The CFO Middle East | Issue 8 by The CFO Middle East

Vol. 1 ISSUE 8

pride of place Sana Khater, CFO, Waha Capital on what it takes to be cfo of the year

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The heir apparent 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

Reams of newsprint have been dedicated to discuss the evolution of the CFO from a “scorekeeper” to “strategic partner,” and how finance chiefs act as the catalyst of change in their organisations, contributing to business strategy and development. Besides being the public face of the company, interacting with external stakeholders such as investors, the CFO is also considered to be the closest ally of the CEO as they share the same vision and mission. This prompts one to ask the question, isn’t the CFO the most natural successor to the CEO role among C-level executives? Yet, very often, it’s the COO or GM who make the successful transition to the top post rather than the finance heads. In fact, a recent survey of the large US companies show that the percentage of CFOs who made the leap is less than five percent (most of them promoted internally in the same companies), and I suspect the number would be even lesser in our region. It’s not difficult to fathom the reasons. These two roles need very different skillsets and attributes – while the CEO requires a wide of array of soft skills including an acumen for strategy, leadership and team building, with a strong background in sales and marketing, the CFO plays the role of an enforcer, with his or her roots firmly in finance and accounting. What really hamstrings CFOs who aspire to the role is the lack of operational experience and strong relationship with the boards. On the flip side, a recent survey by EY shows that a significant number of CFOs see their role as a destination in its own right and are happy to stay in current post. Interestingly, only 10 percent of the EY survey said they aspire to be the CEO. In this issue of the magazine, my colleague Adelle Geronimo has delved deep into the subject and unearthed some of the talents you need before taking the plunge. On a different note, we are gearing up for our inaugural The CFO ME awards, which will be in held in November this year to recognise the most accomplished CFOs and finance teams in the region. We are proud to pay tribute to the unsung heroes who really run the show. Stay tuned for more details of this oneof-its kind awards programme.

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.

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tHE CFO MIDDLE EAST

Advisory Panel The CFO Middle East’s Advisory Panel presents a dynamic group of experts and leaders in various aspects of the world 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 3

Editorâ&#x20AC;&#x2122;s note Group Editor Jeevan Thankappan on the CFOs turning CEOs.

Advisory Panel Leading finance personalities share their world-class expertise to ensure we give you accurate analyses of the latest trends.

News Latest news and developments impacting the finance industry.

In the eye of the shareholder In an exclusive interview with CFO ME, Waha Capital CFO Sana Khater discussed her recent lauds, the company, and the changing role of the CFO in the region.

Effective communications Charged with fostering good relations and transparency within organisations, being a communicator is now a big part of the finance chiefâ&#x20AC;&#x2122;s expanding mandate.

Route to the top Their wide-spanning capabilities make them a good strategic leaders. But are CFOs ready to take on the CEO spot?

Healthy money We spoke with Michele Rosso, Chief Financial Officer, Mediclinic Middle East, who guides us through her career and philosophy for success.

Ten types of innovation Top insights from Deloitte on how CFOs can actively become drivers of the innovation ambition.

Infographic Top challenges plaguing investment banks.

The big shift 36 Roberto Wyszkowski, Co-founder

F is for fraud Fraudulent activities can gravely impact the companyâ&#x20AC;&#x2122;s bottom line. What can CFOs do to combat this?

and Partner, ShiftIN, discusses the different transformations seen in the C-suite.

Transformation leaders We bring you the highlights of the recently held CFO Conference hosted by the Institute of Chartered Accountants Pakistan (ICAP).

A fine balance Brightcove CFO for cloud services Kevin Rhodes talks about balancing investments vs. turning a profit.

Top of the class What are the benefits of Continuing Professional Development (CPD)? Find out what types of training CFOs should be most interested in?

Column

45 Fintan Somers, International CFO and change leader, SomersConsult, on harnessing the power of good relationships within organisations.

Geetu Ahuja, Head of GCC, CIMA, explores the importance of risk management.

News

UAE Banks Federation releases annual report

H.E. Abdulaziz Al Ghurair, Chairman, UBF

The UAE Banks Federation, a professional body representing 50 member banks operating in the UAE, has released its annual report for 2014, detailing its priorities, achievements and activities undertaken during the full year. In his introduction to the report, His Excellency Abdulaziz Al Ghurair, Chairman, UBF, identified the Interim Marginal Lending Facility, work co-ordinated by the Federation on the Mobile Wallet, support given by the Federation for the launch in September of the Al Etihad Credit Bureau, and the Customer Charter as major achievements. “Discussion of best practice, identification of threats to the industry and development of common positions on issues of significance to member banks continued to be the principle goals of all the Federation specialized committees. Some noteworthy examples of the subject areas focused on in 2014 included SME financing, CloseOut Netting, Anti-Money Laundering, Customer Charter and Emiratisation,” said Al Ghurair. The report notes that during 2014 the UAE Banks Federation worked closely with the UAE Central Bank to launch the Interim Marginal Lending Facility, which allows banks to access support from the Central Bank on an overnight basis against eligible securities as collateral. IMLF has been designed as a mechanism allowing the banks to borrow funds from it overnight, to help manage their liquidity.

Cases in DIFC Courts surge during H1 2015 The first six months of 2015 has seen a dramatic rise in the value of claims filed at DIFC Courts, reflecting the growing confidence placed in DIFC and Dubai as a global and regional centre of legal excellence. The total value of claims filed in the DIFC’s Court of First Instance (including Arbitration related cases and counter claims) from January to June 2015 rose to AED 2.27 billion, a 447 per cent increase compared with the same period in 2014. In addition, the average value per claim in the Court of First Instance has increased 490 per cent to AED 106.4 million. The surge in cases can be attributed to a number of enhancements made by the DIFC Courts to their services as well as their increasing international connectivity. In 2015 the DIFC Courts signed memoranda with the Supreme Court of Singapore and the US Federal District Court for the Southern District of New York, adding to memoranda signed with courts in the UK, Kenya and Australia. A dedicated Enforcement

Department with responsibility for handling the enforcement of all DIFC Courts’ decisions locally and internationally has also enhanced the attractiveness of the DIFC as a secure environment to conduct business. Mark Beer, OBE, Chief Executive and Registrar of the DIFC Courts, said, “We are clearly seeing the results of our efforts to make DIFC Courts one of the world’s leading commercial courts and the preeminent centre for English language dispute resolution in the Middle East. The value of claims filed so far this year exceeds the total value of claims filed in the whole of 2014, which itself was almost double the value of claims filed in 2013. This is a direct consequence of the initiatives we have put in place to enhance each court user’s experience and promote greater efficiency, accessibility and transparency. In accordance with the UAE Vision for 2021 we are proud to be playing our part in making the UAE one of the best and most advanced places in the world to do business. ”

ICAEW supports new UAE oil price deregulation policy ICAEW’s recent Economic The Institute of Chartered Insight report noted, Accountants in England removing subsidies during and Wales – ICAEW, has a period of subdued global welcomed the new UAE oil oil prices should mean the price deregulation policy inflationary impact will be which aims to support the felt less sharply. The more so national economy, lower as consumer protection is a fuel consumption, protect Michael Armstrong, ICAEW Regional stated focus of the new fuel the environment and Director for the Middle East, Africa price committee. preserve national resources. and South Asia (MEASA) “However, even though Michael Armstrong, prices should not shift dramatically in the FCA and ICAEW Regional Director immediate future, the knowledge that for the Middle East, Africa and South households and businesses alike will no Asia (MEASA), said, “Deregulating longer be isolated from global oil prices oil prices should support the national through government spending should economy in the longer term whilst also influence behaviour. This policy should helping consolidate government finances. incentivise reduced consumption – and The context – of sustained lower oil thereby protect the environment and prices – means that the UAE has chosen preserve natural resources – going forward.” the right period to adjust oil subsidies. As

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News

Beehive raises funds for SMES Beehive recently announced that it has facilitated over AED 12 million in finance for more than Craig Moore - Founder and CEO 25 small and of Beehive medium-sized enterprises (SMEs) in the UAE since its launch in November 2014. The funds, raised from investors on the Beehive platform, have allowed businesses across a broad range of sectors to expand, recruit more staff and refinance existing debt, saving them on average up to 30 percent on their financing costs. “This key milestone comes at a time when hundreds of SMEs across the UAE are struggling to gain access to the finance needed to grow their

businesses,” said Craig Moore, Founder and CEO of Beehive. “This is a major step in Beehive’s effort to bring attractively priced finance directly to SMEs. We are connecting investors with creditworthy businesses to build mutually beneficial partnerships for growth through our innovative platform and also through new financing options, such as our Invoice Finance product. SMEs represent the vast majority of companies in the UAE, and provide the bulk of jobs in the private sector, and we are proud to support them.” The Beehive platform uses peer-to-peer finance, based on crowdfunding technology, to directly connect investors with creditworthy businesses seeking working capital to grow their business. The technology eliminates the cost and complexity of conventional finance and enables SMEs to access faster, lower cost and more flexible funding.

MENA M&A market stalls during Q2 2015 The MENA M&A market markedly regressed during Q2 2015, well behind its prolonged three-year revived activity, according to a report from Bureau van Djik and MENA Research Partners. The overall 12-month activity now falls short from a sustained and marked rebound mainly due to the regional political turmoil, which is cited amongst the major factors weighing on investor confidence in the MENA region. Thinking long-term, the region depicts a long-term compelling economic growth story, sufficient to propel more transactions going forward. With the total number of completed deals on a general declining trend since 2009, the announced value of M&As reached only $3 billion during Q2 2015, below its median level of the last six years. This has depressed the

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average deal sizes although the trend of larger transactions still holds. From a geographic perspective, deal activity has been largely driven by a strong performance in GCC while the remaining of the region attracted a smaller share of the flow with selected Arab Spring countries like Egypt and Morocco witnessing a sustained uptrend. In fact, the GCC region continues to account for the bulk of the regional deal flow, with 79 percent and 56 percent respectively of the announced value and the volume of completed deals during Q2 2015. This is in line with the general trend witnessed during the years 2013 and 2014, in an indication of larger deals being closed outside the Arabian Gulf countries. All in all, larger ticket sizes are more common in the GCC, as opposed to a larger number of smaller deals in other MENA countries.

Deloitte ranked as no. 1 global consulting firm by Gartner

For the fifth consecutive year, Gartner has ranked Deloitte as the number one global consulting organisation, according to the findings of their report titled “Market Share Analysis: Consulting Services Worldwide.” Julian Hawkins, Partner, Consulting leader, Deloitte Middle East, said, “We are delighted to be named the number one consulting organisation for the fifth consecutive year. However, what we believe is really important is that we are helping our clients and creating real value for them. “We believe this is achieved by investing the time to understand their needs, drawing on the breadth and depth of our network capabilities and developing actionable strategies and delivering on them with clients”. The report notes that the worldwide consulting service market grew 6.1 percent to $125.2 billion in 2014 from $118.1 billion in 2013. The top 10 consulting service providers combined grew at a fast pace of 6.8 percent compared with the overall market. “The world has never been as complex, dynamic, and uncertain as it is today and the pace of change will only increase,” said Hawkins. “Deloitte is helping clients with their most complex challenges – how to grow globally; how to innovate; how to integrate technology and strategy; how to attract, develop, and retain talent – so they can make bold decisions with confidence.”

FEATURE

Sana Khater

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FEATURE

Sana Khater

In the eye of the shareholder Sana Khater has been on a wining streak. ICAEW named her CFO of the year, and Forbes has tapped her as one of the region’s most powerful women. In spite of these personal wins, she gives all credit to her team at Waha Capital.

Given the everchanging and volatile market conditions, developing regulatory conditions, and more complex and diverse businesses, the role of the CFO has evolved from stewardship of the business to partnership. www.thecfome.com

ana Khater, CFO, Waha Capital, is one of the most influential women in business – and she has the well-deserved awards to prove it. With over 20 years of experience in the finance and banking sectors, Khater has been a key player in the company’s success. She sat down with CFO ME to discuss her recent lauds, the company, and the changing role of the CFO in the region. You were recently named one of Forbes most powerful Arab women, as well as ICAEW’s CFO of the year. What does this string of awards mean to you? It is a privilege and honour to receive such recognition. For me, it is the culmination of a rich and

very rewarding career in finance in general and particularly at Waha Capital. I think the existence of these awards reflects the changing role of the CFO into a strategic partner – a key player in the success of a business. It is also a testament to the leading role that professional women are playing in the UAE and the Arab business world. You mention the changing role of the CFO – how do you see the role changing? Given the ever-changing and volatile market conditions, developing regulatory conditions, and more complex and diverse businesses, the role of the CFO has evolved from stewardship of the business to partnership. The CFO is entrusted

FEATURE

Sana Khater

We work closely with our group of lenders who have supported us over the years and helped us achieve outstanding results. with formulating business strategy, working closely with business leaders to execute that strategy, and - more so now than before - communicating financial performance and strategy clearly and effectively to stakeholders. C- Suite collaboration is key now, and the finance team is an integral part of this mindset. What does this new, collaborative, finance team look like? My finance team and I collaborate closely with the business divisions to ensure alignment of objectives and efficiency of execution. The finance team is embedded in the business areas to drive initiatives, provide support and financial advice to the business leaders, thereby increasing understanding of the underlying businesses and streamlining processes. Additionally, we have enhanced our investor relations activities over the last few years to provide more disclosures and transparency of our strategic goals, business model and activities to investors; we introduced an investor relations section on our

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website and have participated in several investor conferences that present this transparency. In what way is your role key to an investment firm as actively diverse as Waha Capital? As a member of the senior management team, I participate in setting the strategic direction of Waha Capital. Furthermore, my role is key to providing financial oversight in terms of capital structure, governance, and financial planning. Our portfolio is diverse â&#x20AC;&#x201C; including aviation, real-estate, healthcare, oil and gas services as well as capital markets. Over the past few years, our strategy encompassed an increased focus on asset allocation, risk management and funding. This entailed identifying the sector and geography of our investment universe, balancing and diversifying our portfolio, and obtaining the appropriate funding for new investments and acquisitions while maintaining appropriate leverage throughout.

Does your background in banking assist you as CFO? Yes, my experience in the banking industry has been quite valuable, as building and nurturing banking relationships is key to my role as CFO. We work closely with our group of lenders who have supported us over the years and have helped us achieve outstanding results in 2014. This past year has been quite successful for Waha â&#x20AC;&#x201C; what do you think has driven that success? It has been an exceptional year for Waha Capital. Our record performance reflects a steadfast commitment by our board and senior management to provide shareholder value. Our share price has appreciated significantly over the last 24 months, reflecting investorsâ&#x20AC;&#x2122; confidence in our execution capability. I believe our success remains our human capital and our ability to convert this capital to wealth creation for our shareholders.

FEATURE

Investor communications

Effective communications Charged with fostering good relations and transparency within organisations, the CFOâ&#x20AC;&#x2122;s function as a communicator has become increasingly important. Today, having greater shareholder involvement also constitutes the finance chiefâ&#x20AC;&#x2122;s expanding mandate.

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FEATURE

Investor communications

“Communicating with your shareholders is not something that should be limited to reporting periods only but should happen even in between periods as and when needed.” Greg Fewer, CFO, Aldar Properties

or any business, no matter the size, keeping the investors happy is among the key priorities to keeping the business intact. This means ensuring that they are up-to-date with the company’s standing in the market and other potential opportunities. Achieving this requires a proper line of communication between both parties. A strong engagement between an organisation and its investors results in a well-informed and supportive shareholder-base, which can undeniably be a valuable corporate asset. Having such a relationship ensures not only the health of the business but also gives each side the confidence to reach a supercharged bottom line. The CFO is increasingly being considered to be the public face of the company, hence shareholders

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now expect deeper attention from CFOs when it comes to keeping them in the loop. Greg Fewer, CFO, Aldar Properties, says that an open line of communication with investors is a crucial element to any business. However, it’s a two-way street. “We need to know what is on the minds of our shareholders as much as they need to be kept abreast of regular company updates,” Fewer says. “This consistent transparency is what is needed to maintain investor confidence and sustain access to the increasingly competitive capital markets.” Sanjay Amar, Director, Finance and Operations, Jacky’s Group of Companies, supports this assertion and says that although keeping the line open is paramount in keeping the business intact, one should keep in mind that delivering the messages clearly across is just as important. “A

very important lesson I have learned when it comes to communicating with investors is that – what they want to hear and what you need to tell them are two very different things. “Say for example, an investment opportunity comes up in a particular market or business venture, your shareholders should be able to freely pick up the phone and contact you to discuss any ideas or reservations they may have. At the same time, as the CFO or finance director, you must be able to openly express your views as to how you think this can impact the business may it be positive or negative,” adds Amar. Typically, the correspondence with the shareholders takes place during quarterly meetings. However, the constancy is dependent to an organisation’s specific investor relations strategy.

FEATURE

Investor communications

Fewer reiterates that regular communication with investors is of critical importance, especially for publicly listed companies like Aldar. “Communicating with your shareholders is not something that should be limited to reporting periods only but should happen even in between periods as and when needed. An active investor relations strategy should maintain regular contact with analysts, investors, regulators and financial media,” he adds. Stakes are high when dealing with investors, therefore it’s critical that the communicator understands specifically what needs to be said.

key. “In my experience as a CFO, I have learnt a very important thing,” he says. “It’s putting yourself in the shoes of your shareholders. Seeing things in their point of view will help you figure out how you can effectively communicate a particular news or strategy to your investors.” “From time to time opportunities will arise,” Amar continues. “We’d spot new trends and its potential. Oftentimes capitalising on these prospects might require committing a significant portion of the company’s resources. In cases like those, it’s ideal to set up a meeting with the investors and discuss the prospects with them.”

“A very important lesson I have learned when it comes to communicating with investors is that – what they want to hear and what you need to tell them are two very different things.” Disclosing too much information to your shareholders who only wants details of bottom line results could raise concerns or questions that could potentially delay projects in the pipeline. Consequently, not sharing enough or lacking clarity in the communication can be just as risky. “Primarily, there are two things that investor communications should focus on,” says Fewer. “One, the company and its strategy, financial strength and operational performance; and two, the market and the specific trends that the company is observing in the market they operate.” For a better investor communications approach, Amar says that trying to see things from the investor’s perspective is ideally

While it’s certainly nice to only deliver positive news, in business that is just not realistic. Investors will grow suspicious of a CFO who never gives a report of how things don’t go as planned. That’s why it’s always favourable to be as transparent as possible. Although it may be harder to convey information when things are not doing great, it’s often the news that needs to be relayed immediately. Fewer explains that the ideal way to share good and bad news is exactly the same – it must be shared accurately and in a timely manner. “Over the long-term, a company improves its reputation by becoming known to share both with equal measure,” he says. “It’s important that when delivering bad news a company should present a

strategy for how the business will tackle any setback.” He also stresses that for listed companies, not communicating with the investment community increases surprise risk both upside and downside. “Reducing surprise risk is a key objective of the investor relations department,” he says. “Further, as the universe of potential investors increases, competition for capital also increases. In Emerging Markets, investors have so many investment alternatives available to them so companies must maximise their relative investability by adopting strong communication practices. Without these shareholders will simply pass and invest elsewhere even if your story is a strong one.” Amar echoes this statement and says there really is no good time to deliver bad news to investors. “There’s only real-time, meaning you just have to accept the circumstances and find the best way to go about it,” he explains. “You must remember three things – recognise, communicate and offer a solution. In communicating a problem within the business, as a CFO, you must remember that you are not just a reporter. Your opinion and insights matter to your investors, hence it is important for them to hear what actions need to be taken and the possible solutions you came up with.” He adds that what CFOs need to understand is that while a number of investors are business-savvy not all of them are finance-savvy. “With this in mind, the reports that you present to them should not entirely be comprised of numbers and figures alone. You should also prepare a qualitative report summarising the important elements that you would like them grasp.”

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FEATURE

CFO to CEO

Route to the top With their strong financial acumen, risk management skills, and corporate governance experience, modern-day CFOs are emerging to become strategic leaders proficient in managing the business. But are these capabilities enough for them to take on the CEO spot?

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FEATURE

CFO to CEO

uch has been said and written about the evolving role of the CFO. Most of it has been about how the finance chief has now also taken on more strategic and operational decisionmaking responsibilities in addition to being the gatekeeper of the financial organisation. On par with the CEO in managing the business, many believe that the experiences and skillset of the finance chief might make him or her a natural fit for the role of a CEO. However, it is still so rare that they get the role, traditionally division presidents and COOs are the ones who ascend to the position. Former CFO and now Co-CEO of Bahrain-based investment company Investcorp, Rishi Kapoor believes that the CFO’s role in a 21st century enterprise has evolved beyond the traditional focus on financials and reporting into decision support through mining and analysis of key performance and financial data at all levels. “CFOs are now playing more of a leadership role with a strong grasp of corporate governance,” he says. “These are all core competencies that you want

“There are many factors that help in the grooming of a CFO as potential CEO candidate. Among which, is their ability to collate and analyse data across all financial and operational aspects of a company’s operations, including its macroeconomic and competitive environment and use this as a decision support tool to shape the firm’s strategy on an ongoing basis.” www.thecfome.com

to have in a CEO and because of that, many more boards today consider CFOs amongst the group of natural successors to the CEO. I’m not saying that every CFO will become a CEO or indeed is suited to becoming one. But, there are those who will continue to thrive and add value in the more finance focused regular CFO role.” Fintan Somers, International CFO, Change Leader, SomersConsult, seconds this view and says that the skillset of the newer breed of CFO may qualify him or her for the top post. “However suitability will depend more on leadership skills and the context of what is required than anything to do with skills particular to being a CFO,” he adds. The CFO’s role covers exceptional grounding in a number of aspects within the business. They often possess a rigorous knowledge of a company’s financial facets, while also aware of its internal and external strategies as well as its growth potential, which makes them an ideal candidate for the CEO position. “There are many factors that help in the grooming of a CFO as potential CEO candidate,” says Kapoor. “Among which, is their ability to collate and analyse data across all financial and operational aspects of a company’s operations, including its macroeconomic and competitive environment and use this as a decision support tool to shape the firm’s strategy on an ongoing basis. They also have the capacity to engage internally in a constructive manner with senior leaders across the firm – including the Board, the CEO, business and functional unit heads. “Finally, they can be credible spokespersons for the firm with key

FEATURE

CFO to CEO

external stakeholders including lenders, banks, capital markets participants, shareholders, investors and the likes,” he adds. According to Somers, the CFO is often the only member of the executive team that fully shares the CEO’s overview of the business and understands the relativity of the various contributors; while being dispassionate about the allocation of capital and resources to assure overall business performance. However, he believes that what CFOs are lacking sometimes is the capability to make political compromises necessary to move the team and the business forward. “The CFO role is, to some extent, the conscience of the executive team,” explains Somers. “And we all know that CEOs and other leaders sometimes have to make decisions that necessarily involve some practical compromises. “As a CFO I believe my job is to ensure that my colleagues understand the potential costs as well as the immediate and potential benefits of such decisions. But, at the end of the day, no matter how collegiate the team is, it is the CEO’s call. Also, the best CFOs may not necessarily be the best risk-takers, deal-makers, strategists, customer and product people or, for that matter, the most charismatic leaders. Depending on the needs of the business, these can often be far more important skills than the great skillsets that most CFOs bring to the table,” he adds. Many CFOs are stepping up to take charge of dealing with a broader set of business issues. With their expanding competencies at the strategic front and strong grasp of a company’s financial picture, finance chiefs may very well have a clear understanding of what it takes to run a business in a tactful and cost-effective manner. Once an organisation allows the CFO to take on the position of the

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“Depending on what is needed by the business when a new CEO is required, the CFO could be a great choice. But until the context is presented it is probably not a good idea to make a selection in advance” CEO, it will only yield the benefits if the board finds someone who has a clear understanding of the businesses both from an operational and financial perspective, explains Kapoor. “He or she will should have a strong working relationship with key internal and external stakeholders including senior management, the Board, shareholders, lenders etc., as well as being known among the company’s employees,” he says. “More importantly, they should source a CFO who knows what it takes to run an efficient operation and how to optimise profitability over both a near-medium term as well as long-term horizon – something that is absolutely critical to being a successful CEO.” Somers reiterates that reaping benefits from a CFO turned CEO really depends on the context of what is required by the business. “CFOs can excel in situations that require a certain amount of dispassionate crisis decision-making where transforming numbers, cash flows, funding, balance sheet - quickly is the objective. We can, perhaps, be less effective in other business contexts that require entrepreneurial and deal making skills,” he adds. Nevertheless, as the context of the CFO’s duties broaden and lines within organisational structures blur, some may argue that the finance chief already holds a very influential position that can drive change in business and corporate strategies. In fact, a research carried out by EY entitled ‘The DNA of the CFO - CFO: staging post or career destination’

showed that 73 per cent of CFOs surveyed in the EMEA region sees their role as a destination in its own right and only 10 per cent harbour an ambition to be the CEO. “The role of the CFO is much more strategic today and consequently the modern CFO is certainly more empowered in a decision-making and leadership position within the firm,” says Kapoor. “As far as aspirations go, human civilisation is all about aspiration but different individuals will have different aspirations. While some CFOs will aspire to be CEOs and will potentially be well-suited for it, others will may well prefer to focus more on the financial and operational aspects, and others may opt to do something entirely different. There is no one size fits all!” Somers, on the other hand, thinks that CFOs need to be very cautious about politically positioning themselves as the “natural” successor of the CEO. “The last thing that the CEO or the executive team needs is a CFO with a political agenda. Our political strength and trustworthiness are, to a very large extent, based on our independent focus on numerical outcomes. “That is not to say a CFO should rule him or herself out from being a potential successor of the CEO. Depending on what is needed by the business when a new CEO is required, the CFO could be a great choice. But until the context is presented it is probably not a good idea to make a selection in advance,” he adds.

Interview

Michele Rosso

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Interview

Michele Rosso

Healthy money Although the UAE is a leader by many measures, with only 14 percent of the country’s senior management positions held by women, in this sense it falls short. We spoke with Michele Rosso, Chief Financial Officer, Mediclinic Middle East, who guides us through her career and philosophy for success.

“

If you don’t ask, you don’t get,’” Michele Rosso has learned that good things only come about by action. “Everyone needs a voice, and if you don’t exercise one, there’s a tendency to become complacent, and remain stagnant in your career. I always tell my team that no one will look after their career but them, so they need to have the confidence to speak.” Having been in the UAE for 10 months, Rosso’s tenure in the country – and as Chief Financial Officer of private hospital group Mediclinic Middle East - is certainly in its nascent stages. However, she has already developed a taste for the intensity at which objectives – and change – are delivered in Dubai. “Having last worked in the U.K., where it takes months of talks and whitepapers

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before any change can happen, it’s refreshing to be here,” she says. “The mindset is very entrepreneurial and fast-paced. The country’s leadership can wake up and decide on something like the regulation of prices, and change can be instigated in no time at all. It means our team have to be dynamic and able to react swiftly to developments.” Rosso’s relatively short career has already seen her make a marked rise via her experience in several prime international locations, at an array of renowned companies. Raised in South Africa, after graduating from university and gaining her Chartered Accountant status with Deloitte, Rosso went on to have spells in New York City and Sydney with the firm as an Auditor. “Both cities are melting pots of cultures,” she says. “I was lucky to get such a good start to my

career with that experience, but wasn’t ultimately interested in becoming a partner, so I left.” London called, Rosso answered. She joined telecoms giant Cable & Wireless in the world’s financial hub as Group Reporting Accountant, and was lucky to garner more international experience in the role, albeit at the start of the 2008 financial crisis. By the end of 2011 she had shifted into the medical industry at BMI Healthcare in a similar job, which would bring challenges. “It was a very difficult time for the business,” she says. “There were complex debt structures and shareholder issues, so it was very much a headfirst task. We faced a two-anda-half year battle with the Competition Commission over the use of our hospitals, which was a huge test of my regulatory, legal and strategic competencies.”

Interview

Michele Rosso

“As a school leaver, I did not see myself where I am now, if I am honest. But, importantly, I did not ‘not’ see myself where I am.” This wealth of experience has led Rosso to her CFO berth at Mediclinic Middle East, but as a woman in a senior management role in the UAE, she is in the minority. Grant Thornton’s 2014 ‘Women in business: from classroom to boardroom’ report revealed that the UAE has one of the world’s 10 lowest percentages - 14 - of women in senior management positions. However, Rosso does not feel the number is a reflection of negative treatment, “It may be stating the obvious, but I just feel it’s important not to generalise or stereotype with things like gender,” she says. “If I’m being honest, I occasionally get a certain reaction from stakeholders, but I think most people are completely tolerant. It’s far more important to make sure that I am properly prepared for a meeting rather than worrying about being the only woman in the room.” While the status quo may faze some, Rosso does not believe her conduct is affected by her being female in a largely male-dominated environment. “I don’t feel that I’ve had to overcompensate in my role as a female CFO,” she says. “I don’t believe that I face additional challenges because I’m a woman.” She goes on to say how the very nature of her profession is cutthroat for anyone, regardless of gender. “The role of the CFO itself is challenging, irrespective

of sex,” she says. “It has changed so much over the last decade. The CFO is longer the tuna sandwich-eating number cruncher who is sat in the corner. The role now entails being a business partner to the CEO, which requires a huge amount of technical skill, with strength across commercial finance, M&A and banking sectors.” Although Rosso is at home in her role, she is nonetheless mindful that change is needed to ensure women are fairly represented in boardrooms. “The reality is that roughly 50 percent of the world’s population is female, so it is a disservice to women to not be included in senior roles – which their skills and qualifications clearly warrant,” she says. “I’ve worked with plenty of exceptionally solid female partners and executives, so there is no question of female pedigree.” While the number of female executives is on the rise worldwide – Grant Thornton also found that in 2014, 12 percent of businesses had a female CEO, up from 5 percent in 2012 - it will undoubtedly take time for any sort of equilibrium to arise within the numbers, either organically or by design. The solution, Rosso says, starts

with self-belief, and cultivating a belief that women can transform the statistics. “To a certain extent, with groups like women, the situation is a self-fulfilling prophecy,” she says. “I believe success boils down to your personality, background, self-awareness, and – most importantly – confidence. It’s essential that women do not limit themselves to what they can and can’t do.” Rosso says although she has exceeded her own expectations, she had never defined limits for what she could achieve. “As a school leaver, I did not see myself where I am now, if I am honest,” she says. “But, importantly, I did not ‘not’ see myself where I am.” Rosso acknowledges that it will take time to raise the number of female business managers, but believes that technology has a huge part to play in driving change. “There’s no question things won’t happen overnight,” she says. “But I do believe that if you look at what the Internet and smartphones are doing for business, they can act as a real catalyst in awareness and education and opportunities for women. Things like that have a tendency to snowball.”

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insight

Deloitte

Ten Types of Innovation The discipline of building breakthroughs

n·no·va·tion – As the pace of change continues to increase, innovation is a universal imperative for organisations. Customers demand it. Competitors may outflank you if you don’t achieve it. Talented employees might not join your firm if you don’t deliver it. Analysts expect it. Investors reward it. And yet many people still believe in primitive myths about innovation: “It’s mainly about new products and new technology”; “It’s about rare strokes of inspired genius”; “There’s no disciplined, consistent method that you can apply”; and so on. These common assumptions are simply not true. The disciplined approach to innovation we take at Doblin, the innovation practice of Monitor Deloitte, helps organisations determine their level of ambition, develop innovations according to those ambitions, and build organisations that can support those ambitions. Each element of the innovation process plays a key role towards achieving breakthroughs. Increasingly, the CFO is expected to play a key role process; demonstrating the transformation from a financial operator to a catalyst for change. Particularly, the CFO can become more actively involved and assume authority in evaluating, financing, and driving innovation in their companies. Before going further, it’s important to ask, “What is innovation?” We define it as the creation of a new viable business offering. It is different than invention; it is new to

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the market or world and creates value both for customers and the enterprise. The offering ideally goes beyond products to platforms, business models and customer experiences. We also believe it does not have to be either high-cost or high-risk. Most importantly, we approach innovation as a discipline, not an art. Innovation ambition According to our research, 95 percent of innovation attempts, on average, do not return their capital. The low success rate is a daunting reminder of the lost resources (time, capital and talent) of each unsuccessful organisation. While ignoring innovation is no longer an option for most companies, it is no surprise that there is growing frustration and increased skepticism felt by executives when discussing this very topic. They’re doing it wrong. We believe effective innovators follow four important principles: • Be explicit about innovation ambition, then organise and execute accordingly. • Look beyond product innovation to transform other elements of your business system. • Drive innovation from deep and unconventional insights about users throughout the value chain. • Don’t be fooled by the mythical importance of creativity; focus on discipline instead.

insight

Deloitte

Innovation is one of the last remaining sources of growth that can create nonlinear economic returns. A concentrated focus on such lucrative potential outcomes sets the stage for the poor development of one’s innovation portfolio. Similar to financial investing, an innovation portfolio should be constructed to yield the highest overall return while aligning to the organisation’s risk appetite. Firms that excel at total innovation management simultaneously invest at several levels of ambition, carefully managing the balance among them. The Doblin Innovation Ambition Matrix provides a framework to classify innovation initiatives across three levels: core, adjacent and transformational. The matrix also facilitates the discussion on the appropriate overall ambition of an organisation’s innovation portfolio. • Core: aims to optimise existing products for existing customers. • Adjacent: leverages extensions, enhancements and improvements to existing capabilities to enter new markets and serve new customers. • Transformational: intended to develop breakthroughs, if not whole new businesses to serve new markets and new customer needs.

20 percent to adjacent opportunities and 10 percent to transformational initiatives. Let’s be clear, the 70/20/10 rule is not a secret formula for success, it is a basic guideline for the average organisation. The appropriate balance for any company can range depending on the organisation’s strategic and risk profiles, maturity and industry. Another critical factor in determining the innovation ambition ratio is the expected economic return of the organisation. For example, some businesses will place high emphasis on innovating at the core or adjacent businesses and minimise efforts on transformational endeavors.

Source: Doblin

Any organisation has the opportunity to work at each level of ambition. However, the best innovators are explicit about their activity and resources across ambition levels, and garner higher returns from higher levels. A cross-industry and cross-geography analysis performed by Doblin identified that on average, organisations invest 70 percent of their innovation resources to enhancements of core offerings,

Introducing the Ten Types of Innovation® Doblin’s Ten Types of Innovation framework emerged from applying a proprietary approach to a list of more than 2,000 successful innovations, including Amazon.com, early IBM mainframes, the Ford Model-T, and many more, to determine ten meaningful “moves” that great innovators typically make and that provide insight into innovation. The framework explores these insights to diagnose patterns of innovation within industries, to identify innovation opportunities, and to evaluate how firms are performing against competitors. This framework has influenced thousands of executives and companies around the world since its discovery in 1998 and is an enduring and useful way to start thinking about business transformation. Businesses can use these innovation principles to cultivate meaningful and sustainable growth within their organisations.

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insight

Deloitte The Ten Types of Innovation Framework Profit Model

Structure

The way in which you make money

Profit Model

Product Performance

Distinguishing features and functionality

Alignment of your talent and assets

Network

Structure

Process

Product Performance

CoNfiguratioN

Network

Connections with others to create value

Service

Support and enhancements that surround your offerings

Product System

Service

Channel

offEriNg

Process

Signature or superior methods for doing your work

Brand

Representation of your offerings and business

Brand

Customer Engagement

ExPEriENCE

Product System

Complementary products and services

Channel

How your offerings are delivered to customers and users

Consumer Engagement Distinctive interactions you foster

Source: Larry Keeley, Ryan Pikkel, Brian Quinn, Helen Walters, Ten Types of Innovation: Graphic: Doblin.com/Ten Types The Discipline of Building Breakthroughs (Hoboken, New Jersey: John Wiley & Sons, 2013).

Increasing ambition levels require you to be more disruptive to existing business models and need to consider the addition of more innovation types. The average innovator tends to pursue product-based innovation which integrates few other types, while the most successful innovators in the world have figured out how to work more evenly across their business system to create lasting competitive advantage, sometimes leveraging twice the number of types as an average innovator. Below is some general guidance on how many types you will need to successfully innovate at each ambition level. • For transformational innovation, you will need coordinated innovation across multiple (4+) interdependent types • For adjacent innovation, you will need innovation within multiple types (3-4) around a new market offering • For core innovation, you will be innovating within independent innovation types around existing offerings aimed at current customers

framework, CFOs can contribute beyond resource allocation issues and “yes” or “no” funding decisions. They can bring to the innovation discussion financial expertise and depth in data and analysis pertaining to core business metrics, especially when an innovation initiative is occurring in core business functions. CFOs can and should accelerate the company’s journey into innovation. Key actions to take include: • Understand where innovation efforts are today. • Align portfolio choices with ambition. • Ensure the portfolio is properly resourced. • Aim for fewer, bolder initiatives. • Create a smart metric system and valuation methodology that reflects the ambition. • Become a strategic partner to other functions within the organisation. Above all, they should be a catalyst for change and lead!

Innovation and the CFO agenda It’s little wonder that a simple approach to innovation that lacks discipline has made CFOs skeptical of innovation. For some CFOs, the term innovation has become meaningless and has been applied to just about anything that can justify budgets in a company. Yet, CFOs are the people who can bring discipline and analytical thinking to the innovation process, which are needed for success. The CFO’s traditional role of managing the company assets is clearly very important, but there is an opportunity to broaden the role to include supporting the organisation’s innovation agenda and strategy. Using such frameworks as Doblin’s Innovation Ambition Matrix and Ten Types of Innovation

About the authors: Geoff Tuff is a principal of Deloitte Consulting LLP and a leader of Doblin, Deloitte Consulting’s innovation practice. Over the past 22 years, he has been instrumental in developing and helping clients embed and take advantage of Monitor Deloitte’s methodologies for driving profitable growth and innovation. He is published in business journals such as “Harvard Business Review.” Prior to Monitor Deloitte, was a partner at Monitor Group and member of its global Board of Directors. Michael Romkey is a director at Monitor Deloitte Middle East and the Middle East innovation leader. He has industry experience within a wide range of sectors, with specific focus in the public sector. Michael has been a strategic advisor for over 11 years with experience across North America, Africa and the Middle East.

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Infographic

Eight challenges plaguing investment banks 1 Profitability destroyed FY14 industry ROE of 8% is well below the cost of equity.

War n

ing!

Low p

rofit !

2 Efficiency and

productivity crisis Over the last three years, one investment bank managed to achieve an average cost-to-income below 60%.

3 Structurally higher costs $

Aggregate costs for major investment banks were 25% higher in 2014 than in 2005.

4 Controls failures Combined investment banking fines, litigation and major trading losses from 2007 to 2014 = US$104b. This is equivalent to:

US$104b

Additional fines have been incurred in 2015

2.8%

6.6%

37%

reduction in annual ROE, 2007-14

of aggregate revenues, 2007-14

of aggregate 2014 revenue

5 A cultural crisis A recent survey found that just 13% of UK respondents believe that people who work in investment banks in the City of London generally behave honestly.

Trust

13%

Infographic

Investment banking is an industry in crisis. A raft of incremental change programs is doing little to address the issues.

6 Misaligned products

Many institutions have too many variants of similar products, whose costs are too high and revenues too low to justify them.

7 Legacy technology Banks spend 75% of their IT budgets on systems maintenance.

2007

8 Intensifying competition

16%

Boutique

Competition ahead!

2014

22%

Boutiques advised on 22% of M&A deals globally in 2014, up from just 16% in 2007.

15% ROE If investment banks are to progress from todayâ&#x20AC;&#x2122;s protect-and-survive mode, overcoming these obstacles in the next 24 months is critical. Transforming investment banks finds that achieving sustainable returns on equity of 12%-15% is possible but will require radical change to both business strategy and operations. SOURCE: EY

FEATURE

Fraud

F is for fraud

Fraudulent activity can make a severe dent in an organisation’s bottom line, and serves to undermine internal morale. What can CFOs do to combat fraud and what are the weaknesses that incite it in the first place?

he effects of fraud within an organisation are not just financial. When employees discover that their once-trusted colleagues have been involved with such an act, it has the power to damage morale and serve as bad publicity for the organisation. The latter alone is a potentially large deterrent for future external dealings, a dark stigma surrounding

the organisation, potentially bringing down the company. With a wide range of options available for potential fraudsters, Stuart Frearson, CFO, RIC, believes that a lack of transparency is the biggest threat to an organisation. “It’s a killer,” he says. “In some departments there’s only one person checking the accounts. A lack of outside transparency can also cause problems. All reporting must come back to an independent

figure, either a department head, internal audit outside team.” Stephen Crowe, Director, Forensic Services, Deloitte Middle East, believes that workload designation plays a huge part. “One procedural weakness that leads to most frauds is the lack of proper or functional segregation of duties,” he says. “Is the same employee who processes the payroll also the only person in the organisation seeing the payroll reports? Does the same person in

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FEATURE

Fraud

“Is the same employee who processes the payroll also the only person in the organisation seeing the payroll reports? Does the same person in finance with authority to approve payments also have the authority to record that transaction?”

finance with authority to approve payments also have the authority to record that transaction? Are they also the signatory to the bank account, and have responsibility to reconcile the bank statement at the end of the month? These types of circumstances provide opportunities to individuals who are encouraged into fraud by the absence of a second set of eyes on a process.” Michael Adlem, Partner and Head of Fraud Investigation & Dispute Services, MENA, EY, is mindful of flimsy hiring practices that lead to a lack of research being done on employees, and teams consisting of people operating together to commit fraud. “It’s very common that companies in the UAE hire an employee of a particular nationality, and within a few months that entire team will consist of people who are all from that person’s village,” he says. “Those employees are loyal to their hirer and not the company. It’s important to keep teams diversified and ensure there aren’t any such cliques. Unfortunately a lack of background research and too much trust of candidates contribute to a higher turnaround rate and higher risk of fraud.”

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FEATURE

Fraud

While fraud can range in its toxicity and scope, some types are more prevalent through their easier accessibility to culprits. “In terms of the most damaging types of fraud, history has shown that financial misstatement has the most catastrophic impact, both in terms of pure materiality, and in reputation,” Crowe says. “One only needs to think of the collapses of Enron and WorldCom to understand the far reaching implications of overstating earnings. Bribery and corruption matters are also high risk, and continue to be a concern in the Middle East, especially for those businesses who have connections to the US or Europe.” Adlem sees cash theft as being the most common type of fraud in this part of the world. “We deal with a number of cases of senior management teams who misstate or hide their companies’ real financials, to make the figures look more impressive so they can get a better bonus or so they can hide failures from an auditor,” he says. “Bribery is also prevalent, particularly in cases where companies want to win contracts.” Frearson, meanwhile, is wary of those who able to smooth-talk their way to cash. “In all the years I’ve been auditing, the worst examples are insurance scams,” he says. “More often than not, rather than relying on being cunning financial scams they depend on fraud of character and manipulation.” One of the largest scale fraud types in the Middle East is that within the region’s supper-rich families, often of royal status. While the families themselves have vast amounts of cash to lose, the legal and economic implications for the region’s ordinary citizens could be great. The case of the Al Gosaibi family fraud in Saudi Arabia sticks out, where Maan Al Sanea – who had previously married into the Al Gosaibi family – was accused of committing a $150 million

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“CFOs can be exposed to pressures from management to ‘massage’ the numbers with the obvious incentive being increased bonuses and stock options.” fraud. Positions of power are a common magnet for fraud, according to Adlem, who says that figures in senior management roles also pose a higher risk. “Senior management figures should be the most heavily scrutinised,” he says. “They are in a position that gives them the greatest power to commit fraud. The more due diligence that can be done on these people, the better.” Crowe agrees with the assertion, and says that the region’s CFO’s should not be intimidated into complying with such illicit practices. “There are a number of surveys that report asset misappropriation as the most prevalent in the Middle East,” he says. “From the matters we have investigated in these past five years, the most prevalent types of organisational fraud have stemmed from the abuse of position by a person in senior management who treats the business as their own cash point to extract money. CFO’s can be exposed to pressures from management to ‘massage’ the numbers with the obvious incentive being increased bonuses and stock options. Therefore it is important that other functions within the company also have responsibility for detection and fraud prevention.” One of the most critical stages in combating fraud is what is done in the aftermath of an offence. Crowe says that implementing the correct protocols goes a long way in rectifying issues. “The key here is to ensure that the organisation has an established response plan, which is ratified by

management, with clear responsibility and escalation points, and terms of reference,” he says. “Having established lines of notification and subsequent approval points for the compilation of an appropriate and proportional investigation plan is critical.” Adlem says that although some regional entities have made progress in terms of their responsiveness, there is still work to be done. “Most corporate organisations in the Middle East don’t have appropriate fraud response plans,” he says. “The Abu Dhabi Government has done quite a lot to advance itself in this respect, but they are in the minority.” He also believes that the decision to launch a full-blown criminal investigation should not be taken lightly. “In the heat of the moment a victim often decides that they want to take legal action against the culprit,” he says. “But that can take years in this part of the world. Two years down the line, a case can still be dragging on. Launching an investigation should be a last resort in reality. The earlier that action is taken, the shorter the investigation trail and the easier it is to limit damage.” Frearson also believes that faster action is likely to lead to a more effective result. “The biggest mistake that fraud victims can make is to bury their head in the sand,” he says. “They need to call the police as soon as possible; shying away from transparency is the worst possible approach.”

event

ICAP

Transformation leaders With their role moving towards driving business growth, CFOs are now seen as strategic and operational leaders of organisations. To further highlight the growing importance of the finance chief, the Institute of Chartered Accountants of Pakistan (ICAP) UAE Chapter hosted the third CFO Conference at Atlantis, The Palm in Dubai.

eld under the theme ‘Transformative CFOs — The Adaption Champions’, the event gathered over 450 CFOs, finance directors, senior accountants, and other finance and business professionals, across the GCC region and Pakistan. The conference serves as a platform for finance leaders to take cognisance of the continuously evolving global economic scenario. Opening the packed occasion, ICAP President Yacoob Suttar delivered his welcome note expressing his appreciation to all the participants and commending the efforts of the ICAP UAE Chapter Committee Members, especially the president of the UAE Chapter Khalid Mahmood, for their contribution in organising the conference.

“This event is a milestone to provide a knowledge sharing platform for finance professionals in the UAE,” said Suttar. “Moreover, ICAP’s professionals constitute an integral part of the UAE industry and it is incumbent for the Institute to cater to their needs and expectations to increase the members in UAE. The CFO Conference is focused on highlighting the Management & Technical areas of the industry and it will be a continued event where professionals can explore, confront and thrash out solutions to meet the recent challenges and issues.” Suttar then highlighted the importance of the roles that organisations like ICAP plays in the region’s finance industry. He

underlined that ICAP members have become an integral part of the UAE economy and that they are determined to support them in their endeavours. Taking the floor, Khalid Mehmood, President, ICAP-UAE Chapter, shared the different activities and initiatives that the organisation has lined up for the whole year. “It’s important for the Pakistani Chartered Accountants to network with other nationalities and this conference is only the start for our big events in future,” he said. Mehmood then announced that the CFO Conference will become an annual event, with the next one planned for May 2016. The first keynote speaker of the day was Ziad Makhzoumi, Group CEO, Fakih IVF, and gave a presentation entitled “Strategic leaders – ‘Are CFOs

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event

ICAP

“CFOs are now expected to not only just drive the finance function but to contribute in the overall strategy of the organisation as well.”

ready to drive business’.” Throughout his session, Makhzoumi shared his extensive experience regarding the transition from CFO to CEO. “CFOs are now expected to not only just drive the finance function but to contribute in the overall strategy of the organisation as well,” he said. “Today’s organisational challenges moves the CFO’s role to be a transformationalleader of change charged with creating synergy and building teams.” In his session called “The strategic CFO: Changing the game for finance,” Dirk Backhaus, Group Director Finance (CFO), Al Batha Group, emphasised that finance leaders should now be forward-thinking rather than looking backward in order to cope with economic realities. He further stated that while the traditional function of CFOs is still important, it is imperative that they also focus on the non-financial elements for critical decision-making. “The CFO must drive firm value by focusing more explicitly on free cash-flow generation and

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reallocation rather than on income,” said Backhaus. “Transparency is an imperative and it is also crucial that data is turned into intelligence. The Strategic CFO should offer insights to all P&L leaders. He is perceived as a reliable and trustworthy partner who collegially and constructively challenge all fellow senior executives.” The CFO Conference also featured presentations from Mir Mohammad Ali, CEO, UBL Funds, who explored the different investment opportunities in Pakistan; and Gary Dugan, Managing Director – GW CIO & Head of Strategy, National Bank of Abu Dhabi who shared insights on the global economic scene and how it can affect the GCC market. Neil Hargreaves and Ghazanfar Shah from Deloitte also did a presentation that focused on Fraud Risk Management and touched upon other major concerns that organisations face regarding fraud awareness and prevention. Another highlight of the event was motivational speaker Carol

Talbot’s very engaging session called “Leading…from the Inside Out,” in which she highlighted the importance of positive thinking as an approach to all endeavours in life. The event also showcased expert panel discussions including a session comprising Sanjay Manchanda, CEO, Nakheel; Hazem Galal, Partner, PWC; and Fasahat Beg, SVP Consumer Business Division, Agthia Group, which delved into “Expectations and perceptions for 2020.” Asher Noor from Al Touq Group, Saudi Arabia, also moderated a session which discussed the topic “Financial performance management and best practices for organisation excellence,” and featured experts like Adnan Anwar, CFO, National Bank of Fujairah; Rana Saeed, Cluster CFO, ACWA Holding KSA; Christopher Taylor, CEO, Abu Dhabi Finance; Umar Saleem, Group Chief Financial Officer, Depa; and Kamran Hafeez, Group Managing Director, JANG Group.

interview

ShiftIN

The big shift

ShiftIN is aptly named - their objective is to support businesses make a shift from within. Roberto Wyszkowski has seen a number of shifts in the C-suite. He lets us know what shifts are coming, and how these changes will impact businesses in the region.

hiftIN Partners is a strategy management consulting firm focused on helping clients manage strategy and innovation programmes that enable the organisations to achieve their goals. ShiftIN Partners has Offices in Abu Dhabi, Dubai, Riyadh and Lisbon. CFO Middle East sat down with Roberto Wyszkowski, Co-founder and Partner at ShiftIN to discuss what shifts the company is seeing in the C-suite. What are the objectives of ShiftIN and how have you seen them change? Our focus is on strategic execution. The company was founded in the UAE. We are not only involved in consulting, but also in solutions and training. We have trained around 700 people in the region already. We focus on the C-level student – presidents of companies, board members etc. The company was established to work in the GCC, but through our customers, we now work outside the GCC. In that you work often with CFOs, can you tell us how you have seen the role of the CFO change? We see more and more collaboration between business strategy and financial planning in an organisation. It is key for the CFO to be part of the business strategy these days. They aren’t just

a part of carrying out the business objectives, they are part of planning those objectives. How far is the reach of ShiftIN – do you work in all sectors? I like to say that we are small but brave. We are a small outfit with a very big network of partners around the world. If we go to a sector and don’t have that particular expertise, we reach out to our friends and partners. The world is our limit, we just want to be where we can support our customers. We, as a company, are challenge driven. What are you seeing in the region, as far as strategic planning? We recently released the results of a survey of 200 organisations from the GCC. The State of Strategy Execution – GCC Edition reflects research that was conducted during 2014 and drew from both government organisations and private companies from multiple sectors. One of the results from the survey revealed that more than 80 percent of the organisations feel that they have a strong level of strategic clarity. Additionally, 70 percent believe they have a robust strategic plan in place to guide their organisations. However, only 40 percent of organisations reported that their strategic plans are not delivering the expected results.

What are people missing? Why aren’t they hitting the mark when it comes to execution? This gap between strategic definition and execution can be attributed to multiple factors. Amongst these, the SOSE survey identifies that a large number of organisations - almost half - are not developing their key staff’s skills and capabilities – a major area opportunity for improvement. Additionally, the survey has found that one of the main barriers for strategy to succeed is the lack of proper resources. 62 percent of organisations consider that their strategic projects are not staffed with the right people, while 30 percent of the organisations identified misallocation of budget as an issue for successfully executing the strategy. What can be done to improve the rate of execution and results? Organisations need to define their enablers and key partners. This is what ShiftIN does – we and are partners lead business transformations, from full-fledged overhauls to discrete initiatives. We offer innovation framework development, idea generation workshop and tools, go to market acceleration programmes and innovation management certificate courses.

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ShiftIN

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Interview

Kevin Rhodes

A fine balance Kevin Rhodes, CFO of Cloud Services firm Brightcove talks about how to balance investments vs. turning a profit.

re you under pressure to be profitable? We’ve guided to be profitable in the fourth quarter of this year. We’re making investments on the products side. We’re making investments on the sales and marketing side. We have actually guided for the street that we will be back at a double-digit growth rate by the end of the year, with accelerating revenue growth throughout the year. It is a delicate balance of looking at the opportunities, the product sets that you have, the needs of the marketplace, and where you invest in the company, being mindful as well [that] shareholders would like a company at our size to at some point start to deliver some profitability. But for the next couple quarters we’re going to make the right investments for the business that [are] going to generate enough revenue flow to get us to profitability in the fourth quarter and then go from there. If we wanted to be profitable tomorrow, we could be profitable tomorrow. We could stop making these investments.

You have to balance risk and reward as a CFO. The CFO’s role, especially at a technology company, is being able to create an environment where the engineers feel like they’ve got enough ability to be creative. As a public company CFO, I want to make sure that there’s enough controls on the company to ensure that people are not going wild in the streets. There’s a balance there between enabling these highly creative, highly intelligent people to go and create really cool products that the market needs and wants, but at the exact same time ensuring that we’ve got the discipline in place as an organisation to stay within the rails and to really deliver. CFOs really need to spend as much time outside of the finance organisation as they are in the organisation. I think 50% of my time is not spent within the financial realm of my job and spent more in sales meetings, in engineering meetings, in other areas of the business and understanding what’s making the company tick.

What makes a good CFO? There’s nothing more important for a CFO than credibility. And they need the ability to be thoughtful but independent and try and make the best decisions for the business and focus on how do we drive the company forward towards its strategy.

What should a finance team look like? They should not necessarily be spending their time closing the books or doing the compliance stuff. That’s important and you need to do that. But the finance organisation needs to spend much more of their time enabling the business.

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How do we take friction out of the business? How do we enable the sales guys to sell more? How do we help them with compensation programmes that help the sales guys be more incentivised to sell? We just recently rolled out organisationally a sales-incentive calculator from my finance organisation that would allow a salesperson to look at the deals that they have in the pipeline and be able to calculate for themselves what their commissions would be in the quarter if they closed that pipeline. The sales guys love it, by the way. Things like that, where you’re focused on the front-office and the finance organization ends up enabling people to do more [are] important. How do you keep in sync with the Chief Executive Officer? We talk every day. We know what each other is focused on. We often divide and conquer. I try to understand what’s on his mind and how I can help him address his concerns and priorities. CFOs, including myself, are spending more and more time looking at strategy, looking at markets, looking at the opportunities that lie ahead and where should we grow as a company and how do we grow. That being said, in order to spend your time there, and spend it wisely, you have to have outstanding people below you.

FEATURE

CPD

Top of the class Continuing Professional Development (CPD) is a key component of the training of all employees, and the CFO is not exempt from this bracket. What are the benefits of CPD and what types of training should CFOs be most interested in?

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CPD

An investment in knowledge always pays the best interest.” While the Middle East’s CFO’s may see greater value in a range of other complex and calculated financial transactions, Benjamin Franklin’s adage should nonetheless strike a chord with such educated and astute individuals. Even the most accomplished executives can always benefit from CPD, and indeed, those most willing to enhance their learning will see the results in the long run. Whether it’s a question of sharpening up on technical expertise or learning new techniques to boost leadership skills, the gains of CPD shouldn’t be underestimated. Whether embarking on a full-blown MBA, MSc or other course which may set a student on a path of a year or more, CPD encompasses a range of other courses, which can be as little as a few extra hours each year. “CPD can provide widespread benefits to an individual and are a must for ambitious executives,” says Ehsan Razavizadeh, Regional Director, MENA, and Head of Dubai Centre, Cass Business School. “It can improve knowledge and performance, and is a fantastic networking platform to meet likeminded people within the industry. It’s a great way to share best practices with peers, which is paramount for someone like a CFO. Levels of compliance, and regulation in the market means CFO’s need to be up-to-date on such matters.” Suhail Shamieh, Learning Consultant, Fitch Middle East and Africa, believes that there is an unjustified and potentially damaging stigma surrounding CPD. “Unfortunately, most people,

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including CFOs, associate learning with formal education at university, in-house training or public courses,” he says. “However, this is only one type of learning. Lifelong and continuous learning is about creating a habit and a positive attitude towards learning and development on both professional and personal levels.” A key decision that any professional seeking CPD needs to consider is whether to undertake courses either locally – be it in the UAE, Saudi Arabia or elsewhere in the Middle East – or further afield, in the US or UK elsewhere that offers a strong financial education. “Leadership phenomena emerge from culture, so it is important to understand the relevant market,” says Rory Hendrikz, Director, Ashridge Business School Middle East. “It’s all well and good studying in the US or Europe, but if it doesn’t give

“In this kind of global uncertainty, CFOs need to invest in continuing education even more to understand what drives financial markets in our global economy.” 41

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CPD

you a relevant understanding of local markets then CFOs may return and find that their training hasn’t been as effective as first thought. International interaction is important – most research publications are borne out of Western ideology - but understanding how things manifest in a local context is very important.” Razavizadeh agrees, “I believe that we are living in an increasingly global world, and so it’s important to consider your options from two perspectives,” he says. “One the one hand, the benefits of international education are obvious, the world is increasingly connected, now more than it has ever been. However having regional expertise is an undeniable advantage. We’ve introduced Islamic Finance and Energy courses, which obviously have great relevance for this region.” The increasingly connected world is not the only challenge posed to finance professionals. The last eight years have been turbulent and unstable in the financial world, and Ismail Ertürk, Senior Lecturer in Banking, Manchester Business School, believes that mercurial times call for fresh education. “In this kind of global uncertainty, where old financial models and knowledge are being challenged, CFOs need to invest in continuing education even more to understand what drives financial markets in our global economy,” he says. “They need to know how to manage corporate finances during a prolonged period of low interest rates and high uncertainty in foreign exchange and bond markets. Liquidity management, capital structure decisions, and country risk management are all big challenges in the current environment, making continuing education a must for CFOs.” CFO’s also need to ensure they can keep up with the pace of change. “From our point of view, in a broad context, markets are always competitive and

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“Unfortunately, most people, including CFOs, associate learning with formal education at university, in-house training or public courses.” Suhail Shamieh, Learning Consultant, Fitch Middle East and Africa

dynamic,” Hendrikz says. “Particular skills may be relevant at one point in time, but CPD needs to be equal to or greater than the rate of change within the market. Once it is it provides huge and essential benefits to its recipients.” Shamieh concurs, saying that the need for educational advancement is never-ending due to market requirements. “Unlike some subject areas, both accounting and tax best practice change on a regular basis, either as part of the FASB or IASB update programmes or through events such as annual budgets when tax rates are changed to fit current economic conditions,” he says. “Continuous education is essential for CFOs to keep their general business and economic awareness up-to-date so that they can anticipate the potential treasury and risk management needs of their business and hedge risk accordingly.” As well as being savvy finance managers, it’s key for CFO’s to be a business partner to the CFO, and an effective leader for their division. “On the technical side of finance, it’s important to note that there is more often than not an exact science of how to do things,” Hendrikz says. “Global

protocols are there so they can’t be ignored. However, the soft science of leadership is something that can always be honed, and something that CPD can bring to the table.” Shamieh thinks this ability to have a strong presence within the boardroom – as well as being able to think outside the box – will always hold CFO’s in good stead. “As you move up the corporate ladder, it becomes an essential and a dominant factor to have very strong leadership, strategic thinking and communication skills,” he says. “Furthermore, it’s equally as important to have excellent problem solving skills and the ability to look at things abstractly.” Razavizadeh believes that CPD, and the softer skills that can be honed, are an essential stepping stone for those who have the highest aspirations in business. “More often than not, CFO’s – and a number of other senior business figures – who attend our courses are determined to one day become CEO or managing director,” he says. “Furthermore, a number also aspire to set up their own business, which may entail a more generic programme of study.”

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SomersConsult

It’s all about objectives Fintan Somers, International CFO and change leader, SomersConsult

n my opinion, and this is a big statement, one of the biggest contributors to world discord is a lack of agreement of objectives and priorities between the members of the global “team”. Now, of course, the global “team” consists of billions of people so it is to be expected that getting agreement that we are all on the same “team” and that we should agree common objectives and priorities is going to be a complex, if not impossible, undertaking. And many world leaders spend their lives attempting to achieve some progress in this undertaking, with varying degrees of success. So, it’s not surprising that the first port-of-call I make when looking at a poorly performing business or finance function is objectives. All leaders, including CFOs, need to spend a lot of time on developing objectives, communicating these to the team and getting buy-in from the team. If you don’t tell the team that they need to “take the castle on the hill” or if they don’t agree to do it, then don’t be surprised if you don’t take the castle on the hill! And the problem, of course, is that it is not simply a question of communicating the overall objective and expecting the team to get on with it. To be successful in the overall objective - “take the castle on the hill” - you need to translate it into a range of sub-objectives, organisation, processes and behaviours so that you, as the leader, and the team, have a reasonable probability of success.

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Let’s look at the finance function equivalent of the “take the castle on the hill” objective that I outlined. Support the CEO and the Executive Team in building a sustainable and profitable business in a manner compliant with the policies and interests of the business. Now, returning to the three core levels of focus, “relationships”, “building profitability” and “line of defence”, in a little more detail: 1. Support the CEO and Executive Team: now you will hear the expression “Business Partnering” used a lot as a target objective for the CFO and finance function. In my opinion we need to be very careful in the use of this term. Partnership implies some form of equality in terms of generating outcomes. I have been on the receiving end of enough abuse from poorly performing business heads to understand the difference between our respective roles. The business is the business; finance is finance; they deliver; we support. It is important to be clear on this distinction. 2. Build sustainable and profitable business: many business leaders, including some of the most successful, effective and ethical leaders I have worked with, have been prepared or tempted to cash in some future profit to look good in the present. This is a particular temptation when financial performance is under pressure. The CFO and the finance team have got a clear responsibility to set the “moral tone” surrounding the setting and achievement of financial outcomes

so that profitability is sustainable. This is not an easy task; life and business decisions and outcomes are not always a simple matter of “yes” or “no”. Business, like life, is a negotiation. 3. Compliant with policies and interests of the business: This is not just about legal and regulatory compliance; it is also about the spirit of what is right for the shareholder. I have seen finance people back away from engaging with and influencing policy decisions in the business - on the basis that no laws were being broken - but which decisions were clearly worthy at least of debate. The top-level objective of the CFO means that he or she is in the relationship management business, in the building profits business and is a key line of defence for shareholders to ensure that the future is not cashed in to make the present look good. For shareholder value is about sustainability not the quick buck. Unfortunately, as recent history has shown, many CFOs either do not engage in, or lose, the sustainability debate with their CEO and leadership team colleagues. In the next article I will describe a simple operating model that I use for looking at business effectiveness and link this to the role of the CFO and finance function. In later articles, we will look at finance function LIFT, which is my model for developing and executing finance function transformation. If you have any feedback on my column, write to me at fintan@ somersconsult.com

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CIMA

The importance of risk management Geetu Ahuja, Head of GCC, CIMA

n a recent study on Enterprise Risk Management Initiative carried out by the North Carolina State University on behalf of the Chartered Institute of Management Accountants (CIMA), it was found that organisations of all types face an ever-increasing array of risks that may significantly affect their strategic success. This study was conducted with an aim to help organisations benchmark their relative risk oversight maturity and to highlight opportunities to enhance the strategic value of their oversight efforts. It was found that businesses are putting themselves in danger by neglecting or avoiding formal risk management processes. The study consulted more than 1,300 executives worldwide and looked at enterprise risk management (ERM), a commonly-accepted framework to identify and prepare for future threats to an organisation’s core business model and strategic plan. Unfortunately, ERM take-up was poor around the world, with only 35 per cent of organisations claiming to have a formal ERM system in place. 80 per cent of firms had not invested in risk management training for executives in the last few years. 70 per cent felt their risk management process was not “mature” and just 40 per cent were satisfied with the reporting of information about top risk exposures to senior management. An overwhelming majority of

management respondents believed their current risk oversight processes were relatively immature. Sadly, an increasing number of senior executives view risk management as mostly focused on compliance and loss prevention with little connection to strategy and value creation. As organisations evaluate their risk management processes, they may benefit from providing an honest assessment about the extent to which risk management in their organisation is an important input to the strategic planning process. Given that executives understand the importance of taking risks to generate returns, shouldn’t risk management be an important strategic tool in their decision making process? For enterprise-wide risk oversight to be a strategic tool, most organisations realise that risk management needs to move from a casual, ad hoc way of thinking to a structured and explicit set of risk identification, assessment and monitoring processes. This requires leadership and focus that is often the result of establishing risk management leadership and accountabilities at the board and senior management levels. Organisations may want to consider appointing a senior executive with explicit responsibility for risk management leadership. This executive would help lead the development of structured processes related to risk and they would coordinate the organisation’s risk thinking so that senior management and the board of

directors obtain a top-down, enterprise view of the portfolio of risks on the horizon for the organisation. Organisations need to develop formal risk management structures that are integrated with their strategies so that they are better informed to identify their most pressing risks to the business’ success. There needs to be a clear way for risk management information to be passed upwards to those leading the strategies of the business so they can increase the business’ agility in navigating challenges that may impact strategic success. For business to succeed it’s essential that leaders make decisions to create and preserve value for the short, medium and long-term. Decision makers need to ‘join the dots’, bringing together the information they need, in the way they need it to understand cost, risk and value. Given the rapid pace of change in the global business environment, more organisations are realising that status quo risk management will likely lead to failure and significant missed opportunities. Those that embrace the reality that risk and return are related are likely to increase their investment in enterprise risk oversight and strengthen their organisation’s resiliency and agility when navigating the complex risk landscape on the horizon. To access the full report, visit www.cgma.org/Resources/Reports/ Pages/Global-state-of-enterprise-riskoversight.aspx.

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