic cost management’s implementation is most critical in key areas like production, supply chain management and project management.

“When planning to deploy a strategic cost management programme,” says Faisal.

“The finance leader should also ensure that the management team is on board and that they understand the role they will play in its implementation. The absence of support from key personnel within the organisation may result to reluctance or lack of cooperation in progressing the programme.”

“Aside from this, an effective strategic cost management programme should also consider integrating information systems to streamline processes and workflow,”

www.thecfome.com

adds Faisal. “Finance heads should have effective cross-functional teams with proper training to implement and use the systems, and a collaboration between the finance and operational teams is warranted for seamless execution of the whole process.”

A number of types of business intelligence software tools are also available and helpful in its deployment, however, these are not an imperative.

Rajagopal explains that identifying sources for revenues, which activities needs to be reduced or sustained, and what aspects of the business can increase effectiveness within the organisation, are also of critical importance when planning the programme.

“We need to be more pragmatic to ascertain the cost drivers in planning an effective strategic cost management programme. Cost drivers must reflect the activities they measure, therefore, we should ensure their accuracy,” says Rajagopal.

“The finance leader in charge of the programme’s implementation should also be able to identify inter-functional complexity within the firm, strategies that can lower costs, and whether the employees involved are skilled and knowledgeable enough to implement the plan and systems it entails,” he adds.

Further reiterating the importance of top management support, Faisal shares that employing the latest strategic cost management plans, techniques and relevant controls with the help of all

stakeholders will only guarantee the smooth flow of the programme’s execution.

“As an example, within our organisation we have developed proper cost control mechanisms by M2M focus throughout the value chain in order to complete the projects in the most economical and efficient manner. In order to achieve this target, concepts of Total Quality Management and Business Process Reengineering play an important role throughout the organisation. These are all being done as part of our continuous efforts with top management,” explains Faisal.

Once a firm grasps the importance of strategic cost management, achieving its objective – reducing costs while strengthening the firm’s strategic position – is just within reach.

“Embracing strategic cost management is instrumental in the transformation of the finance and accounting functions of an organisation into business partners rather than being mere bookkeepers,” says Rajagopal. “This can also identify the true link between costs and revenues.”

To achieve meaningful results, strategic cost management requires a broad management support and commitment, emphasises Rajagopal. “Finance leaders should identify opportunities and be wellequipped with the knowledge of assessing them from a cross-functional point of view. They should also stay proactive and have an integrative mind-set.”

Echoing this notion, Faisal also stresses that the successful implementation of the programme also requires dedication from the finance leader and his team.

There are a number of ways businesses can improve productivity, while investing in initiatives to streamline business growth is an ideal way of moving forward, it doesn’t always necessarily result in profitable bottom line. Thus, while attending to the top-line advances, finance leaders should also remember to engage in a systematic approach to governing costs to ensure long-term value creation.

33

opinion

HK Financial

going public Planning is key in a high profile IPO Bobby Morse, Co-founder, and Anca Cighi, Senior Consultant, HK Financial

A

ugust 2015 has proven to be a very difficult month for investors in most international capital markets. Oil prices here declined to six year lows, European markets were impacted by fears of the breakup of the Euro, China’s economic slowdown has been more pronounced than even the most bearish of commentators, and GCC stock values have collapsed in line with their global counterparts.

As a private company, why would you want to list your shares on the stock market when conditions seem to be so poor? Markets can be cyclical, and during times of uncertainty, volatility increases in the short term. The key to listing a company, however, is having a long term vision and strategy which smooths out short term volatility and delivers value to shareholders over the long term. Whether market conditions are strong or weak, investors constantly seek individual stocks with strong fundamentals and long-term growth prospects to maximise their returns. A company seeking an initial public offering (IPO) can bring a welcome breath of fresh air to markets which constantly seek new investment ideas, particularly if that investment story is compelling and communicated effectively to the investment market. An IPO transaction can be a major catalyst into driving the value of a fast growth business, broadening its ownership and shareholder base, whilst also generating liquidity for its stakeholders.

After a fairly uneventful first quarter of the year, the MENA region has seen a steady increase in the number of IPOs

34

during the second quarter, with a total of nine transactions, raising over $2.1 billion, a 92 percent increase compared to the same period last year.

For businesses seeking an IPO, the following is a 10 point checklist prior to embarking on the path to becoming a listed company: Plan ahead The process from being a privately owned business to becoming a publicly listed company is one of the biggest changes to any business, and it needs to be planned very carefully. This will include planning for the establishment of appropriate processes and procedures, particularly on auditing of accounts, through to the operating structure of the business. Prior to approaching the relevant regulatory authority for your plans to IPO, your company needs to be as sufficiently compliant as possible as a prospective public company.

1

2

Controlled disclosure of information Before a formal announcement is made to communicate the company’s intention to list – which is subject to approval from the capital markets authorities – ensure communications are controlled and adhere to market regulations. Through media and presentation training, spokespeople need to be briefed and coached on what they can and cannot say from the beginning of the IPO process.

Establish a ‘normal and customary’ flow of communications As a private entity, it is never too early to open communication channels with key participants in your chosen capital market and to begin building a strong public image. This includes promoting the organisational changes you have made to the business in order to build the right platform for growth –as well making the business more compliant with listed company regulation – as well as communicating the growth strategy and the progress the business is making with that strategy. Once advisors are appointed and the IPO application is filed with the capital market authority, all of your external communications will be highly regulated and legally binding not only to the company but also, in some cases, with directors of the company being personally liable to what is stated publicly.

Ideally, regular PR outreach should start at least one year before the filing date. A strong public profile will help generate interest from both retail and institutional investors in the run up to the IPO.

3

Think, act and perform like a public company Beyond implementing mechanisms such as structure and accounting principles of the business, act like a public company before going public.

A robust public image cannot be achieved overnight. Your communications advisers will build a strategy which is in line with your business strategy and

4

www.thecfome.com

help you manage the communications flow to ensure optimal results. The implementation of the communications campaign should effectively build your profile with investors - both institutional and retail - and those who will influence the investment decision such as financial media, industry publications and financial analysts.

Public companies need to adhere to good corporate governance procedures, with the correct balance of executives and non-executives on the board (including independence), transparent financials and a clearly communicated growth strategy.

Team IPO – marketing, advertising, communications Designate one executive (or a devoted team) to manage the execution of the IPO communications campaign. Whether an internal or external appointment, the project manager needs to approve all communications materials before being released to the public to ensure they comply with capital market regulations and are in line with the company’s core messages. If the offer is heavily reliant on the subscription of retail investors, the IPO candidate will need to invest in advertising which will need to be carefully managed in tandem with the financial communications programme. You should also consider investing in an investor relations-compliant website which can serve as a powerful communications channel for your target audience.

5

Communicating your equity growth story Through roadshows, press releases, media interviews and analyst briefings, you should be in a strong position to articulate your company’s growth story.

Beyond the prospectus, the investor presentation is the key collateral for the IPO process – it needs to have dynamic yet clear and simple content, and it needs

6

www.thecfome.com

to be delivered effectively. The drafting and rehearsal of this aspect of the IPO process can make the difference between success and failure of an IPO. Follow the publicity guidelines set by the capital markets authority What is perceived as misleading information or the leakage of “price sensitive” information can lead to punitive actions taken by the respective market regulators, and can even result in having your IPO application declined.

Avoid any forward looking statements and disclosure of information that has not been included in the prospectus, unless ratified by your lawyers and financial advisors.

You should aim at communicating a clear investment case to generate investor momentum for the upcoming listing, however, all communication needs to adhere to market regulations.

It is extremely important for all spokespeople to strictly follow the publicity guidelines set by your communications advisors, lawyers and investment bankers to minimise the chances of disruption during the IPO process.

7

Profile the expertise of the management team The investment community wants to know whether the management team has the right experience and capabilities to take the company to its next stage of growth. This will show investors that the company is well governed and likely to demonstrate sustainable returns and the building of shareholder value.

Therefore, the corporate communications campaign should thoroughly demonstrate the strength of the business, as well as best practice on corporate governance to ensure that shareholders are represented appropriately on the board.

8

Communicate internally Transitioning from a private entity to a public company can be a significant distraction for all employees.

Employee communications should therefore be timely, in line with external announcements, and identify the impact that the IPO will have on the company’s culture and day to day activities. It must be remembered that each and every employee is an ambassador for the company.

Therefore, they need to feel they are participating in the successful transition of the company from a private to public entity.

Employees will also need to be educated on which information is regarded as share price sensitive and how that information should be disseminated.

This is particularly pertinent when dealing with media enquiries, all of which should be channeled through company representatives who are nominated and trained for this role.

9

Have a leak strategy in place The investment community and the media are always on the lookout for the next IPO story. Ensure company spokespeople are not taken by surprise and are prepared to respond to potential market rumours or internal leaks about the IPO. Your communications advisors should prepare a public statement for you to use if confidential IPO information leaks to the market and will help you respond appropriately to questions and queries about the IPO.

10

The IPO is only the start of a company’s journey to using the capital markets to grow its business. As a listed entity, the company will have an obligation towards new, existing and future shareholders to communicate on a regular basis and in accordance to the stock exchange disclosure regulations.

A company which communicates its investment case effectively to capital market audiences will attract quality investors.

35

opinion

Hanady Khalife

Agents of

change The rise of CFOs in the Middle East’s family businesses

By Hanady Khalife, Director of Operations, Middle East and Africa, IMA (Institute of Management Accountants)

T

he global business environment has changed a great deal in the last decade, and this change has manifested in the way companies operate, and – of particular interest to finance professionals – has brought the role of the CFO to the fore.

To start with, the days of mere number-crunching are long gone.

Of course, the CFO is still very much responsible for the financial health of the company, but there are some key competences and requirements on top of his or her financial expertise that point to the fact that the role of the CFO is undergoing a significant transformation.

Today, the CFO is expected to get involved and help the executive leadership team with setting the company strategy, and further executing that strategy through sound financial planning and performance management. That

36

implies a deeper knowledge of company operations, industry environment and competitive landscape.

But the real challenge of this new role is not improving or acquiring an ever-expanding business acumen, it is, in fact, the ability to influence and collaborate with the Chairman, the CEO and the board. To be successful in his new role, the CFO must be an effective business partner and a sharp strategic thinker. To accomplish this, they need leadership skills.

This shift in responsibilities and skills is especially relevant in the Middle East, where family businesses are the core players in the region’s economy, and the role of the CFO is not fully realised.

Recent research by Ernst & Young reported that 80 to 90 percent of businesses in the region are either owned or controlled by families. The implications are enormous: family businesses

www.thecfome.com

generate 80 percent of the region’s GDP; they account for 75 percent of the economic activity of the private sector, across industries such as retail, trading, travel, construction, real estate, hospitality, oil and gas.

And they also employ 75 percent of the labour force in the GCC, which accounts for 67 million employees.

Whilst family businesses face the same operational challenges as any other business in a global economic environment, they also need to deal with a range of specific problems, such as continuity - the proverbial ‘generational change’.

Globally, just a mere 20 percent of family businesses make it to the 3rd generation. The majority of family businesses in the GCC were set up in the 1960s and 1970s, and are now facing the tests and trials related to continuity and generational change.

The key to ensuring continuity and sustainability for a family business in its 2nd and 3rd and ongoing generation to come, is simple and straight-forward in theory. Sound governance, clear and efficient policies and structures – very similar to publicly owned companies. However, there they mean replacing the family dynamics, which are prevalent in the first and even the second generation, with a more corporate approach, discipline and diligence.

It’s a big change, one that calls

80%

of the region’s GDP is generated by families www.thecfome.com

for a seasoned and skillful CFO. As the majority of Arab family businesses are still relatively young, there is a limited pool of experience and expertise they can draw from, hence, the CFO role is most certainly outsourced.

Bringing in an external person to fill a high level positon within family business operations challenges the values, culture and dynamics of the family business.

In a panel discussion hosted during our IMA Regional Conference held last month, several CFOs of family businesses - Fadi Atallah, Chief Finance and Investment Officer at Al Ghurair Group, Tarek Amer, Group CFO at Energy Care Holding, and Hassan A. Sharafeddin, Chief Executive Officer at Abnia, Danway Industries and Danway Fusion Glass – shed new light on the challenges and opportunities for the role of the CFO in a family business.

Armed with business experience and professional qualifications, the CFO has a juggling act at hand.

They key challenge is refreshing what they have learned in their careers so far, and what they set out to accomplish as a mandate in the new role, with the family’s expectations of appropriateness, good manners and right timing, which sometimes may feel out of touch with the demands of running a business.

Via difficult encounters, the new CFO learns that the family culture and family values are very powerful engines. Steered in the right direction, they are drivers that can grow the business into future generations. Tested, defied or steered in the wrong direction they can lead to chaos and failure.

75% of the labour force in the GCC is employed by family businesses

Before laying out a blueprint for family and ownership governance, continuity and succession planning; before charting a corporate and financial strategy along with performance management, finance and reporting tools – all of which are essential in setting strong foundations for business governance and best practices . The CFO’s first move is to make the conscious decision to understand and tap into the mindset of the family business family comes before business.

This is the path to building trust and credibility with the founders and owners of the business. This is the way to channel real influence with the Chairman or the CEO, and become their right-hand person in the company.

Nevertheless, despite the prerequisite of building close relationships with the family, objectivity must remain a core value, because the CFOs are the guardians of control and good business practices in the company.

Achieving the right degree of objectivity and collaboration with the family leadership is a tough balancing act, but it can also be highly rewarding. Ultimately, the key opportunity for CFOs in family businesses is to become agents of change.

37

HURRY LIMITED SEATS

LEAD SPONSOR

STRATEGIC PARTNERS

KEY SPEAKERS

Dr. Obaid S. Al Zaabi DCEO listing, Disclosure & Legal Securities and Commodities Authority, UAE Summit Chairman Arab IPO Summit

Ali Al Hashimi Executive Vice President, Head of Financial Services Division Borse Dubai UAE

Fahima Al Bastaki Senior Vice President, Head of Business Development Division Dubai Financial Market UAE

H.E. Rasheed Al Balooshi Chief Executive Officer Abu Dhabi Securities Exchange UAE

Ahmed Saleh Al Marhoon Director General Muscat Securities Market Oman

Mayur Pau MENA IPO Leader Ernst & Young, Middle East & North Africa

Dr. Mounther Barakat Senior Adviser and Head of Research and Financial Analysis Securities & Commodities Authority UAE

Adil Taqi Group Chief Financial Officer Damac Group UAE

OFFICIAL PR AGENCY

OFFICIAL MAGAZINE PARTNER

OFFICIAL ARABIC BROADCASTER

OFFICIAL VENUE PARTNER

EVENT ORGANISER

SUPPORTING PARTNERS

MEDIA PARTNERS

Guide

CPM

Choose wisely The CFO ME shares a few tips to help you choose the right CPM software for your business.

I

t is now more important than ever to keep on top of corporate performance. Business leaders are expected to be more attuned to strategy execution and market opportunities, as failure to correctly advance both can cause damage to the company.

Corporate performance management (CPM) software simplifies the processes of financial planning, budgeting, forecasting and reporting, and allows finance chiefs and other executives to evaluate business performance. While it focuses heavily on financials, the reach of many systems has expanded to include enterprise-wide functions, including sales and operations.

Since finance touches every part of a business – from production to human resources – monitoring performance within the organisation then becomes an integral aspect of running the business. The responsibility of selecting and implementing CPM software falls in the lap of the finance chief.

CPM software falls under the umbrella of business intelligence (BI), and often works alongside a company’s other BI initiatives. A 2013 survey conducted by Gartner showed that due to the increasing nexus between business and financial performance, and technology, BI and business applications are increasingly becoming an IT investment priority for CFOs.

www.thecfome.com

Here are a few tips to choosing your CPM software:

1

There's no ‘one-size-fits-all’ Remember that each business is unique. While reviews are great, software that has been successfully deployed in one company may not necessarily be ideal for you. Hence, it is crucial to keep your business’ specific needs, priorities and expectation in check.

Be sure that you identify and document all your requirements and the respective goal it wants to achieve. That way, when you evaluate the software vendor that you are considering, you can match their offerings to your needs.

2

Make it an investment.

Many CFOs and other finance heads tend to be conservative spenders, which is why it’s necessary for them to fully understand how CPM software can benefit the organisation.

Although acquiring and implementing one does not come without costs, finance chiefs should keep in mind that making decisions with incorrect data can be more costly in the long-run.

3

Find out which deployment option you prefer.

The deployment can be done in two ways – on-premise wherein the software is integrated to your company’s IT infrastructure, or hosted (Softwareas-a-Service) where the maintenance is

handled by the software vendor.

As the industries gain more confidence in cloud technologies, a lot of businesses are opting for hosted or SaaS CPM platforms. However, there are still some organisations whose technical infrastructure requires on-premise solutions as they follow various regulatory policies that insist that all data be stored on-site. Nevertheless, it is imperative that finance leaders know their IT’s scope and capabilities for them to fully comprehend which deployment works best for the organisation.

4

Familiarise yourself with available products.

Big players like IBM, SAP and Oracle are still dominating the industry when it comes to CPM. But, choosing a performance management platform is typically dependent on the scale of the organisation itself.

Remember tip number one – there’s no on size fits all. Needless to say, although these are the top vendors of CPM, they may not be the right fit for your business.

Explore product options from other vendors such as Quantrix, Tagetik, Epicor, Infor and the likes.

5

Evaluation is key.

An ideal technique in assessing vendors is by obtaining a free proof-of-concept. This is something that would make your selection process more objective. Through this, you can find out if the software you are evaluating is business-user friendly and easy to use. It should be easy to set up a proof-of-concept as part of your critical requirements.

Choosing a performance management software platform can sometimes be a tedious task. However, with a clear goal in mind and these few tips to guide you, making the decision can be a little less daunting.

39

FEATURE

M&A

Sealing the deal For companies who are selling, raising capital or acquiring smaller businesses for growth, finance leaders are a vital organ at every stage of the deal. How can the CFO steer the M&A process to success?

40

www.thecfome.com

ergers and acquisition (M&A) deals are some of the most intense activities any organisation might face during their business lifecycle. While it presents enormous opportunities for both the buy-side and sell-side of the transaction, without proper planning and postdeal integration, failure is imminent.

As risk managers, strategists and, of course, financial custodians, CFOs bear a big chunk of responsibility in the success of the deal.

Anil Menon, M&A and IPO Leader, EY MENA, confirms this notion, saying CFOs are involved in all the facets and full lifecycle of the transaction. “They are an integral part of the deal team,” he says.

“Starting from transaction planning, strategy, execution, negotiations, deal consummation and post-merger integration.”

“Primarily, the CFO’s role starts from identifying the objective behind a potential M&A deal,” says Adil Taqi, CFO, DAMAC Properties. “They must ensure that they are buying a company for the right reasons and the right price. The finance figurehead is pivotal in the financial modelling and in determining the savings and value addition the deal will make.”

Once a deal is done, organisations need even greater attention from the finance chief. When it comes to a merger, bringing an integration plan to reality is the main focus. According to Neeraj Tekchandani, CFO, Apparel Group, the finance chief should ensure a smooth transition of the businesses with respect to the change

M

www.thecfome.com

management process. “Among the priorities of the CFO is warranting the alignment of both organisations’ overall strategy, objectives, goals, vision and mission.”

Menon explains that as financial stewards of organisations, CFOs should act as catalysts in value creation by identifying and capturing potential synergies, including the operational and financial functions.

“The top priorities of the CFO postdeal typically entail ensuring that effective transition plans, day one plans, synergies realisation plans and a well-thought out integration plan is in place with fully committed teams and clear timelines,” he says.

“He must also make sure that the integration objectives are clear and well-defined; and a robust stakeholder management plan is in place.”

Due diligence does not end, once the contracts are signed. Post-deal integration programmes are critical to fully achieve success. A survey by Deloitte highlighted that directors and CFOs see that the greatest cause for concern in achieving M&A success is failure to effectively integrate the post-merger entity or the target company, with 37 percent of directors and 43 percent of CFOs citing this answer. Hence, CFOs should keep in mind that the first 100 days after the transaction are vital. Missed opportunities and mistakes made during this period can haunt the merged organisation for years.

However, a post-M&A integration is something that needs to be planned right from the early stages of the M&A transaction. “It is of paramount importance to understand the positive and negative forces impacting the integration process,”

41

October 25th - 26th 2015 9 Annual CFO Strategies Forum MENA th

Sofitel The Palm Dubai www.cfomideast.com

Network with over 100 CFOs from the Middle East and North Africa Forum highlights

Workshops

Panel discussions

15% Discount

Keynotes

for CFO Middle East Magazine subscribers

Think tanks

Use the reference code CFOME2015CPI when registering

Speakers include Paul-Louis Gay CFO Almarai

Eyad Ramlawi Vice President & Chief Strategy and Finance Officer Alturki Holding

Greg Fewer CFO Aldar Properties

Vicki Gillespie CFO for Middle East and Africa PepsiCo

Mahmoud AlKurdy CFO Banque Audi

Jassim Alseddiqi CEO Abu Dhabi Financial Group

Mark Beer Chief Executive and Registrar DIFC Courts

Matein Khalid Managing Director IPC Global

Sponsors and partners Platinum Sponsor

Gold Sponsor

Intelligence Partner

Supporting Partner

Silver Sponsor

CONtACt Hammad Khilji | hammadk@naseba.com | +971 44 55 79 66

Bronze Sponsors

Knowledge Partners

Leadership series by

FEATURE

M&A

“The CFO’s role starts from identifying the objective behind a potential M&A deal. They must ensure that they are buying a company for the right reasons and the right price. The CFO is pivotal in the financial modelling and in determining the savings and value addition the deal will make.”

Adil Taqi, CFO, DAMAC Properties

says Tekchandani. “This is because a large number of transaction in the M&A space have failed postintegration due to the challenges involved which were never analysed or not properly addressed with the integration strategies.”

Taqi echoes this sentiment explaining that, first and foremost, the CFO and other executive leaders should ensure that compatibility of the organisations. Doing so can guarantee the smooth flow of the integration plan post-deal.

“I personally don’t believe that opposites make a perfect fit,” he says. “Therefore, key decision makers involved in the deal should identify the commonalities of both organisations – are they both sales-oriented, financially prudent, innovative and so on. A CFO plays an important role in this setting because they can bring a more realistic and objective insight into the matter.”

A good integration plan also typically comprises communicating with all the stakeholders early in the process, creating and implementing a robust day one plan by addressing matters relevant to people on both sides, says Menon. “Through this, the C-suite can accelerate the transition phase across all work streams and

www.thecfome.com

processes, identify immediate and medium priorities and prepare a definitive action involving all the stakeholders, create leadership teams at various levels.”

Every organisation has its own culture. When attempting to marry one culture with another, challenges are inevitable, and this of course requires the CFO’s most capable attention. The Deloitte study also cited that culture has emerged as one of the dominant post-deal barriers, causing 30 percent of failed integrations.

“The common bottlenecks the CFO and the C-suite have to deal with post-deal, include fear within the organisation,” says Taqi. “When two organisations are merged there arise some questions in job security. This is a common issue in top management as well. People should remember to put their focus on shareholder value, not fear. This is easier said than done of course.

“While I think organisational culture is one of the most abused terminologies in the corporate space, this remains to be one the major issues affecting M&A success. As I have described previously, if the two companies involved in the deal do not connect at a cultural level, then

they are doomed from the start. This is because, if their principles and objectives are not compatible, the whole post-deal integration process will only be spent on politics,” explains Taqi.

According to Menon, a good way to address this issue is by creating an environment that’s transparent and encouraging in fostering relationships across various levels of the organisation. “Developing a clear stakeholder map to understand, evaluate and neutralise resistance to change is a critical element and this can be achieved by setting up people forums in the combined organisation and considering inputs from both sides while creating a day-one plan,” he adds.

Tekchandani seconds this, saying communication, transparency and open dialogue pave a long way for a successful M&A integration. “The company should choose a senior leadership team from both of the businesses and form a joint integration committee responsible for overseeing the integration process and its overall success.

“The C-suite play a critical role in driving that change management and also realising the common synergies between the businesses for the good of the overall organisation,” he adds.

43

11 – 13 October 2015 | The Address Hotel | Dubai Mall | Dubai | UAE LEVERAGING INSURANCE AND CREDIT MANAGEMENT TO MINIMISE RISK, ENHANCE TRADE AND ENSURE SUSTAINABLE BUSINESS GROWTH

Dr. Raed Safadi

Vincent O’Brien

Deputy Director, Trade and Agriculture Directorate

Chair, ICC Banking Commission Market Intelligence

OECD

ICC Banking Commission

France

UK

Dr. Ashraf Mahate

Head, Export Market Intelligence

Dubai Exports, Dubai Department of Economic Development UAE

Robert Nijhout

Nasir Issa Al Ismaily

ICISA

Export Credit Guarantee Agency

Executive Director Netherlands

Former General Manager Oman

THREE EASY WAYS TO REGISTER

W: www.tradecreditinsuranceme.com | E: register-mea@informa.com | T: +971 4 407 2633

PARTNERSHIP OPPORTUNITIES

T: +971 4 407 2792 | E: sponsorship@informa.com

BOOK BEFORE 2 August 2015 & SAVE up to $1,498

25+ leaders from leading ministries, regulators, corporates, SMEs and insurers including: ABB § Abu Dhabi Commercial Bank § Al Habtoor Motors § Berne Union § Citi § Dubai Exports § ECGA § Euler Hermes § Huawei § ICC Banking Commission § ICISA § Louis Dreyfus Commodities § OECD § Qatar Development Bank § Redington Gulf ENDORSED BY

ENDORSING ASSOCIATION

MEDIA PARTNERS

an informa event

www.tradecreditinsuranceme.com

column

SomersConsult

enterprise financial management culture Fintan Somers, International CFO and change leader, SomersConsult on how to set the tone for success.

W

hen I join the executive team of a business as CFO for the first time - whether it is a high performing team or not - I am very aware that I have a fairly brief honeymoon period. During that time, I need to evaluate where my function can add most value and develop a compelling program that makes a difference to the business. Then, the pressure is on to deliver.

Sometimes the agenda is thrust upon you. For example, a local, regional or global economic crisis or stress has put profitability and/or growth under pressure. Sometimes it is less obvious. Whatever the business or environment you are dealing with, it is the responsibility of the CFO to shine a light on and put measurement around the material opportunities, risks, weaknesses or strengths that the management team should be focused on. No business is ever ‘just fine’.

In my experience, poorly performing businesses and management teams do not support and are not supported by an effective enterprise financial management culture (EFMC). The creation of this needs business ownership and leadership. Of course, finance can facilitate and support its development. However, unless leaders in the business really get behind it and push for it to happen, it won’t.

You can recognise an effective EFMC when everybody from top-to-bottom of the organisation: • Understands and owns the overall financial targets and their role in

www.thecfome.com

reaching those targets • Understands and executes the things that need to happen to reach the targets • Is looking forward, anticipating problems and opportunities that might affect financial performance, taking action to fix or mitigate the problems and/or exploit the opportunities • Communicates and manages problems and issues before they hit the reported results and opportunities before they are missed • Is focused on influencing and communicating key performance indicators that demonstrate traction on the things that matter • Understands the linkage between pay and performance I can pretty much guarantee that if you see a poorly performing organisation, one or more of these factors needs improvement. And, of course, it starts with the leadership team. If they fail on or de-emphasise one or more of these factors then it is likely that this will be replicated all the way down the organisation.

The leadership challenge of creating an effective EFMC is a journey rather than a destination. One reason for this is that it has human complexity.

Irrespective of the tools that you introduce, the human dimension involved in developing and maintaining a strong EFMC can be the most challenging, not least the risk that a lack of transparency about financial performance and accountability suits some people very nicely - and this can

include very senior people.

I have also observed that businesses with deficient EFMC will often make a lot of noise about the inadequacies of the finance function, the IT function, the HR function; indeed every function except the parts of the business that have the responsibility to make money!

Sometimes this is justified. But, more often than not, you find that the people making the most noise are the people most unwilling to accept that they share the leadership responsibility in creating the culture and that to be successful you need to invest in those functions.

Communication, particularly in larger organisations, poses one of the biggest challenges in ensuring that the vast majority of people in the organisation understand the part they play in financial outcomes. I have been surprised at how often I have come across people who have worked for years for a business yet have little knowledge about how the business actually makes money.

What is absolutely certain is that you cannot create an effective EFMC if you do not have an effective finance team and other support functions. And many times I have seen how underinvestment in or poor leadership of the finance function and other support functions is a big contributor to poor business performance.

In the next couple of months, I will look at Finance Function LIFT, which is my model for developing and executing Finance Function transformation.

45

column

CIMA

Managing responsible business

Geetu Ahuja, Head of GCC, CIMA

T

he rapid rise in interconnectivity, information flows and the complex global supply chain has resulted in higher risks for organisations. Managing a responsible business today has become increasingly complex due to its vulnerability to cybercrimes, security breaches and online fraud. This means there is a greater need for businesses to become more structured, and to consider input from specialists who can suggest checks and measures to secure business information.

The third annual Chartered Global Management Accountant (CGMA) report on ‘Managing Responsible Business’ released by CIMA and AICPA, gathered insights from over 2,500 CGMA designation holders and CIMA students, working in both private and public sectors, to review how the ethical landscape of businesses has shifted since 2012.

This study, which was conducted with an aim to help organisations recognise the importance of ethical practice and integrated reporting, found that there have been shifts in different markets since 2012, with India and South Africa reporting less pressure and, conversely, the UK and US admitting to more.

Given the increased attention paid to “responsible business”, this may reflect a growing awareness of the importance of ethical standards. There might also be a heightened sensitivity as to when a wide range of standards

46

and policies within the organisation are compromised.

Due to this shift, finance professionals feel pressured to compromise ethical standards.

They are being forced to overlook poor practice or could be behaving unethically due to the struggle to work through a crisis of culture within business. The key is to maintain focus in such situations.

Ethical performance cannot be neglected and organisations cannot afford to dismiss ethical business protocols. The majority of businesses have codes which are put in place, but are nonetheless overlooked. The report highlights that as few as 36 per cent of respondents confirmed that their organisations are known to collect Ethical Management Information (EMI) that enables them to assess and address risk. This is despite an increase in demand for data on ethical business practices, particularly from the investor community; 30 per cent of whom are users of EMI. Ethical practice keeps the organisation in a healthy place by avoiding misconduct. The ignorance of ethical protocol results in destroying the reputation of a business, which is something that can happen overnight.

It is mandatory for an organisation to continuously collect and interpret information about ethical performance, which enables an organisation to predict if they are heading in the right

direction in terms of fulfilling the codes of conduct. Organisations today have become aware of the need to be further structured and ethical, as businesses are prone to risk due to neglecting or avoiding ethical code of conduct. In order to establish an easy-to-follow structure that integrates with the organisation’s strategies, it requires leadership and focus on codes of ethics as well as integrated reporting.

In the long run, running integrated reports and ethical practices benefits the organisation immensely. Integrated reporting systems collect information on ethics from both management and stakeholders. Management accountants possess the required skill set and expertise to not only gather data, but also to analyse and interpret them. In particular, through integrated reporting, management accountants are able to identify risks and thereby protect the organisation from unethical practice. Once they have built trust within the organisation, they encourage a positive working environment and culture and also win the stakeholders’ confidence. It is also highly recommended that organisations disclose information to the public and be as transparent as possible due to the fact that individuals prefer and trust a company that is transparent and honest.

To access the full report, http:// www.cgma.org/Resources/Reports/ Pages/2015-managing-responsiblebusiness.aspx

www.thecfome.com

FOR SOME, THE NEED TO GROW JUST KEEPS GROWING. Successful businesses aren’t satisfied by the here and now. They prefer to ask ‘Where next?’

With nearly 150 years of experience in supporting global businesses including 65 years in the Middle East and North Africa, HSBC has long believed in businesses willing to push boundaries and cross borders. That’s why we offer access to international trade growth solutions and local expertise around the world.

As your business seeks growth opportunities, our global network can help make it possible.

See how we can help your business www.business.hsbc.ae/solutions

Issued by HSBC Bank Middle East Limited, P. O. Box 66, Dubai, UAE. Regulated by the Jersey Financial Services Commission and Central Bank of the United Arab Emirates. CRN 150603 © Copyright. HSBC Group 2015. ALL RIGHTS RESERVED.