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setting standards in financial auditing & accountancy

OCTOBER 2013

NAVIGATING FINANCIAL STORMS

Dubai Ports World money man – Ahmad Darwish on how to anchor a solid financial future

HONOURING THE STARS

ICAEW launches 2013 excellence awards, event slated for December 11, 2013, in Abu Dhabi

TO INFINITY AND BEYOND

Abu Dhabi-based EY accountant enters contest for a chance to win one-way ticket to Planet Mars

TELLING THE CORPORATE STORY

Long-serving CFO - Syed Iftikhar Ali - reveals the changes that his long career journey has had on his professional outlook

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editor's audit

Publisher Dominic De Sousa Group COO Nadeem Hood

Honouring industry’s finest

Managing Director Richard Judd richard.judd@cpimediagroup.com +971 4 440 9126

ON WEDNESDAY, December 11, 2013, the accountancy and finance industry will once again witness exceptional individuals, teams and firms being honoured during the 3rd annual excellence awards hosted by the Institute of Chartered Accountants in England and Wales (ICAEW), scheduled to take place in the UAE’s Capital Abu Dhabi.

EDITORIAL Editor Joyce Njeri joyce.njeri@cpimediagroup.com +971 4 440 9140 Contributor Shane Phillips ADVERTISING Commercial Director Chris Stevenson chris.stevenson@cpimediagroup.com +971 4 440 9138 PRODUCTION & CIRCULATION Production Manager James P Tharian james.tharian@cpimediagroup.com +971 4 440 9146 Database and Circulation Manager Rajeesh M rajeesh.nair@cpimediagroup.com +971 4 440 9147 DESIGN Head of Design Fahed Sabbagh fahed.sabbagh@cpimediagroup.com +971 4 440 9148 Designer Froilan A. Cosgafa IV froilan.cosgafa@cpimediagroup.com Photographers Jay Colina Kader Pattambi DIGITAL SERVICES Digital Services Manager Tristan Troy Maagma Web Developer Abey Mascreen online@cpidubai.com +971 4 440 9100 Published by

Office 804 Grosvenor Business Tower, TECOM PO Box 13700 Dubai, UAE

The event is a big deal particularly on two levels: Firstly, as our exclusive interviews reveal, some of the last year’s winners have gone on and excelled highly in their respective careers. Take for instance Chris Taylor. Since winning the last year’s Chartered Accountant of the Year, Chris, formerly the Chief Operating Officer of Abu Dhabi Finance, has had a good year which has seen him being promoted to the coveted position of Chief Executive Officer. Likewise, the overall winner in the CFO of the Year category, NMC Healthcare’s Prasanth Manghat, has this year helped to steer his company to post significant profit increases with NMC, providing healthcare to over one million patients in the first six months. Secondly, as Peter Beynon, ICAEW’s Middle East Regional Director, puts it: “Winning one of the awards categories means that a nominee has been judged to have shown the highest levels of professional standards, exceptional abilities and dedicated diligence.”

Referred to as 'Oscars' of the region’s accountancy and finance industry, the awards are among the most coveted prizes, being based on the votes of respected industry insiders. Therefore this is a fantastic opportunity for professionals to demonstrate their remarkable abilities, whether working for a large, medium or small firm, in business or in practice. To submit a nomination visit www.icaew.ae/awards. Speaking of extraordinary propensities and ambitions, a wannabe astronaut is hoping to take her accountancy skills to Mars, after signing up to enter a reality TV contest for a chance to win one-way ticket to the Red Planet.

Abu Dhabi-based EY accountant Sarah Johnson is among more than 200,000 people who have already applied for the chance to leave Earth forever, for an expedition to a galaxy far, far away. The $6 billion ‘Mars One’ project is a foundation that hopes to establish a permanent human settlement on Mars in 2023. The search for astronauts began in April 2013 and I hope you will all join me in wishing Sarah best of luck in her quest to infinity and beyond. Finally, we sail to Dubai Ports World where we get an all access entrée to the operations of one of the world’s largest marine terminal and port operator, courtesy of Ahmad Darwish. The Emirati national is the Manager for Accounting, Treasury and Asset Management in the finance department of DP World, where he gives us tips on how to battle financial headwinds and anchor a solid fiscal future. Have a good read.

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SETTING STANDARDS IN FINANCIAL AUDITING & ACCOUNTANCY

OCTOBER 2013

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Joyce Njeri Editor, Accountant Middle East

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© Copyright 2013 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.

E-mail: joyce.njeri@cpimediagroup.com

NAVIGATING FINANCIAL STORMS

Dubai Ports World money man – Ahmad Darwish on how to anchor a solid financial future

HONOURING THE STARS

ICAEW launches 2013 excellence awards, event slated for December 11, 2013, in Abu Dhabi

TO INFINITY AND BEYOND

Abu Dhabi-based EY accountant enters contest for a chance to win one-way ticket to Planet Mars

TELLING THE CORPORATE STORY

Long-serving CFO - Syed Iftikhar Ali - reveals the changes that his long career journey has had on his professional outlook

PUBLICATION LICENSED BY IMPZ

LinkedIn group: Accountant Middle East

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www.accountancyme.com 3


Contents OCTOBER 2013

Main Features

30

4

12

Personality & Practice:

To infinity and beyond – Abu Dhabi-based EY accountant hopes to take her crunching skills to Mars as she enters reality TV contest for a chance to win one-way ticket to the Red Planet.

30

Cover Story:

50

Different Dimensions:

Ledgers in headwinds - ACCA Chairman Ahmad Darwish, who is also DP World’s money man on how to anchor a solid financial future.

Telling the corporate story – Syed Iftikhar Ali has worked in various finance roles in the UAE for over three decades. He talks about the changes that his career journey has had on his professional outlook.

October 2013

20


Current Affairs 6 News & Views:

20

ICAEW Awards:

Profession Watch

Honouring the stars - ICAEW launches 2013 excellence awards, event slated for December 11 in the UAE’s capital Abu Dhabi.

60

Idea Watch:

68

Technology Talk:

70

GT Index:

The dilemma device – CIMA launches new ethical scenario tool for today’s business people. New tech to help recover tax - RevaticSmart, a Deloitte’s initiative, will assist Middle East businesses to recover levies paid in the European Union countries. UAE among top business best - GT Global Dynamism Index ranks Emirates seventh in the world for the dynamism of its financing environment.

74

Industry Appointments:

Revolving door - Find out the latest movement of professionals between roles, companies as well as new industry hires.

44

56 Special Reports

Repute before return - Reputational risk is now seen as a critical company-wide concern, according to a global survey by CIMA and AIPCA.

16

Corporate Governance:

Connecting the bright spots - Without proper governance, National Oil Companies face significant challenges, new Deloitte whitepaper states.

44

Risk Management:

56

Taking Stock:

62

Business Insights:

Pitfalls in processes - Ali Raza, BDO Senior Partner details the fundamental mistakes organisations make when implementing Enterprise Risk Management systems.

Deloitte records double-digit growth Network says priority markets contributed nearly one-fifth of revenue; Nearly 30 strategic acquisitions were made in the fiscal year ending 31 May 2013.

Business beyond borders - In its latest study titled ‘Why go International?’ UHY audit firm educates on the benefits, risks and challenges of setting up a company overseas.

From the Experts 18 Outsourcing:

Enabling growth - Grant Thornton’s Atul Varma explores the benefits of sub-contracting in an ever changing and competitive market.

72

CORPORATE TREASURY:

The contemporary treasurer – Today’s treasurers have their fingers in many pies, but their full strategic potential is still untapped, according to ACT research.

Interactions 3 Editor's audit

5


News & Views

CASHLESS SOCIETY

MASTERCARD RECENTLY unveiled a new global report titled ‘The Cashless Journey’ that ranks the UAE economy amongst those most rapidly moving away from being a predominantly cash based society. The report explores the evolution of consumer payment patterns in 33 countries from five regions, representing more than 85% of global GDP, taking in both developed and developing nations, using a single methodology. MasterCard Advisors’ research indicates that a country’s readiness to move to a cashless society is determined by factors like the accessibility and affordability of financial services; the scale and market share of retailers; the level of technology that is available; and participation of consumers in the formal economy. With a Trajectory Indicator of 65, the United Arab Emirates is among the faster changing payments ecosystems of those countries studied. Eyad Al Kourdi (pictured), UAE country manager, MasterCard, said: “The United Arab Emirates is indeed progressing at a brisk pace on its cashless journey, which has received a tremendous boost with the implementation of key Government initiatives like the Wage Protection System (WPS) that has vastly increased access to electronic payment methods over a short period of time. These changes suggest that the country’s cashless journey is well underway and gaining momentum.” 6

October 2013

REPUTE BEFORE RETURN ONCE THE sole remit of the marketing and PR departments, reputational risk is now seen as a critical company-wide concern, according to a global survey by the Chartered Institute of Management Accountants (CIMA) and the American Institute of CPAs (AICPA). The survey of UAE finance leaders who hold the Chartered Global Management Accountant (CGMA) designation identified the demand for more transparency, competitor reputational failures and the rise in social media channels such as Facebook, Twitter and LinkedIn as key contributing factors to the increased global interest on the topic. Despite this, only 47% of organisations surveyed said that they use feedback from these channels to help them anticipate

and manage risk to their reputation to some degree. Similarly, 47% of those surveyed had no formal processes or models in place for calculating the financial impact of not managing reputational risk. Geetu Ahuja (pictured), Head of GCC – Middle East at CIMA said; “Organisations are increasingly recognising the need to take reputational risks very seriously if potential crises are not to turn into catastrophes.”

STATS FACT:

73%

UAE financial leaders who said their company was prepared to lose profit for the sake of reputation

ANTI-FRAUD EVENT SET FOR NOVEMBER TRAINING PROVIDER OpenThinking is set to host an event for industry professionals, on the crucial issue of AntiFraud mechanisms. The event is slated for November in Dubai and will also take place in the other Emirates of Sharjah, Ras Al Khaimah and Abu Dhabi. More than 700 professionals have confirmed their participation.

Iyad Mourtada the director of the event said; “Our main goal is to enhance the understanding of fraud examination and anti-fraud practices in the private and public sectors in the UAE.” The event is sponsored by the IMA Dubai Chapter, ACCA Middle East, ISACA UAE Chapter among other 40 sponsors. To get more information about the event visit: www.openthinking.ae


News & Views

BANK SPREADS SERVICES TENTACLES STANDARD CHARTERED recently announced the expansion of fund services capabilities from its Regional Securities Services Centre based in Dubai International Financial Centre (DIFC). These services include fund accounting and administration, compliance reporting, performance measurement and analytics, and institutional transfer agency services. Standard Chartered’s comprehensive offering provides clients with a one stop solution for all their securities services and banking needs, incorporating cash management, order execution, foreign exchange, custody and fund services.

KUWAITI FIRM LISTS ON DUBAI FINANCIAL MARKET

DUBAI FINANCIAL Market (DFM) recently announced the listing of Kuwait’s Al Salam Holding Group. The company shares commenced trading on Sunday, September 29th 2013, under the trading symbol ‘Alsalamkw’, which appears on DFM screens, trading systems and publications within the Investment and Financial Services sector. The new listing of Al Salam Holding Group lifts the total number of equity listings to 55 public joint stock companies and further increases the number of Kuwaiti companies listed on DFM to 8 companies.

Essa Kazim, Managing Director and CEO, Dubai Financial Market; Mishari Al-Majed – Chairman, Al-Salam Group Holding, Mamdouh El-Sherbiny – CEO and Dr Ali Al-Shamali, Advisor of the group, and senior representatives from both sides attended the listing ceremony. The listing further fortifies the prominent position of Dubai Financial Market as the favoured listing venue for leading local and regional companies. Commenting on this development, Essa Kazim said; “The listing reinforces DFM’s position as the market of choice for Kuwaiti companies seeking a dual listing, and reflects the high level of confidence businesses have in our exchange and the role DFM plays to support the growth story of successful companies.”

AL HILAL GETS TOP RATING With the expansion, Standard Chartered’s fund services coverage has reached to 17 markets. Standard Chartered has been providing fund services to over 3000 funds based in Asia, Africa and the Middle East ranging from traditional, alternative (including Real Estate Investment Trust, Private Equity) and pension funds. Commenting on the expansion of capabilities, Shikkoh Malik, Regional Product Head for Investors and Intermediaries, said: “We have done extensive market research to ensure that not only our capabilities meet client requirements but we differentiate ourselves from other players in the region. We are extremely grateful for the support given to us by the regulator during the licensing process.”

AL HILAL Bank has announced that it has been awarded an A1 rating by Moody’s and an A+ by Fitch, the highest ratings awarded to an Islamic Bank in the UAE. Moody’s extended Al Hilal Bank an A1 rating with a stable outlook, citing the Bank’s robust franchise growth, strength of its asset quality, advanced technology infrastructure and government support as the rationale for the positive rating outcome. Fitch Ratings extended the Bank an A+ rating with a stable outlook. Fitch noted improving profitability, healthy asset

quality, robust reserve coverage, satisfactory capitalization as well as government support as key rating factors. “The ratings mark a significant milestone in Al Hilal Bank’s history and stand testimony to the bank’s philosophy of responsible growth, continuous infrastructure enhancement as well as relentless focus on innovation and excellence,” said Mohamed Jamil Berro, Chief Executive Officer, Al Hilal Bank. Al Hilal Bank is one of the fastest growing banks in the UAE, with a total revenue of AED 1.8 billion and a net profit of AED 310 million. 7


BUSINESS PICTORIAL

COLOURS OF SALAAM R SM DAHMAN, one of the top accounting and auditing firms based in the UAE and a member of RSM International, recently launched a regional peace initiative dubbed, ‘Colours of Salaam’. The event was to celebrate RSM World Day, an occasion marked every year to advance the firm’s shared values as a global community, unified in building close personal relationships with clients, RSM employees and the society at large. Partners and members of staff celebrated at the Dubai Mall with children from the Dubai Autism Centre, enjoying a day of fun which involved painting, football and a sumptuous lunch.

8

October 2013


BUSINESS PICTORIAL

AMBASSADORS OF PEACE Children with special needs join staff members of top audit firm RSM Dahman, for a day of fun at the Dubai Mall. The children enjoyed some exciting activities and games, which included face painting and a thrilling game of soccer at the indoor football pitch.

9


EY IFRS Special Milestone

REBIRTH OF EY Professional services provider completes 90 years in the Middle East and North Africa region, unveils new logo and adopts global brand name…

E

Y HAS completed 90 years in the Middle East and Nor th Afr ica (MENA). This milestone was recently commemorated at EY’s annual partners’ meeting in Dubai, which was attended by 130 partners from across the region and global network.

Abdulaziz Al Sowailim, EY’s Chairman and CEO for Middle East and North Africa.

During the event, Abdulaziz Al Sowailim, Chairman and CEO, EY MENA said; “Our first MENA office opened in 1923. Since then, we have grown to more than 5,000 employees across the region. As an organisation, we continue to develop outstanding leaders who deliver exceptional services to our clients and who contribute to our communities. We are very proud of all our accomplishments and of being part of the business community over the past 90 years.” Proud history EY recently announced that Mark Weinberger has become Global Chairman and CEO.

Mark, 51, has had a distinguished career with a track record of leadership both inside and outside of EY. He has previously served as the Global and Americas Head of Tax and on the Global and Americas Executive. He has been a senior advisory partner for many of the

Simplified name and redesigned logo From July 1 2013, Ernst & Young changed its brand name to EY. According to the Global CEO Mark Weinberger, the objective was to shorten the brand name for the purposes of providing consistency and ease of use for EY practices and clients around the world. The firm also redesigned its logo, to reflect its new brand name in the design.

10

October 2013

organisation’s largest clients and also served on the Global Markets Executive and Global Public Policy Committees. “It is a privilege to lead this great organisation in these dynamic times and I’m looking forward to tackling the challenges ahead,” Mark said, adding that EY has a proud history that “stretches back more than a century.”

“Over that time we have forged our reputation based on quality, trust and integrity. We are building on our history and our reputation to create our future,” the Global CEO added. A better world EY also unveiled a new tagline, ‘Building a better working world’ to “serve as both its purpose and becoming central to its brand.”

“Every day, every EY person is part of building a better working world – for our clients, our communities, and our families. We believe that everything we do – every audit, every tax return, every advisory opportunity, every interaction with a client or colleague contributes to building a better working world. We know that building a better working world is an ambitious objective but it is an incredibly important aspiration and will be front and centre of everything we do as an organisation,” Mark said.

Abdulaziz added: “This is a continuation to our legacy in the region. A better working world must foster sustainable growth, increased productivity, innovation and a broader talent pool. We strive every day to create a better working world in areas that best match our business, our knowledge and our skills. In doing so, we play a critical role in building a better working world for our people, our clients and our communities.” Bassam Hage, Markets Leader, EY MENA commented: “For the region to energise its innovation climate, which is critical to sustaining its growth, countries should emphasise lowering the barriers and costs of innovation. As this improves, countries in the region will find it easier to pursue economic diversification. We want to fuel the discussion around the challenges the working world faces, and collaborate to be part of the solutions. The pursuit of this is our way of working towards building a better working world.”


Personality & Practice

Abu Dhabi-based EY accountant hopes to take her number crunching skills to Mars as she enters reality TV contest for a chance to win one-way ticket to the Red Planet‌

Sarah Johnson is currently working as a Manager in the Assurance service line with EY Abu Dhabi.

12 October 2013


Personality & Practice

200,000+ Number of space enthusiasts who have signed up to relocate to Mars

Joyce Njeri Editor, Accountant Middle East

Y

ou are among thousands of other people who have applied to sign up for the chance to relocate to Mars forever. This being the first ever trial expedition to the ‘Red Planet’, how do you feel playing guinea pig if your application is successful? It would be an amazing achievement for the human race to put life on another planet and an essential contingency plan to develop another habitable environment should life on earth ever be threatened. More importantly, it would dispel the myth that accountants are dull and boring! Journey time to Mars has been reported to be around 200 days and the wannabe Martians would have to encounter a barren, cratered landscape, an unbreathable atmosphere made up of temperatures ranging from 35C to minus 135C. Have you really had a time of reflection given these harsh realities?

Successful applicants will undergo an eight year training programme including periods in a simulation base which will replicate the settlement on Mars. The settlement will allow astronauts to lead relatively typical day-to-day lives including, cultivating crops, preparing food and performing maintenance / research, however a suit will need to be worn outside of the settlement. “It would be an amazing achievement for the human race to put life on another planet and an essential contingency plan to develop another habitable environment should life on earth ever be threatened,” Sarah says.

You’ll be one of the first humans to live on Mars. Are you prepared psychologically about the risks and obvious challenges that lie ahead?

This is the first stage of the selection process which is submission of an online application. If successful in subsequent stages of the process there will be an extensive training period which will prepare candidates psychologically for the mission. 13


Personality & Practice

LAUNCHER: Several rocket launches will be needed to take humans into Earth orbit and then onto Mars. Mars One anticipates using Space X Falcon Heavy, an upgraded version of the Falcon 9, which is in use by Space X currently. The Falcon Heavy is slated to undergo test flights in 2014, granting ample time for fine-tuning prior to the Mars One missions. – Photo courtesy Mars One

The Mars expedition is a one way ticket and you’ll never return back to earth. Are you sure about leaving your Earthly relations and possessions? This is without a doubt the most difficult part of the process to come to terms with, however, the trade-off is a phenomenal achievement for the human race which may prove to safeguard the continuity of mankind. Have you discussed your plans with your family members? How do they feel about the idea?

My parents always encouraged me to do something different – but maybe not quite this different! I’m sure they’ll get Skype up and running on Mars so I can stay in touch with friends and family back home! How did you become interested in Outer Space?

To be honest I’m not really a space geek but I thought the whole concept of putting life on another planet was incredibly exciting and wanted to be part of it. Applicants are required from a range of backgrounds with complimentary skill sets and you never know, they might need an astronaut accountant! 14

October 2013

The Mars One project promises to make the outer space accessible to everyone. How did you come across that programme? I saw the opportunity on an email from a website called Escape the City (www.escapethecity. org). The site aims to ‘help smart people find exciting opportunities outside of the corporate mainstream’ – I can safely say that’s true! The journey requires that one must be intelligent, creative, psychologically stable and physically healthy. Do you think you have what it takes to be considered for the programme?

I hope so! I have a strong academic track record and extensive international experience working in the UK, France and the UAE and volunteering in Tanzania, Costa Rica and India therefore I adapt

Journey time to Mars has been reported to be around 200 days and the wannabe Martians would have to encounter a barren, cratered landscape, an unbreathable atmosphere made up of temperatures ranging from 35C to minus 135C.


Personality & Practice

The first stage of the selection process is submission of an online application. If successful in subsequent stages of the process, there will be an extensive training period which will prepare candidates psychologically for the mission. well to new environments and relish being out of my comfort zone. If you win the one way ticket to Mars, what is the one thing you would you take with you?

My i-Pod with lots of 90’s dance anthems to keep everyone upbeat! Tell us about your accounting career. What is your current position and what does your job entail?

I am currently working as a Manager in the Assurance service line with Ernst & Young Abu Dhabi. My job entails looking after a diverse portfolio of clients across a breadth of industries with responsibility for planning and overseeing annual financial statement audits and other engagements. I am also accountable for training for all assurance professionals in the office. What path did you take to become an accountant?

I completed an internship with Ernst & Young in the UK before my final year of university and secured a

About Mars One Mars One is a not-for-profit foundation that will establish a permanent human settlement on Mars in 2023. Human settlement on Mars is possible today with existing technologies. Mars One mission plan integrates components that are well tested and readily available from industry leaders worldwide. The first footprint on Mars and lives of the crew thereon will captivate and inspire generations; it is this public interest that will help finance this human mission to Mars. The Mars One mission plan consists of cargo missions and unmanned preparation of a habitable settlement, followed by human landings. In the coming years, a demonstration mission, communication satellites, two rovers and several cargo missions will be sent to Mars. These missions will set up the outpost where the human crew will live and work. – Courtesy Mars One

place on the graduate training programme. I joined EY in 2006 and completed my training contract and gained my Chartered Accountant (CA) qualification with the Institute of Chartered Accountants of Scotland (ICAS) in 2009. How long have you been with your current employer? I have been with EY Abu Dhabi for two years and was with EY Newcastle in the UK for five years prior to that, so seven years in total. The facets of accounting profession are broad, including auditing, tax, legislation, management, banking… among others. In your career, is there one specific area which is of most interest to you?

My background is in auditing which has a reputation for being rather geeky and unexciting, however it’s a fantastic learning environment and I enjoy adding value to a client’s business through highlighting meaningful areas of improvement. What are the best and worst things about your job?

The best thing about my job is the variety of people and business which I work with, particularly here in the Middle East. I work with colleagues from a diverse range of nationalities, religions and backgrounds and with clients operating in a range of industries including asset management, oil and gas, utilities and construction.

The worst thing about my job is dealing with conflicting deadlines so hopefully Mars will be a bit more relaxed! How do you spend your free time? What are your sporting interests, if any?

I like going to the beach and making the most of the year round sunshine in the Middle East! I enjoy keeping fit and try to play ultimate Frisbee twice a week (it’s harder than it sounds!). I also like jogging and completed the ADNIC Yas Run around the Abu Dhabi Grand Prix circuit last year. Who or what inspires you?

My dad always told me that anything is possible if you put your mind to it and this is a philosophy that I live by. 15


Corporate Governance

Without proper governance, National Oil Companies can face significant challenges in many areas, both external and internal to the organisation.

CONNECTING THE BRIGHT SPOTS Without proper governance, National Oil Companies face significant challenges, new Deloitte whitepaper states…

M

ANY DEVELOPING and emerging economies try to take advantage of the natural resources available in their countries to boost development. National Oil Companies (NOCs) that pursue the Extraction (upstream), Refining and Marketing (Downstream) of oil and natural gas resources are a clear example of this and the role these NOCs play is significant in many regions around the world. A new Deloitte whitepaper, ‘Connecting the bright spots: key components of an oil and gas governance

16 October 2013

framework’, puts forth the establishment and implementation of a governance framework as the common and essential element for all NOCs to ensure maximal results.

“Regardless of the type of NOC set-up, (entirely public, Joint Ventures, or other operating models), they share one element that is common and essential to them all to ensure maximal returns are realised, which is establishing and implementing a governance framework. This Corporate Governance framework should help overcome certain obstacles and yield many benefits” said Rami Wadie, Partner, enterprise risk services at Deloitte Middle East.


IFRS Corporate Special Governance

“Without proper governance, NOCs can face significant challenges in many areas, both external and internal to the organisation. As is evident across the region, many of the NOC’s are going through leadership and management style change which requires strong and well established governance practices to ensure consistent, controlled and continued operations,” he added.

Deloit te ex per t s f ind t hat a gover nance framework that provides transparency and evokes confidence in the controls instituted across the NOC will also provide benefits across the spectrum, as follows: Funders and investors will be more confident that their capital will be employed to the best interests of the organisation, leading to lower risk and better returns for them.

Internal issues will also be addressed through s t r ingent s t a nda rds en forced t hroug h proper organizational design, delineation of authorities, and detailed policies and procedures that safeguard the well-being of the NOC as a whole.

The Deloitte whitepaper lists the external challenges associated with lack of governance to include difficulty in sourcing funding and attracting investment and a distorted view of earnings and balance sheet performance. When addressing internal challenges, the whitepaper finds they include system inefficiencies in all aspects such as capital deployment, organisational performance and operational issues as well as adverse effects on the NOCs sustainability and social responsibility. A thought f ully planned and successf ully implemented governance framework can reverse the above-mentioned problems as per Deloitte’s whitepaper. It further highlights the characteristics of an effective governance framework with these elements: i) Values: set the purpose of the organisation and must be clear and understandable

ii) Operating model: provides an explanation of the distinction between operational and functional roles

iii) Management system: includes the set of hierarchically structured policies and procedures for the organisation

iv) Governing bodies: provide oversight for the whole governance framework, from the top level board of directors’ charter down to executive and non-executive roles and responsibilities Once the governance framework is developed, Deloitte experts list six critical success factors for effective implementation. These are:

A compelling case – preparing, agreeing and communicating the benefits for the business, the individual, employees and other stakeholders Awareness of key challenges – where will pushback come from, where will apathy exist

A strong and consistent message from all levels of leadership and management Time – for awareness and understanding to embed across the region

Two way communicat ion – process of communication and engagement

A plan – definitions of success, priorities, review points to assess progress and transition to ongoing business environment

“These six elements also rely heavily on the involvement and engagement of stakeholders who understand and support the values of the organisation,” concluded Wadie.

Regardless of the type of NOC set-up, (entirely public, Joint Ventures, or other operating models), they share one element that is common and essential to them all to ensure maximal returns are realised, which is establishing and implementing a governance framework.

17


From the IFRS Special Experts

‘OUTSOURCING ENABLES

GROWTH’

Grant Thornton’s Atul Varma explores the benefits of sub-contracting in an ever changing and competitive market…

T

HE UAE has seen the increased emergence of growth orientated businesses; therefore complacency is no longer an option, especially in an ever changing and competitive market. In order to remain competitive, it is essential to have manageable operating costs. Many businesses are facing common challenges including: high operating costs an increased need to focus on risk and compliance complexities of business processes required investment in technology need for training and retaining staff

Ongoing operational challenges can often deter the focus away from the strategic direction, which impacts the growth and profit potential.

With this in mind, outsourcing has emerged as a solution to address such time consuming challenges, whilst further promoting productivity in the workplace and throughout the business. Outsourcing introduces efficient and costeffective delivery models in order to ensure that stakeholders can remain focused on strategic growth. The impact of this is being directly felt in the segments that outsourcing companies are able to address. 18

October 2013

Outsourcing introduces efficient and cost-effective delivery models in order to ensure that stakeholders can remain focused on strategic growth.

Ensuring compliance Research has suggested that outsourcing is emerging as a favorable option for the majority of companies who want to focus on growth and development, ranging from small to large businesses. In a business environment which is competitive and complex it is essential to ensure compliance and accuracy at each business process stage. Failure to do so will result in: inefficient productivity; monetary loss, complex business processes demotivated staff retention issues Therefore, more so than ever before, business process outsourcing is fast becoming the only


From the Experts

Atul Varma, Head of Business Process Outsourcing at Grant Thornton UAE.

models and methods, these issues can be avoided as specialist teams provide meaningful advice to support and encourage growth.

Business process outsourcing is being seen as a productive method of ensuring business efficiency and development. It often leads to staff satisfaction, as the day to day operational elements of the business are taken care of and become more efficient over time. solution to cutting through complexity and addressing daily challenges, in order to transform them into efficient, high performing and compliant processes.

Often businesses spend a huge amount of time on monotonous tasks, which could be better solved with business process outsourcing specialism. This allows businesses to ensure productivity whilst introducing and endorsing internationally renowned and approved working models that are tailored for their business. Lack of skilled workforce Global research from the International Business Report recently highlighted that one of the biggest constraints on growth was the lack of skilled workforce and access to labour in the UAE. Through adopting business process outsourcing

Atul Varma, Head of Business Process Outsourcing at Grant Thornton UAE explains; “In order to be efficient, competitive and respond to the ever changing global market, businesses need to focus on growth strategies, develop and implement effective models which will reduce complexity, ensure compliance and support them to grow.�

Business process outsourcing is being seen as a productive method of ensuring business efficiency and development. It often leads to staff satisfaction, as the day to day operational elements of the business are taken care of and become more efficient over time.

19


ICAEW Awards

HONOURING THE STARS ICAEW launches 2013 excellence awards, event slated for December 11 in the UAE’s capital Abu Dhabi‌

Winning one of the awards categories means that a nominee has been judged to have shown the highest level of professional standards, exceptional abilities and dedicated diligence.

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ICAEW Awards

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Number of years the ICAEW Excellence Awards event has been running, since its launch in the region

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HE INSTITUTE of Char tered Accountants in England and Wales (ICAEW) has officially launched the nominations process for its third Middle East Accountancy and Finance Excellence Awards. The process will culminate to a glamourous event slated for December 11, where ICAEW will honour the best performing firms, teams as well as individuals. “For the first time, the awards will be coming to Abu Dhabi, at the Ritz Carlton, and we will spend an evening recognising and applauding the achievements of the cream of the profession from right across the region,” said Peter Beynon, ICAEW’s Middle East Regional Director.

“The awards were conceived with a simple premise; we believed finance professionals were not receiving the same accolades as their counterparts in, for example, management, despite their work being vital to business,” he added.

It is fair to say accountancy has historically suffered from something of an image problem – ‘bean counters’ or ‘men in grey suits’ – and still doesn’t quite have the cachet of making moves and running deals. But without finance professionals there are no moves nor deals. “We wanted to address this perception problem, and also to show bright, hardworking young people that there was a rewarding career to be had in finance. Of course the awards ceremony itself

Nominations are open to finance professionals including bright, hardworking young people at the beginning of their careers, to ‘grizzled veterans’ who have demonstrated excellence in their work.

also provides a great networking opportunity, and we hope to simply present an enjoyable occasion,” the director added.

Past keynote speakers during the awards event have included Sir Ian Botham and Lord Sebastian Coe and this year the host will be broadcaster Clive Anderson, “But this is not to detract from overall aim of the Excellence Awards – to plant a flag for the profession,” Peter quipped. A global profession ICAEW boasts over 141,000 members in over 165 countries worldwide. While the event began in Dubai three years ago, the location of ICAEW’s Middle East regional office, the awards are for businesses and individuals from across the whole region.

According to Peter, this year the awards event will take place in UAE’s capital Abu Dhabi for the first time, “and we are hoping in the future to take the event to other finance hubs in the region, reflecting the growing importance of the profession across the entire GCC.” “It is right that we started in Dubai, where there is the greatest concentration of our members, but this event is for the whole region and it is now time to ensure that the awards belongs to the profession right across the region,” the executive added.

Recognising excellence Nominations are open to anyone who is, or who knows, a finance professional demonstrating excellence. This ranges from bright, hardworking young people at the beginning of their careers to ‘grizzled veterans’ who have reached the pinnacle of their chosen field, and everyone in between. The categories span individuals and organisations working in practice or business and even education providers. At the team level, there are awards for Corporate Finance Deal of the Year and Business Finance Team of the Year. 21


ICAEW Awards

It is fair to say accountancy has historically suffered from something of an image problem – ‘bean counters’ or ‘men in grey suits’ – and still doesn’t quite have the cachet of making moves and running deals.

the discipline and rigour of the finance profession is not just about making money, it can also provide the foundations for leadership at the highest levels, contributing to the public benefit.”

“Choosing the categories is an on-going and developing process. We rely not only on the expertise of our members, who work in all aspects of the finance profession and have, collectively, many decades of experience, but also on feedback from other key contacts and stakeholders. The nomination process, by contrast, is extremely simple; it consists of a short online form which needs to be submitted by November 1,” the Director added. Judging the best The judging process is rigorous and has been carefully designed to ensure that proper and scrupulous consideration is given to each candidate. The lynchpin is the 11-strong judging panel.

The judges are selected from highly-respected leaders of business, accountancy and finance, and in the past have included chief executives and company founders, chief financial officers, auditors, standard setters and public servants. Entries are reviewed by the panel and judged according to the individual criteria for each category. Finally, having identified a shortlist, the panel selects one winner for each award.

Peter Beynon, ICAEW’s Middle East Regional Director – “The judging process is rigorous and has been carefully designed to ensure that proper and scrupulous consideration is given to each candidate. The lynchpin is the 11-strong judging panel.”

Excellence is also recognised by separate categories for Financial Reporting, Internal Audit, and Training and Development of Finance Professionals. New for this year is a category of excellence in the Development of the Country’s Future Leaders, and a separate award for Accounting for Sustainability. At the individual level we have CFO of the year, Outstanding Business Leader of the Year and Young Accountant of the year. The awards are not just limited to chartered accountants; we also have a category for Financial Journalist of the Year. “It would be impossible to recognise every single contribution made by the finance profession to business, the economy and society, but we believe that this marks a good attempt,” Peter said. “The category of developing future leaders is a good example of how the awards process is evolving; this is designed to highlight the fact that 22

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“The awards are open to everyone, and each nomination is judged individually on its own merits. We are particularly keen to encourage nominations from firms of all sizes. ICAEW does not believe that quality means different things for different companies; to be an ICAEW Chartered Accountant means to have demonstrated the highest levels of professional, ethical and technical standards, whether working for a large, medium or small firm, in business or in practice,” said Peter. This year, the judging panel includes Dr Abdulkarim Alzarouni, Deputy Group CFO of NBAD, Sameer Al Ansari, the Founder of Private Equity firm PEPlus, Stephen Williams, Managing Director and CFO of Gulf International Bank (GIB Bahrain), as well as representatives of the Abu Dhabi Accountability Authority, UKTI, other leading businesspeople and academics. Leaders in their field Winning one of the awards categories means


ICAEW Awards

THE JUDGES

This year, the judging panel includes Sameer Al Ansari, the Founder of Private Equity firm PEPlus (left), Dr Abdulkarim Alzarouni, Deputy Group CFO of NBAD (centre), Stephen Williams, Managing Director and CFO of Gulf International Bank (GIB Bahrain) (right), among other leading businesspeople and academics.

that a nominee has been judged to have shown exceptional abilities, dedicated diligence and inspirational application. Moreover, they have been assessed by a panel of leading financial and business experts who have collectively seen almost everything there is to see in the finance world. Last year, Bahrain’s Tamkeen won the award for Training and Development, highlighting the efforts they have made to ensure that Bahrain has a talent pool of highly qualified finance professionals capable of stewarding the country’s continued economic prosperity. It is now estimated that almost 80,000 Bahrainis and Bahraini businesses have benefitted from Tamkeen programmes to date, with that number expected to rise to 150,000 in the near future.

According to Peter, Bahrain remains one of the key financial services hubs in the region, “and shows every sign of having overcome the challenges it faced in the aftermath of the unrest two years ago.”

Where individuals are concerned, it is perhaps no surprise to see that awards winners go on to shine brightly. Since winning the last year’s CFO of the Year award, NMC Healthcare’s Prasanth Manghat, has helped steer his company to post significant profit increases with NMC providing healthcare to over one million patients in the first six months. And last year’s Chartered Accountant of the Year, Chris Taylor from Abu Dhabi Finance

PJSC, was this year promoted to the position of Chief Executive Officer.

“Clearly, being feted by leading experts in the industry as one of the best and brightest of a generation is going to add significantly to any professional CV; the winners of this year’s awards will be names to watch for the future,” Peter said. Showcasing the profession The overall benefits of the awards are not just to be measured in the successes of the winners, but also in the overall attitude towards the profession in the region. Part of the overall aim is to raise the profile of the accountancy profession and make people aware of all the hard work that is done behind the scenes, but also to demonstrate that there are great careers to be made in this industry.

Many Middle East countries are investing significantly in economic diversity, trying to reduce the heavy reliance on oil and hydrocarbons, but oil is such a huge part of the economic successes of the regions that countries can face an uphill struggle. According to Peter, there have also been challenges associated with attracting nationals into the private sector.

“By raising awareness of the rewarding careers available to highly-qualified finance professionals ICAEW hopes to demonstrate that working in the 23


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SUCCESS STORIES Since winning the last year’s Chartered Accountant of the Year, Chris Taylor (left) from Abu Dhabi Finance PJSC, has had a good year, which has seen him being promoted to the coveted position of Chief Executive Officer. Likewise, last year’s CFO of the Year, NMC Healthcare’s Prasanth Manghat (right), has this year helped steer his company to post significant profit increases with NMC, providing healthcare to over one million patients in the first six months.

finance profession is one way to access a career that is rewarding in many aspects, and can lead to great things,” he said.

“Increasingly, finance professionals are stepping out of the ‘back room’ and going on to leadership and strategic positions, first as CFO and in many cases later as CEO. At the same time, having an internationally-recognised qualification means being respected worldwide as working to the highest professional, ethical and technical standards. ICAEW hopes that celebrating the cream of the crop will be one way to demonstrate that chartered accountancy is a career where bright , hardwork ing people can have an opportunity to shine,” he added.

Laying the path to prosperity The Accountancy and Finance Excellence Awards has become part of the annual calendar of the finance profession in the Middle East. “Obviously we hope that the chance to gather and celebrate with some of the profession’s leading light s will be an at traction, but the real message of the awards is that a strong 24

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profession is essential to any economy,” the Director said.

The Middle East is currently in a fascinating and unique position. It has a large, and growing, population with a number of young people, meaning that with the right investment in training and skills it has the capacity to develop a huge pool of talent for the future.

At a time when the balance of economic power appears to be shifting eastwards, the Gulf States are enviably placed in order to capitalise on the need for global trade and finance hubs. Equally, the region is fortunate in having tremendous natural resources which mean that – at a time when much of the developed world is facing austerity conditions – there is the capability to invest in long term prosperity, whether in infrastructure or education. “ IC A E W b el ieve s t h at t he ac c ou nt a nc y profession makes a vital contribution to the economy and society in the region, and has the capability to continue doing so for many years to come,” Peter said.


ACCOUNTING FOR EXCELLENCE THE MIDDLE EAST ACCOUNTANCY AND FINANCE EXCELLENCE AWARDS WEDNESDAY 11 DECEMBER 2013 AT THE RITZ CARLTON, ABU DHABI once again, the very best talent in the world of accountancy and finance will be celebrated by icAew at a stellar awards ceremony. icAew is a professional membership organisation supporting over 140,000 chartered accountants around the world. And, on wednesday 11 december 2013, at the ritz carlton in Abu dhabi, we’ll be recognising excellence in twelve categories featuring: cfo of the year, corporate finance deal of the year and the internal Audit excellence Award with an impressive line up of speakers, special guests and entertainment, it all adds up to a truly memorable evening. to submit a nomination or for more information, visit icaew.ae/awards nominations close on 1 november 2013

Platinum sponsor

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ICAEW Awards

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BIG LEAP

One year on, Chris Taylor recounts to Joyce Njeri how winning the ‘Chartered Accountant of the Year’ award catapulted him to the top position of CEO of Abu Dhabi Finance…

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T IS known as one of the UAE’s fastest growing financial ser vices company, providing individuals and businesses alike with the most relevant real estate financial solutions.

Almost five years since the high-stakes strategy upon which Abu Dhabi Finance (ADF) was formed, the vision has paid off.

AMBITIOUS PLANS: "About three years ago post the global financial crisis, ADF, like many other financial lenders, set out to transform itself. I and the team have gone to extraordinary lengths to make that transformation meaningful." Chris Taylor ADF Chief Executive.

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The man now responsible for heading the top mortgage provider to the next growth phase is Chris Taylor, who was promoted from Chief Operating Officer to Chief Executive Officer in July, an appointment that came less than a year after he was declared ‘Chartered Accountant of the Year’ during last year’s excellence awards ceremony hosted by the Institute of Chartered Accountants in England and Wales (ICAEW).


ICAEW Awards

“I now have the honour of leading the team at ADF as we bring our excellent levels of Client Service and flexible product range to Dubai, having spent five years establishing ourselves as the leading provider of conventional mortgages in the capital, Abu Dhabi.” But if you thought the new CEO sits pretty on his swivel leather seat while revelling in extravagances of CEO perks, think again.

“The only thing that has changed is my title,” he says, adding that “Although many CEOs perch themselves at the top of the pyramid and all the other members of the organisation take cues from them, I’ve chosen to take a hands-on approach as the company’s transformatio n progresses.”

“This is a deliberate and powerful way to demonstrate to the other employees how to fundamentally rethink and reshape the business to ensure they spend the right amount of time driving the necessary changes together,” Chris adds. The handsome young Briton speaks proudly of the transformation of the company he’s now leading.

“About three years ago post the global financial crisis, ADF, like many other financial lenders, set out to transform itself. I and the team have gone to extraordinary lengths to make that transformation meaningful. We have strived to build and write a powerful transformation story that has led to the expansion and creation of our Dubai office, strongly reinforcing our commitment to our existing as well as potential customers.”

Since its founding, the finance lending company has operated from its headquarters based in UAE’s capital Abu Dhabi, but in an interview with Accountant Middle East magazine, the CEO says that with the opening of the Dubai office, clients in the Emirate will also have a chance to benefit from ADF’s financial solutions, designed to suit their individual needs. Here are the excerpts from the interview;

Q. One year after winning the ICEAW ‘Chartered Accountant of the Year’ award, what has changed for you in terms of career? A. I am proud to say that shortly after receiving the award I was elevated to the position of CEO at Abu Dhabi Finance (ADF). It is safe to say that some of the achievements which helped me to win the ICAEW award, in particular the successful fund raising, influenced the decision however we have a well-developed succession planning process in place at the company and the move had been under consideration for a while.

I now have the honour of leading the team at ADF as we bring our excellent levels of Client Service and flexible product range to Dubai, having spent five years establishing ourselves as the leading provider of conventional mortgages in the capital, Abu Dhabi. Talk to us about your transition from COO to CEO. Handing over the reins – How did this happen?

We have a well-developed succession planning process and the handover was carefully planned and well executed over a period of three months. The main addition to my responsibilities relates to Sales and Business Development as I was handling most other areas as the COO. This has meant I have had to become more outward facing and spend more time meeting with potential business partners in the Real Estate and Finance sector.

I have really enjoyed this new aspect of the role which has been made possible by the fantastic team at ADF who have stepped up to the mark in ensuring everything in the office runs smoothly whilst I am out and about. It is only a few months since your elevation to the position of CEO. What is your vision, plan and strategy in leading ADF to its next growth phase?

The overall strategy is set by the Board of Directors as agreed with the shareholders. Our fundamental strategy of being the best mortgage provider in the UAE has not changed. We are currently implementing the second phase of that strategy which is launching our residential and commercial mortgage product range in Dubai. Having a great 27


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product or service that you are sure many people will need isn’t good enough. Rather, the answer is finding new clients and taking your services closer to them.

So far the launch has gone really well and we are seeing strong interest from clients who are attracted by our market-leading products and our reputation for transparency and Client Service which we have built up over five years serving the Abu Dhabi market.

During the real estate bust of 2008-2009, UAE mortgage lending institutions took severe beating. However, ADF has sailed the storm and for the last two years experienced tremendous growth. To what do you attribute that success? How did you and your team keep up? You are right. We have been growing at around 20% year-on-year during the crisis and we are very proud of our extremely low levels of delinquency and non-performing loans. We operate to a fundamentally sound set of lending criteria which aim to ensure that a client can truly afford the commitment they are taking on when applying for a mortgage. We do not lend based on property valuation alone but undertake a full budget review and credit assessment of every single client who applies for a mortgage with us. We choose the developers and properties we are prepared to offer mortgages on very carefully and independently value every property before we make our lending decision. Adhering to these fundamentals has and will continue to serve us well in the UAE. What’s the company worth now in terms of assets value, compared to when it was formed 5 years ago?

“Our fundamental strategy of being the best mortgage provider in the UAE has not changed. We are currently implementing the second phase of that strategy which is launching our residential and commercial mortgage product range in Dubai.”

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GROWTH CURVE: I am proud to say that shortly after receiving the ICAEW award, I was elevated to the position of CEO at Abu Dhabi Finance. I wouldn’t link the two events directly but I am sure the award helped!


ICAEW Awards

As we are a privately held company we do not provide this information publicly however I am happy to confirm that we are on course to meet the shareholders expectations for 2013 and our key performance indicators such as Return on Equity, Cost: Income ratio, and Return on Capital continue to improve year on year.

You have held a number of different positions at various finance institutions in the country. How have you been able to advance and adjust? What advice would you give to others seeking to have a similar career path? I have been privileged to have had a varied career path to date. I think my background in accounting and risk management set me in good stead for working at a senior level in various financial services sector organisation both inside and outside the UAE.

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It is important to consistently seek to develop yourself and those around you. For example earlier this year I was fortunate that ADF sponsored me to attend a 2-week INSEAD Strategic Management in Banking Course held in Paris. This allowed me to network with my peer group from similar organisations around the world keeping me up to date with best practice management in banking.

I believe that flexibility, the ability to thrive in a multi-cultural environment, and being able to appropriately apply global best practice through a local filter have helped me to adjust to the different roles I have had. By that I mean that you cannot blindly apply global regulations to the banking sector in the UAE. You have to take your time to understand the mindset and the culture in which you operate before implementing new ideas and concepts. Effective change management, both from a personal and business perspective, has been critical to my career development to date. I have also been lucky wherever I have worked to have the opportunity to work with a great set of people who I have learnt a lot from. The importance of spending executive time on developing a great team through setting a clear vision and embedding a core set of values cannot be underestimated. As I said in the interview when I won the award I have also been lucky to have had a number of mentors through my career and I am thankful for that. I realised early on that I do not have all the answers to every question and seeking guidance

Number of years the ICAEW Excellence Awards event has been running, since its launch in the region

and opinions from others is actually a sign of strength not a weakness. What do you like best about your job and what excites you about the future?

Accountant Middle East Editor Joyce Njeri joins Chris Taylor, shortly after he was declared ‘Chartered Accountant of the Year’ during last year’s ICAEW excellence awards event.

I love the team I work with and the passion they display in helping ADF continue to provide the best levels of service to clients across our product range. They truly are an inspiration to me.

I am excited by the vision which Mubadala our main shareholder has, and look forward to supporting the various initiatives in place to develop and diversify the Abu Dhabi economy. I am looking forward to further industry wide developments areas aimed at enhancing Consumer Financial Literacy and product transparency in the Financial Sector in the UAE.

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Movers & Shakers

NAVIGATING financial storms

ACCA Chairman Ahmad Darwish, who is also DP World’s money man, tells Joyce Njeri how to anchor a solid financial future…

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HMAD DARWISH is a finance virtuoso who handles his numerous roles with the ease of a genius.

As the Manager for Management Accounting, Treasury and Asset Management in the finance department at DP World UAE Region (Dubai Ports World), he juggles other responsibilities outside of his normal day-job with passion and pleasure.

The young Emirati is also UAE’s Chairman of the Association of Chartered Certified Accountants (ACCA) Member’s Advisory Committee, and was recently appointed as a member of Accounting Executive Advisory Board (AEAB) in the UAE University, the first and oldest of the government-sponsored institution of higher learning in the country.

Ahmad also serves as the Head of Chartered Accountants Committee in UAE’s Accountants and Auditors Association (AAA), a body tasked with the promotion and development of accounting profession in the country. 30

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Accountant Middle East caught up with the top accountant for this exclusive interview where he tackles all things accounting and triumphing in the tough world of finance. Q. Recently, staffing firm Manpower Group published its eighth annual Talent Shortage Survey, on the top 10 jobs that are the hardest for employers to fill, and for the third year in a row, ‘Accounting and Finance’ made the list. Why is there a ‘deficit of accountants’?

A. I think the reason for this is because the global economic meltdown that recently rocked the world of business placed new demand on accountants. The rule of business has far been changed and the reality now is that accountants working in business have been forced to handle a broad range of responsibilities beyond taxes, including financial planning, analysis, forecasting, internal controls and decision support. Their role has come full circle and they are now expected to be trusted advisors who can interpret the numbers to direct corporate strategy. In my


Movers IFRS & Shakers Special

AHMAD DARWISH: UAE’s Chairman of the Association of Chartered Certified Accountants (ACCA) Member’s Advisory Committee and Manager for Management Accounting, Treasury and Asset Management in the finance department at DP World, UAE Region.

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observation, these new tough responsibilities have contributed to many people either shying away or shunning the profession altogether.

Speaking of the global financial crisis, with economies around the world managing the after-effects of the downturn, there is no doubt that the role of accountants has broadened from being number crunchers confined in the back office. Can you share with us about these roles in today’s globalised world? The days of the so called ‘number crunchers’ in the back room are over. The role of professionals has radically evolved as accountants are taking a more prominent charge in driving the direction of the organisations for which they work.

The deployment of new regulations by the government is mainly to shield organisations in the event of another financial tsunami and protect businesses from fraud and risks associated with the daily operations of businesses. Therefore the accounting function should also adapt and evolve to better serve the needs of companies in a costefficient way in the future.

Businesses have become highly complex and the work of accountants or auditors can no longer be done in isolation. It requires an understanding of tax, IT and law – and the absence of these skills in a professional accountant will compromise the audit quality, for example. But alongside the technical skills, finance professionals also need to possess the ‘soft skills’, such as the ability to communicate with stakeholders is also becoming increasingly important.

The audit/assurance process continues to be extremely important especially following the recent financial downturn. The recent international corporate accounting scandals have raised the visibility of the profession. Take for instance the scenario where, to protect their lines of credit or other reasons they may have, accountants sometimes overstated their profits. This should not happen and therefore to safeguard the high standards, auditors need to come in and be able to make sure that statements are factual and reliable.

Whatever their specialties, professional accountants need to not only possess a gift with numbers and a penchant for detail but also be able to decipher the volumes of rules and regulations and communicate them to the business senior executives.

On the same note, with the UAE government reacting to the financial crisis by implementing massive regulatory overhaul, what are organisations doing to come into compliance with these regulations?

Accounting and finance in particular have evolved from their initial traditional functions and developed into a broad field encompassing a number of disciplines including book keeping, auditing, taxation, forensic accounting, and new accounting standards.

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Like I earlier said, professional accountants are continuously being assigned new roles by the unseen hands of business reality and challenges that are constantly changing. The aftermath of the global financial crisis has forced accounting department to reflect on its role, focus, contribution and size and how these should evolve in the future.

What should be the relationship between accounting department and other assurance providers such as internal audit and external auditors?

Similarly, businesses have become highly complex and balancing of the financial books can no longer be done in isolation. It requires ‘a second eye’ in order to keep its books tidy. As we look toward the last quarter of 2013 and beyond, we see this as the area with the biggest opportunity for the accounting function to add value to organisations. By leveraging their core competencies, developing trust-based relationships, and providing deeper insights, accounting functions can greatly help organisations deliver value. How is your department aligning its functions to deliver value?

At DP World we look for professionals who are not only knowledgeable in traditional accounting roles, but also well versed in IT systems controls,


Movers & Shakers

Accounting is an excellent career path for the intelligent and detail-oriented student and most of all, it offers a secure means of employment. Unfortunately, there’s still a relatively small number of Emirati graduates entering the accountancy employment market.

internal controls, systems development and the working of the technology behind ports and terminals. We hire professionals with skills beyond what’s required to get a basic accounting degree. Accounting and finance in particular have evolved from their initial traditional functions and developed into a broad field encompassing a number of disciplines including book keeping, auditing, taxation, forensic accounting, and new accounting standards, among others.

At the same time, DP World provides training to members of staff by helping them to develop their own business skills through a combination of leadership development, continuing education and mentoring programmes, which equips them with the right skills to become tomorrow’s leaders. There has been doubt concerning the use and implementation of the International Financial Reporting Standards (IFRS). A wave of changes has been urged on the part of the global standard-setters like the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) for the

need for improvement and more transparency in the industry. How, in your opinion, have accounting standards been impacted for the long term as a result of the financial crises? IFRS is a long-term project and now they are using the term convergence. Some countries have still not approved a go ahead to implement the IFRS by regulation. One of them is the US which is still using US GAAP. At the moment the progress is still at a snail’s pace as the US Securities and Exchange Commission (SEC) has only released two new staff papers which represent the completion of important phases of its work plan to supporting the announcement of a decision about the adoption of IFRS.

SETTING STANDARDS: The ACCA has long campaigned for global standards – like the IFRS - to be adopted since they provide a level playing field for businesses, potential investors, suppliers or customers who can compare organisations on a likefor-like basis.

Accounting is an excellent career path for the intelligent and detail-oriented student and most of all, it offers a secure means of employment. Unfortunately, there’s still a relatively small number of Emirati graduates entering the accountancy employment market.

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that we have is, majority of countries want to comply with IFRS but not wholly. They want to adopt some measures but cite others as cumbersome and inapplicable in their respective jurisdictions. Others want to comply but also want to add more to it. Therefore you have a situation of add and deducts. There is really no full compliance. When you have listed companies using one set of standards and private companies reporting on other standards, more often you find differences, horizons and disparities. ACCA has long campaigned for global standards to be adopted since they provide a level playing field for businesses, potential investors, suppliers or customers who can compare organisations on a like for like basis. It was also the first body to base its examinations on IFRS and we continue to play a leading role in the convergence debate around the world. What is most important to you as the Manager in charge of Accounting when it comes to building a successful best accounting practice at DP World?

We promote the highest possible standards of integrity, ethics and governance to achieve our strategic objectives and we ensure that we attract qualified finance professionals who share with us the same values. RIGHT WORKFORCE: At DP World we promote the highest possible standards of integrity, ethics and governance to achieve our strategic objectives and we ensure that we attract qualified finance professionals who share with us the same values.

The IASB and FASB have been working together to achieve convergence of IFRSs and US generally accepted accounting principles (GAAP) in order to come up with a common set of high quality global standards.

Well, my feeling is that they might approve compliance as the IFRS today keeps changing every now and then, and businesses are required to keep up with these amendments. It’s an ever changing landscape. The issue 34

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DP World’s portfolio consists of more than 65 terminals and new developments across 6 continents, so it is very complex from an accounting perspective. For instance, the emerging economies are just establishing their various institutions of accountancy while in most of the developed countries, the profession has been very well established.

The accounting function across our portfolio manages our financial books and applies standards seamlessly in cross-border markets as per IFRS. That seamless performance is necessary even to the other markets that the port operations are expanding to. You serve in a number of accounting boards, including ACCA and you were recently appointed as a member of Accounting Executive Advisory Board in the UAE University. Are you going to use your influence to encourage more Emirati students to pursue careers in accounting and finance?


Movers & Shakers

This is something I continue to pursue relentlessly. As the Chairman of the committee which advises ACCA’s International Assembly, its Council, Chief Executive and head of UAE, we have lined up initiatives where officials visit various colleges, universities and employers, to reach out to the Emirati youth. There’s relatively a small number of Emirati graduates entering the accountancy employment market and I hope to continue with the same drive in my new role as member of Accounting Executive Advisory Board in the UAE University. Accounting is an excellent career path for the intelligent and detailoriented student and most of all, it offers a secure means of employment.

All certifications available at the moment are foreign, and therefore there is an urgent need to have an accredited professional certificate that provides Arab accountants with the highest qualifications and one that is recognised globally.

I always encourage Emirati students to follow the advice of His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai in becoming qualified finance professionals and be able to compete in all sectors to promote the sustainable growth of the UAE. Talk to us about your various roles in accounting at DP World, ACCA and at ‘Triple A’. What do your responsibilities entail in ensuring effective governance environment?

At DP World, UAE Region, under the general direction of the Finance Director, I manage the financial activities and accounting functions, which involves overseeing all the management accounting, budgets, treasury work, developing and maintaining accounting principles, practices and procedures to ensure accurate and timely financial statements. Similarly, as a board member of AEAB in the UAE University, we provide guidance to the accounting department and assist in the review of courses to make sure they are relevant and appropriate in terms of content and skill development.

In my role as the Chairman of the UAE’s ACCA Advisory Committee, I’m tasked with the responsibility of representing members’ views to ACCA’s International Assembly and its Council to enable it to set and implement the body’s direction and strategy. I have been with ACCA since it was established in the country.

Most importantly, I have to add that ACCA’s governing Council is planning to hold a meeting in Dubai in 2014, which not only shows its commitment to its members in the UAE as well as the entire region, but will enable Council members to meet regulators, employers and business leaders across the region.

EXPANSIVE: DP World’s portfolio consists of more than 65 terminals and new developments across six continents.

I also head the Chartered Accountants Committee in the UAE’s Accountants and Auditors Association (Triple ‘A’), where we are planning to get the recognition of the global accounting bodies’ qualifications and map it into the UAE Educational Framework.

Plans are also underway to design an accounting qualification that suits the needs of the Arab society. As you are aware, all certifications available at the moment are foreign, and therefore there is an urgent need to have an accredited professional certificate that provides Arab accountants with the highest qualifications and one that is recognised globally. 35


Risk IFRS Special Management

ENTERPRISE RISK

MANAGEMENT

The recent global economic crisis and subsequent recession was devastating, but was it really a surprise to those in the financial sector? BDO Senior Manager Francisco Basdekis discusses about a ‘tool’ that guards against economic crisis… mainstream media put the blame squarely on poor risk management practices.

Board members and shareholders alike have expressed their outrage as companies have taken billion-dollar write-downs on transactions that were calculated as remote risks in financial models. Audit committees were questioning why audit risk assessments, conventional financial controls and corporate compliance activities did not reveal the extent of the potential collapse, particularly with so much emphasis given to Sarbanes-Oxley2 (SOX) financial controls and compliance efforts.

‘Risk Management’ is a broad term for the business discipline that protects the assets and profits of an organisation by reducing the potential for loss before it occurs, mitigating the impact of a loss if it occurs, and executing a swift recovery after a loss occurs.

R Francisco Basdekis Senior Manager – Advisory Services, BDO Qatar

E G U L ATO RY AG E N C I E S a n d industr y organisations began warning of liquidity issues in the financial markets in late 2006 and early 2007. In January 2005, Federal Reserve Governor (Edward Gramlich) warned about instability in the subprime mortgage market and possible corrections in the housing market, noting the subprime incidence of mortgage brokers. Likewise, certain reports indicated that real estate gains came to an abrupt halt in the first quarter of 2006. In late 2007, articles in the

36

October 2013

Pursuit of accountability In the pursuit of accountability, additional questions continue to be asked: ‘Where were the risk managers?’ ‘Why did the CFOs’ and Treasurers not highlight these risks?’ ‘Where were the internal and external auditors?’ ‘Why were executives and boards not exercising more oversight?’ ‘Did the rating agencies fail to adequately understand, assess and report on risks taken by these companies?’ ‘Where were the regulators?’ In short, who should have been protecting investors against these unintended consequences? Was there a risk management failure? While it is certainly easy—and perhaps even gratifying to some—simply to lay the blame for these failures on risk management, a closer look reveals that these issues did not arise from a failure of risk management as a business discipline. Rather, the Risk and Insurance Management Society contends that the financial crisis resulted from a system-wide failure to embrace


IFRS Risk Special Management

appropriate enterprise risk management behaviours—or attributes—within these distressed organisations. Additionally, there was an apparent failure to develop and reward internal risk management competencies. From the boardroom to the trading floor, individuals on the front line who were taking—and trading in— these risks ostensibly were rewarded for shortterm profit alone.

Risk-avoiding decisions Finally, there was a failure to use enterprise risk management to inform management’s decision making for both risk-taking and risk-avoiding decisions. Risk and Insurance Management Society believes that several key enterprise risk management behavioral attributes — if designed and implemented comprehensively and systemically — could have identified and mitigated, if not prevented, these losses for many of these entities. Further, there is no ‘manual of enterprise risk management’ to tear up. Risk management is a general term referring to the overall process of addressing risk, not any one particular method for mitigating risk. The term ‘enterprise risk management’ covers risk management in the broadest possible terms, encompassing all forms of risk management activity across the entire organisation. Today, a measure of stability has returned, but significant volatility remains, complicating our ability to effectively manage global risk and sustaining an uncomfortable level of uncertainty. Strategic thinking From sovereign debt to tsunamis, the universe of enterprise risk seems broader and more consequential than ever before, requiring new frameworks for strategic thinking. Those doing that thinking — ranging from C-suites, corporate boards, chief risk officers, and risk managers — have identified the need to take much broader, enterprise-wide views of complex risk interrelationships in order to effectively deal with new realities of risk. The terms ‘risk management,’ ‘enterprise risk management’ and ‘financial risk management’ are often used in ways that make it seem that the terms are interchangeable, when in fact they are not. To help distinguish between these similar-

From sovereign debt to tsunamis, the universe of enterprise risk seems broader and more consequential than ever before, requiring new frameworks for strategic thinking. sounding concepts, some descriptions have been provided below.

‘Risk Management’ is a broad term for the business discipline that protects the assets and profits of an organisation by reducing the potential for loss before it occurs, mitigating the impact of a loss if it occurs, and executing a swift recovery after a loss occurs.

It involves a series of steps that include risk identification, the measurement and evaluation of exposures, exposure reduction or elimination, risk reporting, and risk transfer and/or financing for losses that may occur. Effective risk management and board oversight should not be premised on risk avoidance. Use of hedging contracts Every corporation is exposed to and takes risks daily. What is important is to manage the balance of risk and reward and to identify and minimise the consequences of a negative occurrence to the extent possible. All organisations practice risk management in multiple forms, depending on the exposure being addressed. However, the term used to describe that process will vary based on the nature of the organisation’s operations. For example, both a financial institution and a nonfinancial institution will have risk management procedures that address the threat of damage to physical assets from hazards such as windstorm or fire. Both organisations will also have risk management processes that involve the use of hedging or derivative contracts designed to mitigate financial exposures such as interest rate or currency fluctuations. The financial institution will refer to the process of managing financial exposures as ‘risk management’ due to the relative significance of

37


Risk Management

Every corporation is exposed to and takes risks daily. What is important is to manage the balance of risk and reward and to identify and minimise the consequences of a negative occurrence to the extent possible. that process to that organisation. In contrast, a non-financial institution will often describe this financial exposure mitigation process as ‘financial risk management’ and use the term ‘risk management’ to describe the use of insurance or similar risk transfer techniques related to the protection of physical assets. The key point is not the difference in the use of the term ‘risk management’.

Enterprise Risk Management represents a revolutionary change in an organisation’s approach to risk. It broadens the scope of risk management behaviours to include every significant business risk of the organisation, comprehensively and systemically.

Of more importance is the fact that both these definitions indicate a significant limitation of the overall scope of the risk management process in those organisations—a limitation that is removed through the adoption of the ERM process. Consolidated risk profile Enterprise Risk Management (ERM) represents a revolutionary change in an organisation’s

approach to risk. ERM broadens the scope of risk management behaviours to include every significant business risk of the organisation, comprehensively and systemically. It requires that all of these risks be considered in relation to each other to create a consolidated risk profile.

It expands the scope of risk management practices beyond the physical and financial exposures discussed above to include issues such as long-term strategy, competitor response, human capital, and operational exposures, to name a few. In addition, ERM can potentially identify situations in which risk can be a competitive advantage instead of only a threat.

The past three years have seen more companies recognising the importance of enterprise-wide risk management and, often for the first time, adopting practices to implement it. ERM has become a more important strategic consideration as well, enabling better-informed and more confident decision making in such areas as acquisitions, geographic expansion, and new product development and launch. Big picture approach More companies, too, are moving to a higher level of maturity in their risk management processes, focusing more on proactively managing risk rather than reactively mitigating it. Enterprise Risk Management can, and does, help companies perform better and avoid surprises.

ERM encompasses all aspects of an organisation in managing risks and seizing opportunities related to the achievement of the organisation’s objectives ... not only for protection against losses, but for reducing uncertainties, thus enabling better performance against the organisation’s objectives. ERM promotes a ‘big picture’ approach to risk management. It recognises that various events may converge to increase a firm’s risk exposure and resulting losses. An effective risk management structure accounts for potential risks in all aspects of a firm’s operation and analyses the firm’s overall risk appetite and response strategy.

The 2008 economic crisis is the poster child for improving risk management practices and, hopefully, will motivate boards, stakeholders, and policymakers to promote meaningful ERM programs. 38

October 2013


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Risk Management

THE UPSIDE OF DOWNSIDE Arif Ahmed highlights on a concept that refines an investment’s return by measuring how much risk is involved in producing the yield…

D

O WE consider two climbers on top of Mount Everest equally competent when one has done that without oxygen cylinder?

Naturally not - the one without any oxygen support is considered to be a courageous climber provided he makes it to the top. Similarly we do not consider a developing economy and a developed economy with identical growth rate of Gross Domestic Product (GDP) as equally competent.

This is only fair as the economy which is fraught with economic problems needs a greater effort to achieve a rate of growth identical with a developed economy. Oblivious of risk I have often wondered that how come we drop our fine sense of evaluating the background while comparing financial performance measures of two corporates. We tend to consider them equal, if the financial measures are similar, irrespective of the different obstacles Arif Ahmed is professor and director with South Asian Management Technologies Foundation which is a NASBA accredited CPE sponsor. He hosts training sessions and provide strategic consulting in his areas of expertise. You can check www.south-asian. org to join his workshops on various topics including on the instant subject. Check the “anytime classroom” section of the website for a quiz on this article. You can contact him at a_ahmed@vsnl.com. 40 October 2013

they might have faced. We seem to be totally oblivious of the risk issues that are hidden behind the performance measures.

It will not be fair to blame the finance professionals for the indiscretion as the faculty of accounting and finance still walks parallel with the faculty of risk management with occasional points of convergence driven by requirement of statutory of regulatory norms like IFRS 7. Is convergence of this two faculties difficult or would it involve a major change over in the way they function? The answer, fortunately, is in the negative.

The way current risk management faculty is dominated by mathematical models that apprehension of finance professionals to sue


Risk Management

achievement but also to indicate whether the past is an accurate description of future. This boils down to analysis of uncertainties that can impede the path of maintaining or even improving the corporate performance. It also requires evaluation of the reward that a stakeholder would look to accept those uncertainties.

The complex world of risk management has finally sneaked into the world finance and accounting. Undeniably in the corporate world the finance industry were the pioneers of embracing the risk management techniques though more out of regulatory compulsion that as a matter of better housekeeping.

Be that as it may, this lead to development and design of various tools and techniques without which presently the financial industry cannot conceive of operating. It must also be noted that use of most of these techniques are restricted within the decision making process and does not influence the way finance and accounting function reports the performances.

them is only expected. The reason perhaps lies in the genesis of the faculty of risk management which moved along the need to analyse economic uncertainties rather than corporate uncertainties. Thus the tools that were developed drew heavily from the subject of economics and statistics while finance remained honest to its requirement of reporting the past.

Interest of stakeholders The expansion of corporate world promoted on one hand by greater global opportunity of growth and restricted on the other hand by ever increasing need to protect the interest of the stakeholders, resulted into a complex operational process involving the act of balancing between growth and stability. The accounting and finance function became responsible not only for reporting the

However it is about time that we take notice of this weakness of the current reporting content and structure before another financial debacle prompted by lack of predictive quality of the accounting figures forces the regulators to bring in tough norms. Let us take a few strides into this interesting world where finance and risk management converges and allow me to assure you that it is a non-intimidating world though I cannot promise if you will remain the same person at the end of the walk. Claim of liability holders Let us commence our journey by asking why at all we are taking this walk.

All businesses face uncertainties of various kinds and we can classify them in two types - those which erode the value of an asset (or increases the value of a liability) and those which prevents improving upon or maintaining the current level of performance. We can name these capital risk and performance risk respectively. Capital risk essentially signifies the risk of an organisation going insolvent as a result of their asset value declining or liability value increasing. This will happen as 41


Risk Management

soon as the losses are greater than the capital base and the deficit will have to be met from the claim of other liability holders.

Performance risk will focus on whether the entity is likely to maintain the current level of performance, if not improve upon the same.

Let us give an example of one of the most common tools used in corporate finance breakeven point analysis. Conceptually this is the quantity required to be sold or the sales revenue required to be achieved to cover all costs. In other words the sales required to arrive at ‘no profit - no loss’ scenario. The computation process, as we all know is pretty straight forward - divide the fixed cost by difference of unit sales price and unit variable cost – that is, contribution, and we get the break even quantity. This multiplied by the unit sales price gives us the break even sales volume. An extremely handy tool and I doubt whether there are any finance professionals who has never used this tool.

The breakeven analysis I am also sure that there are many finance professionals who after computing the breakeven point wondered whether the volume is achievable. This is where the risk adjusted performance measure comes into play. It is quite simple to extend the breakeven analysis to find out the probability of achieving the breakeven volume. Let me reassure that you will not need an expert knowledge of statistics to compute this. Let me give you an example.

Consider the following data for a new product - selling price $10, variable cost/unit $6, and fixed cost/year $2,000,000. The breakeven point is the point at which total cost equals total revenue, and can be computed as Total fixed costs / (Unit Price - Unit Variable cost). Thus the breakeven point in this case is 500,000 units.

Now we bring in the risk factors - say the expected average sale is 600,000 and it can be stated that there is 67% probability that the expected sale will remain within a range of 300,000 to 900,000 units. Rest is simple 42

October 2013

It is important for a corporate to assess potential adverse impact of risk factors on its balance sheet and ensure adequacy of capital to face these risks as well as to price the products and services to support the capital base.

from this data we can arrive at the standard deviation - which will be 309,278 units. Now we have enough data to assess the probability of achieving the breakeven volume, which is computed to be 62.6%.

Monte Carlo simulation If you are interested in the computational process please read the computation annexure at the end of the article, otherwise do not bother as the entire iteration can be integrated with your financial information systems. We can similarly find out the probability of the profit being at least 400,000 and others. The probability of achieving breakeven point will allow the finance professional understand the risks associated with this projection. One of the most common questions that I get after citing this example is how to assess the average value of sales if we do not have enough historical data. Well even if we have limited data we can use them and generate a large number of representative data through Monte Carlo simulation.

Before you start accusing me of being more complex, let me assure you that you can even do it in a spreadsheet like Excel.

Let me now extend this framework to pricing of a product.

Consider that there are two projects each reaching breakeven point at 15000 units. The only difference is that in case of one project the probability of achieving the same is 67%


Risk Management

and in case of the other it is 53%. If we have to choose between one of them surely we will select the one with greater probability. If we can go ahead with both like in cases of two product lines, we should examine the possibility of charging higher price for the product line that is riskier. This will reduce the breakeven point which will improve its probability of achievement.

That is the point - in addition to having a project selection a benchmark of breakeven point as a percentage of capacity, we can also specify a minimum probability of achieving the breakeven point as another project hurdle rate.

The economic capital The concept for pricing for risk will lead us to the need to define the economic capital requirement for each project. Economic capital may be loosely defined as the capital requirement adjusted for the risk of the project. This economic capital will include the fund requirement for investment plus a safety margin for probable losses.

Capital Risk signifies the risk of an organisation going insolvent as a result of their asset value declining or liability value increasing. This will happen as soon as the losses are greater than the capital base. Computational Annexure Broadly three standard deviations on both side of the mean cover the entire probability distribution. The range of 300,000 and 900,000 is two standard deviations on either side of the mean covering 67% of the probability distribution. Thus the area to the left of 900,000 represents 5/6th of the total area or 0.8333.

Once we arrive at the economic capital requirement of a project, pricing for risk becomes rather easy to implement. All we need to do is to include an expected rate of return on the economic capital. This assumes further importance with introduction of IFRS 13 where the fair valuation of assets and liabilities will have direct impact on the equity base of a corporate.

There are various risk factors that would have an impact on balance sheet of a corporate. Most common are credit risk, liquidity risk, operational risk, and market risk though country risk, settlement risk, reputation risk, residual risk, and others often play a critical role. It is important for a corporate to assess potential adverse impact of these risk factors on equity base and ensure adequacy of capital to face these risks as well as to price the products and services to support the capital base. Till such time we recognise the risk profile we may actually be paying out dividend from the minimum level of capital we need to maintain. I presume that all of you will agree that this is like drinking from a bottle without reading that the label that says ‘poison.’ It will have an adverse impact, sooner than later.

In the standard normal distribution table, the value z for which P (Z ≤ z) = 0.8333 is about 0.97. Thus the Z score, using the unknown standard deviation, of 900,000 units is 0.97. Z= (900000-600000)/SD = 0.97

Solving for the same we arrive at the standard deviation (SD) at 309278. The Z score of the breakeven point of 500,000 is -0.323. The probability of breaking even, if Q is the sales volume, is P (Q > 500,000) = P (Q > -0.323) = P (Q ≤ 0.323) = 0.626 All these can be computed using a standard spreadsheet like Excel.

43


Risk IFRS Special Management

PITFALLS IN

PROCESSES

In this exclusive interview, Ali Raza, BDO Senior Partner tells Joyce Njeri the fundamental mistakes organisations make when implementing Enterprise Risk Management systems…

S

YSTEMS IMPLEMENTATION continues to be a real challenge and source of concern for many organisations.

We’ve been seeing this since the 90’s especially when organisations started implementing Enterprise Risk Management (ERM) systems. Over the last two decades we continue to see the same issues coming up over and over again. In an exclusive interview with Accountant Middle East, Ali Raza, BDO's Senior Partner, Technology Risk Advisory Services, is of the view that “poor quality of implementation resources, lack of business understanding, inadequate data cleansing before migration, rushed user acceptance testing and deferring resolution of critical issues till after ‘go-live’ are just a few recurring themes.” Here are the excerpts from the interview. Q. What are the challenges you are seeing with systems implementations and how can some pitfalls be avoided?

44

October 2013

A. In my view from what I have seen in a number of countries including the West, we make some fundamental mistakes that make the ERP journey very painful. The list can actually be very long, but some key and most common ones I have experienced are: 1. Quality of the implementation consultants,

which is combination of product understanding, business understanding, technical experience, soft skills and work ethic;

2. System set up (process design) is done in

isolation without a true understanding of business and its nuances;

3. Poor project management which is devoid

of risk management altogether;

4. Weak and ineffective steering committees; 5. Implementation contracts too focused

on “completion” of milestones and not enough on quality related attributes of the milestone; and


IFRS Risk Special Management

Ali A. Raza, BDO Senior Partner, Technology Risk Advisory Services.

45


Risk Management

6. User Acceptance Testing (UAT) is a box ticking

exercise.

A few years ago I was at a steering committee meeting in my capacity as an external Quality Assurance Leader. This was at a very large organisation which has been in operation for decades and therefore very traditional and paper intensive. The implementation partner presented the business blueprints and results from a recent business survey as both were formal project deliverables, requiring sign off from the steering committee. The steering committee was about to give their blessings, when I asked: “What have we learned from the survey, and how has it contributed to the future business design and the required change management? Given that the survey was concluded after the design was completed, is there not a risk that the design has not incorporated important organisational feedback?”

It became clear that the survey was completely an isolated exercise completed for the sake of fulfilling a milestone obligation. No ‘real’ understanding of change management risks and requirements really came out of the initiative as nothing was done with the results.

The Business Blueprint is of utmost importance. Despite its criticality, I continue to see very poor quality blueprints. Almost always, I note that it lacks detailed business process design, process controls, authorisations and access design including segregation of duties. I also typically note weak involvement of Internal Audit in reviewing these key deliverables and the project as a whole so that critical course corrections can be made during the implementation. As a result, these organisations are never really able to optimise business processes and controls resulting in unnecessary overheads from manual processes and controls that build up over time around the system. Furthermore, they end up with an environment with all kinds of security exposures exposing the organisation to loss of data integrity, information theft and fraud. If ERP implementations have been going on since the 90s, surely implementers have learnt valuable lessons during the course of their implementations - why then do we see the same issues come up over and over again?

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October 2013

Having been on both sides of the fence, or actually having sat on all sides of the table – client, implementer, independent QA and internal audit; in my experience, good resources move to good companies and they are kept busy on profitable work. At the end of the day, the implementer is running a business which has to be profitable, just like the client’s organisation.

I have sat in contract negotiations with clients that squeeze implementers to the point where they barely have any margin, hence incentive left. Some walk away, and some take the plunge and immediately start finding ways to avoid financial loss through cutting corners. So, the issues start from the day the contract is signed. This is a situation that gets worse over time, and the project starts its downward spiral.

CUSTOMER FIRST: At BDO, we are passionate about helping businesses succeed and help them make the best possible use of technology while proactively managing technology risks.


Risk Management

I think it’s good that IT takes stewardship, but key decisions related to, for example: work practices and procedures, governance, risk management, require deeper involvement of the operations/business people. On the clients’ side, there is a perception that they made the best deal for a successful implementation, and on the implementers side the Sales people celebrate their win and handover the problem to the implementation team. At the end of the day, the painstakingly engineered situation in all earnestness is risk to the achievement of the organisation’s strategic goals.

To me, negotiation is a conversation that should be around creating value for each other given the constraints. This I believe is the only way to achieve a win/win, and the only way to go into a deal with true ‘partnership’ spirit. Too often it is a conversation about reduction in price. In contracts, it would be nice to see a few simple but focused metrics to evaluate performance and a fair ‘carrot and stick’ arrangement for both parties. This may sound academic and may require overhead to administer, but this could change the whole approach, attitude and commitment to the project from both sides. It could actually be a shot of adrenalin to the project provided they are: clear, measurable without overhead, fair and tracked regularly (reported as part of project progress reporting). Some basic metrics, for example could be: Minimum acceptable involvement of senior people with the relevant experience (resources that won the proposal for the implementer, for instance: percentage of time, full time involvement in certain tasks, on site presence etc). Deliverables/design/document review time by the organisation

User Acceptance Test – first wave of test results (number of passes and fails)

Do you think that key IT initiatives and investments have the right level of leadership

and guidance behind them? What are you seeing in the Industry, whether it’s a systems implementation or any other strategic initiative? In my experience, I do see ‘C’ level involvement and commitment towards such strategic IT initiatives. However, having said that, I see ‘Business’ projects being run as ‘IT’ projects, with more of IT leadership making business decisions and not enough involvement of decision making from the other function leaders of the business. I think it’s good that IT takes stewardship, but key decisions related to, for example: work practices and procedures, information (like, integrity, protection etc), governance, risk management (segregation of duties, accesses etc) require deeper involvement of the operations/business people.

Governance is an interesting area, especially now with Cobit 5 where accountability and responsibility for ‘non IT’ personnel is clearly shown. In my view, information governances which encompasses IT governance is an integral part of corporate governance, which is the Board’s responsibility. Therefore, Boards must have members that have a deep understanding of the governance requirements to protect one of the organisation’s most valuable assets – IT. I believe the industry will start seeing much better information governance standards once it is well understood and pushed down from the Board. A small example which illustrates the point of board involvement and also business decisions in IT led projects is around Information protection/ security. There has been a lot of attention on net work securit y, access management, vulnerability assessment etc. Added to this, we are now seeing a lot of risks as a result of cyber security threats.

Numerous organisations are taking measures to assess their IT weaknesses and are taking steps to make their networks more secure. However, from the vast number of companies I have worked with in Abu Dhabi and Dubai, very few have actually addressed the most basic aspect of information protection. That is, knowing what level of protection is required for which information (physical and electronic). Data classification which is fundamental to information governance is missing in a vast majority of organisations I have worked with. 47


Risk Management

Data classification cannot be done by IT alone. It is the various functions of the business that have to identify and determine the classification, which IT should embed in networks, servers, storage and applications. Boards must provide the necessary leadership to enable this and ensure that their organisations are aware of what to protect and are providing that protection accordingly. Does that mean that these organisations are vulnerable to attacks related to information theft and cyber-crimes, and are not protected?

I think that’s a very general statement which I don’t fully agree with; however, my point is more to do with ‘protection’ rather than ’fault’. The focus here is an appropriate tailored protection (sustainable, scalable, robust and efficient) against risks, rather than what is wrong. You can spend a lot of money in procuring a highly secure infrastructure, or you can optimise your spend and increase robustness by focusing on what really needs to be secured, the degree to which it needs to be secured and how it’s secured. It’s also important to recognise that whichever path you choose, the effectiveness will boil down to employee behaviour and their orientation to risk, protection, resilience and recovery. Hence my point about ‘putting the cart before the horse’. I am seeing a lot of attention on tools and gizmos, rather than getting the fundamentals right first. In my view, bringing in tools and using the implementation as a catalyst, tends to create more of a problem than a solution. While this may vary from organisation to organisation, I would lean more towards getting the basics right first - risk based focus, policies, people, processes and procedures; and then bring in the tool to automate.

On the subject of cyber securit y, critical infrastructure such as SCADA (supervisory control and data acquisition) and Industrial Automation systems in my view need equal, if not more attention than corporate IT systems. The newer SCADA systems can now talk to other IT systems and be hosted on TCP/IP networks, resulting in a significant shift of their risk profile. Traditionally, SCADA and Industrial PLCs, networks, hand held terminals etc have been managed by Plant Operations and not IT. However, with the convergence and consequent change in risk profile, it is now imperative that risks and vulnerabilities of such critical assets are assessed 48

October 2013

KEY FOCUS: IT is an integral part of corporate governance, but strategic decisions related to, for instance, work practices and procedures and risk management, require deeper involvement of the Company’s Board.

and managed proactively. The technolog y available now allows operations process control from a tablet or smart-phone. The focus on SCADA systems and networks now is perhaps more critical than corporate IT systems. What kind of clients is BDO working with in the area of IT Risk Advisory?

We love working with businesses that have a clear vision of how they build their competitive advantage, and are either exploring ways in which Technology enable this, or constantly ‘tweaking’ Technology for more value and better enablement. We are passionate about helping these visionary businesses succeed and help them make the best possible use of technology while proactively managing technology risks. Therefore our focus is more on how to do things better and manage risk better, rather than pointing out what is wrong.

We have a very large number of Mid-Market clients and a rapidly increasing number of large organisations in the UAE. We are not afraid to show businesses a better way of achieving their objective through better use of technology. Above all, if we don’t believe that our client will benefit by more than the fees they pay us; then we will not start the project. BDO is only interested in making a real difference.


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Different Dimensions

TELLING THE

CORPORATE STORY

Syed Iftikhar Ali has worked in various finance roles in the UAE for over three decades. He reveals the changes that his career journey has had on his professional outlook, and how he is using his expertise to change the company he runs…

“ Shane Phillips Managing Director, Shane Phillips Consultants

BROTHERS NEVER part!” retorted Latif Galadari… as Syed Iftikhar Ali handed in his resignation.

This was the type of camaraderie that was shared in the Dubai of yesteryear. The eighties was a time when there was only one free-to-air English broadcast TV channel which was on air 12 hours a day. When the city did not house the world’s tallest tower, largest mall, or the first 7-Star hotel.

Nevertheless, since 1833 when Sheikh Maktoum bin Butti Al Maktoum persuaded over 800 members of his tribe of the Bani Yas to follow him from what was then part of Saudi Arabia, across the desert to the Dubai creek, it has been a benchmark of leadership.

Chapter in history books The ethos of the Emirate could best be described by its leadership strength and business acumen. A global benchmark of entrepreneurialism at its acme. When Iftikhar Ali made the decision to forget about medical school and become an accountant he had no idea that he would be walking hand-in-hand with the men who would be writing a chapter in the history books of humanity. Is it destiny or luck? A question pondered for centuries and to the faith driven, it was destiny and to the empiricist… it was luck. To Iftikhar Ali it was just a job.

“You know back then, we did not have all these fancy computers and real time systems. I often worked 17 hours a day, pencil in hand assisted only by a calculator. You could say it was tough work, but there was something romantic about working the numbers by hand, about having your fingers on the cash flows on a daily basis,” says Iftikhar, who is CEO of Pinnacles Strategic Consultancy and formerly the Group Finance Director for one of the most prestigious family offices in the Gulf. 50 October 2013


Different Dimensions

ROAD TO SUCCESS: After almost 17 years of service to his employer, Iftikhar decided it was time to run his own business and started Pinnacles Strategic Consultancy, which offers services such as capital structuring advisory, business set-up services, strategy, decision analysis and overall financial advisory.

51


Different Dimensions

The job of the Chief Financial Officer by many measures is one of the toughest corner office positions. The weight of accountability for the company’s most valuable item, its cash flow; guardian of the company’s most coveted secrets; champion of the businesses’ finances. The CFO carries the mass of the company with very little limelight or recognition. For over three decades this was Iftikhar’s stock-in-trade.

“I was not exactly sure what I wanted to do with my life but I knew I wanted to be in a position to make a difference and have measurable results and my uncle advised me that the accountancy profession would afford me such a privilege. So off I went to become a member of the Institute of Chartered Accountants of Pakistan, which at the time seemed like torture,” he narrates. “To pass the exams you need to study at least 4 hours a day and this is generally done while you are working, so really you have to sacrifice your personal life. I guess as they say… without sacrifice there can be no progress. I have to say the vocation has been kind to me and I have had the opportunity to work with the most brilliant professionals. I do feel blessed,” he adds. The lure of Dubai After becoming a Chartered Accountant, Iftikhar joined the Oil and Gas industry in a BP subsidiary in Pakistan called Sui Gas in the finance department. Here, he honed his skills and worked for three years. Then out of the blue he was invited to Dubai for a job interview.

The year was 1976 and even back then, Dubai had a certain allure to it as a land of opportunity. A region known as a haven for traders and businessmen liberally peppered with bravado and entrepreneurial spirit. One of Iftikhar’s friends had been hired by the Galadari family and when another post came up he referred Iftikhar for the position.

‘Dubai’, the word alone, was expressed with an extra ounce of verve and brio as Iftikhar told friends and family he was going on an exploratory trip regarding a job opportunity and was planning on being back in a couple of days; the thing is, he never came back. Like so many expatriates who leave their country of origin to enjoy a short overseas work experience, only to watch the decades pass as they become rooted in the Middle East’s business hub. They 52

October 2013

often foster a love for the country rivalled by only the most patriotic locals themselves.

“After being here for 30 years I can say one of my observations is the deep love of their country and their leaders the people of the UAE have,” says Iftikhar.

“I was excited to go to Dubai but did not think I was going to get the job the way I did. They flew me to Dubai and I met with the Galadari’s. Abdul Latif E. Galadari was there with his elder brother Abdul Rahim E. Galadari and in 1976, they had their office by the creek. Hughes of orange and yellow spilled across the sky as the sun set, it was around 6:30pm when I walked into the Galadari head office for the first time.” “I was met with the usual warm Arabic hospitality and offered a hot cup of ‘Ghava’, Arabic coffee. A welcomed gesture after my travels. Latif was very warm and personable. He got up and shook my hand. He was not in a candura but was wearing white pants and a white button down short sleeve shirt, a dress best suited for the hot dessert environment. The first meeting was short but it was the beginning of a long professional relationship and friendship.” “You really couldn’t grasp how big the business was from automobiles to newspapers, heavy equipment to machinery, ice cream to engineering; it was a real powerhouse of a group. When you spoke to Latif and his brothers, their business acumen was immediately apparent; often complimented by a splash of genius. He was a remarkable judge of character. He would spend some time with a person and then immediately make his mind up. In my case he hired me on the spot. I had to send my resignation back to India through a friend and I haven’t gone back ever since!”

Managing family business The Galadari’s were one of the original business families of Dubai and have been a pillar of the business

“A family office brings one face-to-face with gifted men of intellect, vision and foresight. There are competing pressures on time challenging projects where the mind gets creative to think out of box.”


Different Dimensions

“Leaving a company in Dubai was like leaving your family. We were very close and there were many nights in which the Galadaris generously afforded me their hospitality until late in the evening,” says Iftikhar.

As the business day would begin to wind down to a close, Latif would say to Iftikhar; “what are you doing tonight? My wife is cooking a delicious meal for you, you must come over to my house.”

“He was a very kind man with a big heart. Unfortunately the time had come for me to leave the business. It was really a decision which made my heart sink and when I handed in my resignation, Latif said; “what are you doing, brothers never part!” I can still hear those words today, but I had to leave and spread my wings as I was still young and wanted to get new experiences.”

CAREER JOURNEY: “The Chartered Accountancy has been a passport into the corner office, it has afforded me the chance to work with amazing people, an opportunity I believe I would not have gotten if I was not professionally qualified.”

revolution that has taken place in the Emirates. They first opened in the early 1960s and have had a rocket fuelled ascent to the top of Arab business world. Latif and his elder brother Abdul Rahim were the visionaries who catapulted the family business into new dimensions at break neck speeds. From real estate to hospitality, the Galadari’s were even one of the anchor investors of Dubai Bank in the 1970s.

Iftikhar Ali represents the last bastion of the old guard; cadre of men who literally broke new ground initiating core businesses and bringing vital services to the UAE. “Working with the Galadaris was an experience, they were true business visionaries. They set up and started the ‘Khaleej Times’, the first ever English daily newspaper and have done so many firsts. Sometimes I would get a call at 3am and Latif would say ‘I hope you weren’t sleeping I just had this new idea’ and I would say of course I wasn’t sleeping as I was always eager to hear his vision and ideas. He would instantly have a vision, a road map and a plan in his mind and the banks would be lining up to finance his projects,” says Iftikhar.

Sense of business direction Iftikhar ended up joining Abu Dhabi National Oil Company (ADNOC) and for many years he enjoyed an international career with the Oil & Gas giant; a tour of duty that even included an overseas stint in Italy. It was not too long before another of the Emirate’s business moguls would lure him back to the City of Gold, Dubai. This time it was indefatigable Abdulaziz Al Ghurair, the man behind Mashreq Bank and the Al Ghurair family fortune.

“Al Ghurair was one of the sharpest business leaders I have ever met. Ghurair seniors drove the bank to profit every year for over 20 years by the time I joined. The bank was opened in 1967 and used to be called The Bank of Oman. I asked him why he called it such and he said; ‘back then there was no UAE, we just had the Trucial States and Oman was much more established at the time, so we chose Bank of Oman’,” says Iftikhar. “Abdulaziz was a much focused businessman. He would not waste time talking about the weather; he would get straight to the point. He was very switched on and possessed a deep sense of direction. As head of finance and treasury for the bank I reported directly to him and he was always extremely pleasant and friendly. Even back in the late eighties and early nineties Mashreq Bank had 27 branches and offices in America, UK, Sudan, Egypt, India, Pakistan, and Sri Lanka; it was one of the big success stories of Dubai. The name was changed from Bank of Oman to Mashreq in 1993; a name which means both sunrise and sunset in Arabic. 53


Different Dimensions

Thinking out of the box Today Mashreq has 54 branches and is strategically distributed across 12 overseas offices in nine countries. They are the largest private bank in the UAE with one in two households in the UAE banking with them. “I became enamoured with Islamic Banking at that time and was slowly lured by the Dar-Ul-Mal which is the investment arm of the Islamic Investment Co Bahrain. Ethical banking romanticised me and I had to experience it first-hand so I left Mashreq and moved to Bahrain.”

BLAZING THE TRAIL: Syed Iftikhar Ali represents the last bastion of the old guard; cadre of men who literally broke new ground initiating core businesses and bringing vital services to the UAE.

Iftikhar would not leave the Emirate for long as in 1996 he was offered a position with one of the most iconic family groups in the UAE. A place where he worked from 1996 till 2012 before starting his own company Pinnacles Strategic Consultancy. “A family office brings one face-to-face with gifted men of intellect, vision and foresight. There are competing pressures on time challenging projects where decisions have to be taken, the mind gets creative to think out of box and offer competing views rather than echo thinking of the market’s pedestrian

masses. The questions are complex with no precedent to take a baseline from and the ability to prioritise work, while juggling the myriad of challenges that one faces, while all the time keeping one eye on the horizon is paramount for success in this environment.” As the Group Finance Director, Iftikhar had to manage the organisation’s liquidity, offer deep insight into the toughest investment decisions and has had the opportunity to spearhead numerous Green Field operations.

“To be successful, your operations have to be water tight but business development is the key driver for rapid growth, and if you want to lead you have to have high growth. So as my career shifted, I became more and more involved in where the company was heading and how I could help facilitate a high growth environment,” he says. Diversification is critical After almost 17 years of service to his employer, Iftikhar decided it was time to run his own business and started Pinnacles Strategic Consultancy, which offers services such as capital structuring advisory, business set up services, strategy, decision analysis and overall financial advisory. When I asked Iftikhar if he has any advice to offer after his years of business experience he said; “When managing the finance function for a diverse large conglomerate, the most important role for anybody is business development. You can only grow from strength to strength if you keep a push on growing the top line, diversification is critical.”

“Opportunistic moments need to be seized or another family group will seize them. So you need to be agile, streamlined and capable of acting quickly. Finally, you have to be on top of IT advancements, these will increase your operational efficiency. These are some of the critical elements I think you need to be on top of… all the time.”

“On the other hand, my advice for the individual would be this; make sure you become qualified and invest in your education.”

“For me the Chartered Accountancy has been a passport into the corner office, it has afforded me the chance to work with amazing people, an opportunity which I believe I would not have gotten if I was not professionally qualified; and finally you have to work hard as there is no substitute for hard work.” 54

October 2013


Social and buSineSS networking for accountancy profeSSionalS

AA+ is a social networking group for auditors, accountants and other financial professionals to have fun networking with their peers across all professional association, nationalities and ages.

WEDNESDAY OCTOBER 30TH 7 PM TO 9 PM

These are chilled out affairs held in a relaxed environment winding up the hectic month with cheer. There will loads of prizes and surprise give-aways, tasty treats and some good times!!! Leave the CV's and sales pitches at home, be our guests, wind down for the weekend and have an enjoyable evening. These events are free to attend but are strictly for accountancy, audit and other industry professionals

DUBAI INTERNATIONAL FINANCIAL CENTRE EVENT SPONSORS

Look forward to seeing you soon The Accountant ME team

RegisteR now

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Taking IFRS Special Stock

DELOITTE RECORDS

DOUBLE-DIGIT GROWTH Network says priority markets contributed nearly onefifth of revenue; Nearly 30 strategic acquisitions were made in the fiscal year ending 31 May 2013…

I

NCREASED DEMAND for a broad range of client services saw Deloitte grow for the fourth consecutive year, with Deloitte member firm network revenues of $32.4 billion for the fiscal year ending 31 May 2013.

$170m

Deloitte’s investment for improving local communities in fiscal year ending 31 May 2013

56

October 2013

The network experienced healthy growth across all businesses and regions – in local currency – due to strong demand for Deloitte’s capabilities and services, as clients manage complexity and uncertainty while investing in growth. The strengthening of the US dollar towards the end of Deloitte’s fiscal year meant the network’s 3.5 per cent growth was higher in local currency at 5.6 per cent. “Our continued growth globally and in the Middle East is a true testament to Deloitte's clientcentric approach. Deloitte has made strategic investments in important markets, the right businesses and talented people. As a result, Deloitte is helping many more clients navigate the changing business environment.” said Omar Fahoum, chairman and chief executive, Deloitte Middle East.

“Despite major economic fluctuations in some regions, clients are seeking the full range of Deloitte’s services and advice as they invest in innovation and other catalysts of growth. Deloitte is making large investments in talent to provide clients with quality services as they navigate a challenging environment. In FY14, we will build on these distinctive strengths to help clients continue to succeed,” he added.

Promoting reforms According to Fahoum, “Deloitte has a relentless focus on quality — in our solutions, advice and people—to ensure the highest standards are maintained.” “Nowhere is quality more important than the independent audit – key to protecting the investing public and capital markets, and Deloitte takes pride in the important role we play. As such, we are focused in two important arenas: engaging with regulators and other stakeholders worldwide to promote reforms that improve quality for all parties; and, innovating a wide range of measures and programmes to maintain and build our professional excellence.”


IFRS Taking Special Stock

The Deloitte network says it experienced healthy growth across all businesses and regions – in local currency – due to strong demand for its capabilities and services, as clients manage complexity and uncertainty while investing in growth.

An integral component to this is the latest generation of Deloitte’s audit platform, Deloitte Audit. This comprehensive suite of capabilities delivers an insightful, customised audit approach focusing on the most important issues and risks. This helps ensure a consistent execution of high quality audits, leveraging scalable content and technology, while providing quality service to the firm’s clients worldwide. In FY13, Deloitte’s continued focus on priority markets resulted in nearly 7 per cent growth of these markets in local currency, thus outpacing the rest of the network. Priority markets’ accounted for nearly one-fifth of Deloitte network revenues and are expected to increase that share in the near future.

Growth by regions The firm made nearly 30 strategic acquisitions in key capability areas and geographies, marking a significant investment in the future to better serve its clients. Notably, Deloitte acquired the majority of Monitor, one of the world’s leading strategy consulting firms, positioning the network as a worldwide leader in strategy

Building on the success of the US Member Firm’s investment in Deloitte University (DU), which opened in Westlake, Texas in the fall of 2011, Deloitte University EMEA was launched over the summer to offer programmes uniquely tailored to the region’s needs. consulting. Monitor’s talent and assets joined with Deloitte’s world class strategy capabilities to operate under the Monitor Deloitte brand. The firm says that acquisitions will remain a priority to its business strategy in FY14. The Americas led growth by regions with a growth rate of 6.3 per cent in local currency, with strongest growth experienced in Chile (18.1 per cent) and LATCO (14.3 per cent). The United States, the largest member firm in the network, produced particularly strong growth, contributing more than 80 per cent of the

57


Taking Stock

network’s total revenue increase. The majority of advisory and technology services grew in double digits.

Europe, Middle East and Africa (EMEA) grew by 5.6 per cent with the UK member firm experiencing solid growth of 8 per cent, despite a challenging economic climate. The Middle East and Turkey firms posted strong double-digit growth, largely driven by their tax and advisory businesses. Together, the Southern and East African member firms grew by a solid 8.3 per cent. Asia Pacific experienced growth of 3.1 per cent in local currency with India, Mauritius, Southeast Asia, Korea and Japan registering solid growth, each at or above 6.5 per cent.

Business opportunities Consulting growth in FY 13 was particularly strong across all regions, 8.7 per cent in local currency. The growth signals a willingness by companies to explore and invest in business opportunities. Within Consulting, demand for Human Capital and Strategy and Operations services was strongest. Financial Advisory grew by a total of 6.7 per cent. Market led demand resulted in strong growth for Forensic and Restructuring services, while further investments in strategic acquisitions were made across all regions.

Audit and Enterprise Risk Services grew by an aggregate 2.9 per cent. ERS experienced double digit growth in the Asia Pacific region and strong growth in EMEA and the Americas. Tax and Legal grew by a total of 5.6 per cent, experiencing solid growth in each region and sub-function. Most notably, a majority of Asia Pacific member firms were strong, led by Japan, India, Mauritius and Korea. In FY14 the network plans to continue to drive growth through investments in technology-enabled services, globally integrated market offerings, and services that assist clients in addressing challenges stemming from rapid changes related to globalisation, technology advances, and regulatory developments.

Life Sciences and Health Care led growth among industries posting 12.9 per cent growth, followed by Public Sector, which grew by 7.7 per cent and Manufacturing, which grew by 5.5 per cent. 58

October 2013

Energy and Resources also posted strong growth at 5.1 per cent.

Leadership and development Building on the success of the US Member Firm’s investment in Deloitte University (DU), which opened in Westlake, Texas in the fall of 2011, Deloitte University EMEA was launched over the summer to offer programmes uniquely tailored to the region’s needs. This continued investment in leadership and development ensures that Deloitte professionals have the most advanced training and skills to help clients navigate an evolving world. More than 50,000 Deloitte professionals from 70 countries have attended DU at the Westlake location. “Delivering superior service to our clients is at the heart of what we do. Deloitte University EMEA is an investment in the professional development of our people, and providing an environment which creates a compelling learning environment is key to that growth,” said Fahoum. “DU EMEA will be a place where firms can share their diverse perspectives and experiences, and create a consistent standard of excellence that will be reflected in the work we do every day,” the executive added.

Deloitte continued its focus on hiring, developing, and retaining top talent as a driver of business activity. In FY13, the network hired 51,400 professionals; its total workforce now exceeds 200,000 professionals, which marks a significant milestone for the organisation.

In FY14 the Deloitte network plans to continue to drive growth through investments in technologyenabled services, globally integrated market offerings, and services that assist clients in addressing challenges stemming from rapid changes related to globalisation, technology advances, and regulatory developments.

According to Deloitte, the firm “understands the fundamental and positive role business plays in shaping and creating the society of the future, and this year committed record amounts of skills and expertise to tackling challenging social issues

Deloitte continued its focus on hiring, developing, and retaining top talent as a driver of business activity. In FY13, the network hired 51,400 professionals; its total workforce now exceeds 200,000 professionals, which marks a significant milestone for the organisation.


Taking Stock

and responsiveness, Deloitte launched the Humanitarian Innovation Programme. The programme is a collaboration with local, national, and international humanitarian leaders and leverages Deloitte’s own diverse skills and expertise to deliver a globally coordinated approach to supporting crises around the world. “Businesses increasingly recognise that their continued success is inextricably linked with social progress. But many challenges facing society today are so complex and far-reaching that no organisation can solve them alone. Governments, community organisations and business must collaborate to drive positive change,” said Fahoum. “At Deloitte, we’re confident that our investments and contributions will continue to make a difference in 2014,” he added

Deloitte Fiscal Year 2013 Regional and Function Revenue Breakdown (aggregate)

through two new ground-breaking initiatives that reflect our purposed-based business model.” The network invested more than $170 million in communities in FY13 through a combination of skills-based volunteering, pro bono work and donations and over 800,000 volunteer hours.

Innovative approaches In April 2013, Deloitte worked with The Social Progress Imperative (SPI) along with other organisations to introduce The Social Progress Index. The Index originated with the belief that a country’s progress and competitiveness has to be measured beyond economic factors, and through extensive research and methodologies, provides the social and environmental indicators that affect a country’s performance. Deloitte is collaborating with SPI in deploying the Index worldwide by helping to establish the right networks of experts from government, civil society as well as businesses that will contribute to the discussion, drive change and work to solve some of our biggest societal issues. In July 2013, as part of an effort to help strengthen the humanitarian sector and create innovative approaches to humanitarian preparedness

Region

$ Billions

USD Growth

Local Growth

% of Revenue

Americas

16.4

5.7%

6.3%

50.5

Asia Pacific

4.9

(0.2%)

3.1%

15.1%

EMEA

11.1

2.1%

5.6%

34.4%

Total

32.4

3.5%

5.6%

100.0%

Function

$ Billions

USD Growth

Local Growth

% of Revenue

AERS

13.1

0.5%

2.9%

40.4%

Consulting

10.4

7.1%

8.7%

32.1%

Financial Advisory

2.8

4.7%

6.7%

8.7%

Tax and Legal

6.1

3.8%

5.6%

18.8%

Total

32.4

3.5%

5.6%

100.0%

Sub Region

$ Billions

USD Growth

Local Growth

% of Revenue

North America

15.0

6.1%

6.2%

46.4 %

Latin America

1.3

1.1%

7.6%

4.1%

Asia Pacific

4.9

(0.2%)

3.1%

15.1%

Europe

10.3

2.2%

5.2%

31.7%

Middle East

0.3

12.7%

13.8%

0.9%

Africa

0.6

(4.5%)

8.0%

1.8%

Total

32.4

3.5%

5.6%

100.0%

Percentages may not add to 100 due to rounding up

59


Idea IFRS Special Watch

THE DILEMMA DEVICE CIMA launches new ethical scenario tool for today’s business people…

T

HE CHARTERED Institute of Management Accountants (CIMA) has produced an ethical scenario tool to help people comply with ethical standards in a volatile and complex business environment.

Tanya Barman, CIMA’s Head of Ethics

20%

UAE respondents who work for an organisation that ‘had suffered from a serious reputational failure’

60

October 2013

This follows a recent Chartered Global Management Accountant (CGMA) survey which revealed that 20% of respondents in the UAE worked for an organisation that had suffered from a serious reputational failure. Globally this has reached 25% while the numbers rose to over a third in the UK, which has witnessed a series of corporate crises ranging from LIBOR to tax avoidance and meat scandals.

Code of Ethics Yet in the UAE, nearly 75% of companies are prepared to lose profit in the short term for the sake of protecting its reputation and driving more success in the long term. This is promising for the region considering that a CGMA research last year also highlighted that one in three finance professionals around the world have faced pressure to act unethically. As CIMA members are committed to upholding a Code of Ethics, the Institute has produced this interactive tool to support and guide ethical decision-making. Created with input from members globally, and available to the wider business community, it takes the user through a series of challenges in areas such as conflict of interest, the supply chain, bribery and data protection. Tanya Barman, CIMA’s Head of Ethics, said; “Ethical challenges are part of working life, and often there is no perfect answer. But if they are not dealt with appropriately, there may be severe consequences

when they come to light – both for the individuals and for the companies they work for.”

“Unfortunately it is still common for employees, be they in finance or in other parts of the business, to face pressure to compromise their ethical standards, and the standards of their company. It is vital to act ethically; to build long-term business success and avoid the shortcuts that can turn into tomorrow’s scandal,” she added.

“Through releasing this tool – to both members and the wider business population – we hope to encourage better working cultures that lend themselves to the ethical standards that most firms subscribe to.”

Best practice guideline Geetu Ahuja – Head of GCC, CIMA said: “We are seeing a strong effort by the government and businesses in the UAE to adhere to ethical guidelines across all sectors. Just recently the process of pitching for clients by advertising and marketing organisations has received an overhaul in the UAE. Many in the industry have signed up to a best practice guideline, a code that is the first

Geetu Ahuja – Head of GCC, CIMA

of its kind in the region and that has the support of the International Advertising Association’s UAE Chapter.”

These kinds of initiatives, including CIMA’s ethical scenario tool, helps employers and employees alike ensure that they are acting in an ethical manner that meets both local and international standards.” The tool is available at: www.cimaglobal.com/ ethicstool


Business IFRS Special Insights

BUSINESS BEYOND BORDERS In its latest study titled ‘Why go International?’ UHY audit firm educates on the benefits, risks and challenges of setting up a company overseas…

A

S COMPANIES, both large and small, search for new international markets in today’s global economy, they appreciate the differences between trading in their home market, with its known parameters, and marketing products overseas. Competing overseas usually involves greater risk and requires a detailed understanding of uncertainties – such as currency prices, payments, regulations, cultural matters, market structures and protocols. It also requires business partnerships to provide local expertise and support. “Expanding your business abroad is a big step,” says UHY chairman Ladislav Hornan.

“Whether exporting for the first time, or entering a new international market, selling goods or services abroad is an excellent way of gaining exposure to longer-term growth and highimpact profits. As governments make efforts to facilitate cross-border trading and it therefore becomes easier to do business internationally, an increasing number of dynamic companies are 62

October 2013

looking to transfer their expertise overseas,” he added.

Spreading tentacles A successful presence in overseas markets will help businesses achieve:

Increased growth beyond what is possible domestically – leading to economies of scale, such as larger production runs that reduce costs A competitive edge – exposure to intensive


IFRS BUSINESS Special INSIGHTS

Higher profile and brand awareness – leading to increased reputation with existing customers and improved staff morale

Spreading the exchange rate risk – for example, if a business does most of its trade in US dollars, it may want to start trading with Japan to spread the exchange rate risk between the dollar and the yen Increased commercial lifespan of products and services – and therefore increased returns on investment in research and development.

Key performance factors The size of your business is not a key factor; nor, often, is the product sector. What is important is that the product meets local need, overseas teams are trained, long-term partner relationships are established and new markets are established to compensate for less buoyant ones. Economic research by business advisory services, such as chambers of trade, consistently shows that companies which export to any country, in any financial climate, perform better than those which do not.

“There’s rarely such a thing as a global market. International trade involves recognising that people all over the world have different needs,” says UHY Marketing and Business Development Manager Dominique Maeremans.

BREAKING BOUNDARIES: A successful presence in overseas markets will help businesses achieve. Increased growth beyond what is possible domestically – leading to economies of scale, such as larger production runs that reduce costs.

competition, new products and ideas, more efficient technologies and better working practices increase the company’s ability to compete

Greater sales volume – translating into higher earnings, especially where margins in some markets exceed those in the domestic market, thereby increasing resilience of revenues and profits

The ability to spread risks – while product sales in the home market may be in decline, those in overseas markets may be booming

“Many products will only suit specific countries because of different values, customs, languages, technical standards and currencies. There is rarely such a thing as a global market, but rather a number of different overseas markets. In order to pinpoint markets where a business is most likely to be successful in selling its products, a lot of groundwork has to be done and advice sought. It is also just as important to identify unsuitable markets,” she added. Step 1- Getting Started When considering to open a new office overseas, you need to ask yourself these important questions;

1. Have you reviewed your international potential? Take time to consider the realities 63


Business IFRS Special Insights

“As governments make efforts to facilitate cross-border trading, an increasing number of dynamic companies are looking to transfer their expertise overseas,� says UHY chairman Ladislav Hornan.

of setting up a subsidiary, or licensing an agent, abroad and be aware of the implications for all aspects of your business. Consider the support you will need. 2. Have you developed an action plan? Going

international is a process, which needs to be planned. Clear and focused objectives are needed. International businesses need to be realistic as to what can be achieved within a given timescale.

3. Have you researched and prepared to visit

the market? Researching markets is essential to help reduce risk and improve the chance of success. Research is usually a combination of desk and field research. Each business and each market is unique. Taking part in overseas events, trade fairs or missions is an effective way to do field research to test markets, attract

Economic research by business advisory services, such as chambers of trade, consistently shows that companies which export to any country in any financial climate, perform better than those which do not.

64

October 2013

customers, appoint agents or distributors and make sales. 4. Have you explored routes to market entry? Choosing a sales presence in an overseas market can be complex. There are a number of options, including having a subsidiary, branch, joint venture and recruiting an agent or distributor. The suitability of each will depend on your company and your products and services.

5. Have you identified cultural and linguistic challenges? Your relationships with people from other cultures, who have different languages from your own, can be enhanced when you are aware of cultural differences such as communication styles, religious beliefs, power structures, and attitudes toward time and work. 6.

Have you protected your intellectual property? Protecting your intellectual property can be the difference between commercial success and failure. It is important to know at an early stage regulations and legal requirements which must be complied with and trading terms which might apply. Step 2: Identify your market niche According to Dominique Maeremans an important factor to consider when identifying your market niche is the speed at which the market is growing.


IFRS BUSINESS Special INSIGHTS

In order to pinpoint markets where a business is most likely to be successful in selling its products, a lot of groundwork has to be done and advice sought. It is also just as important to identify unsuitable markets. “It is usually easier to take a share of an expanding market than to fight for a share of a market that is already mature or declining. The quality of competition in some markets may make entering these markets difficult,” says Dominique.

“The nature and type of market a company is considering entering is also particularly important. For example, some businesses might find a small market to be a useful way of slowly expanding into international markets, while for others, only a large market could provide them with the potential to realise their ambitions.” “Focusing on countries with fewer competitors might be more beneficial. The degree of similarity to the company’s home territory, or other markets in which a business operates, can also be valuable, as it can be hard for companies to break into markets lacking common ground,” she added.

Step 3: Risks and Challenges Don’t ‘jump’ when you see opportunities, the UHY study warns.

Small to medium-size (SME) businesses dominate the international business arena by contributing 97% to the number of exports, according to the US Department of Commerce. These businesses are able to take advantage of significant growth opportunities, but not without overcoming challenges and risks. Too often, says the US department, business owners ‘jump’ when they see opportunities abroad, without first taking the time to research the market and train their employees for the challenges they may face. Have you thought about the risks and challenges? Inexperienced team The SME management may not have experience

of international businesses. Experience is critical for businesses to move into the international market with the fewest surprises, mistakes and expenses. The existing management team should have the right expertise or be trained beforehand. Another option is to hire internal or external experts to guide decision-making.

No local contacts Connections in the new international market are a valuable asset when pushing products out faster and obtaining a quicker return on investment.

Laws and regulations Each country has its own set of laws and regulations for importing goods, taxes, and even selling online. Some products are banned in some countries and, even though you may not be aware of these restrictions, your company may end up in legal difficulty if your company ships those products. Obtain legal advice from an experienced business lawyer for the new market and research which laws and regulations will affect your business. Finding information online does not replace legal advice from a specialist. Inadequate infrastructure Some countries do not have adequate infrastructure for transporting goods. Find out which obstacles exist and what should be done to overcome them or what adjustments should be made.

Cultural, language barriers Researching the local culture and speaking the same language is not enough to communicate efficiently. When two people are speaking the same sentence, the underlying meaning may not be the same. Find out how the locals conduct business and how their culture affects their decision-making and communication. Corruption among officials Corruption is more prevalent than most small business owners are prepared for. Research the new market country and find out how business is truly conducted.

Flexibility After entering into the new market, the business may have to adapt further to the local market. Small businesses that are not flexible or refuse to make alternations will lose out on customers and revenue. 65


Business Insights

Small to medium-size businesses dominate the international business arena by contributing 97% to the number of exports, according to the US Department of Commerce.

Tariffs and quotas awareness Countries add taxes or restrictions to particular products coming into their country to give their own businesses a higher advantage. Unsuspecting small business owners unaware of these tariffs and quotas can end up at a loss.

Pricing not optimised for the country Small business owners who price products the same abroad as in their home territory are either overcharging or undercharging customers. In countries with a lower GDP, consumers have less money to spend on purchases so lower price points should be set to attract more buyers – after also taking into account higher or lower costs of production.

No after-sales services Customer support should be available in the language of each country and be conveniently accessible. Customers should not have to pay

Competing overseas usually involves greater risk and requires a detailed understanding of uncertainties – such as currency prices, payments, regulations, cultural matters, market structures and protocols.

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October 2013

long distance call charges to get help. Small business owners may choose to outsource customer support to a customer call centre within the new market country (or a country with the same language), provide a local phone number (or toll-free number), email support (but make sure the internet is widely available in the new market country), and live chat through its company website.

Wrong payment methods SME owners must address payment methods before accepting or placing international orders. Countries may have different payment methods that are locally popular, but may not be commonly used internationally. Always select the safest option for you. The currency exchange rate is also important: be aware of currency exchange rates at the time of buying or selling products. Drastic changes on exchange rates may scupper your business. Step 5: Support your staff abroad Take care of your employees and their families - Companies that go international often choose to dispatch a team of managers they know and trust to the overseas market.

Part of the incentive offered to such employees can be a support package in the new jurisdiction – not only providing support on business issues, but taking care of personal finance needs for themselves and their families.


SUBSCRIBE NOW TO THE REGION'S FIRST MIDDLE EASTERN FOCUSED ACCOUNTANCY MAGAZINE. Complimentary subscription for any accountants currently working or studying in the UAE. Every month we will bring you the latest news, expert opinion, interviews with regional influencers and policy makers, as well as CPD advice, job opportunities and moves. Accountant ME will also feature regular articles and reports on auditing, legislation, management advisory services, ethics, professional development and practice management.

To subscribe visit

accountancyme.com/subscribe Contact us today for more information about this brand new title. SALES Christopher Stevenson Tel 04 440 9138 Email chris@cpidubai.com

EDITORIAL Joyce Njeri Tel 04 440 9140 Email joyce@cpidubai.com


Technology Talk

It is widely estimated that every year businesses incur $1.8 billion of European Union VAT which they should be entitled to recover.

NEW TECH TO HELP

RECOVER

TAX

RevaticSmart, a Deloitte’s initiative, will assist Middle East businesses to recover levies paid in the European Union countries…

D

ELOITTE HAS announced the launch of a regional initiative to assist Middle East businesses to recover tax (value added tax) paid in the European Union countries through the use of special proprietary technology, ‘RevaticSmart’. The technology allows Deloitte to efficiently and cost effectively identify, process, and substantiate VAT refund claims and facilitates the entire VAT recovery lifecycle, including

68 October 2013

eligibility analysis, invoice retrieval, refund processing improvement and dispute resolution. “This technology acquisition, combined with Deloitte’s local indirect tax expertise, presents a unique opportunity for our clients in the Middle East to reduce hidden VAT costs,” said Nauman Ahmed, Deloitte Middle East tax practice leader. Indirect Tax leaders ‘RevaticSmart’, extracts data necessary to recover VAT incurred, which might otherwise be lost.


Technology Talk

The acquisition of the ‘RevaticSmart’ technology, with is optical character recognition software, enables Deloitte to compile information on thousands of invoices in a fraction of the time it would have taken in the past. Concurrently, the International Tax Review Indirect Tax Leaders guide has recognised 94 Deloitte member firm professionals as leading indirect tax advisers, more than any other organisation in the world. The list includes the Deloitte Middle East Indirect Tax Leader, Justin Whitehouse. “I am delighted to have been named on the recognised Indirect Tax leaders list as it is personally pleasing. However, it is a testament not just to me, but the Indirect Tax team in the Middle East, which is the largest specialised team of its type in the region helping clients across all indirect tax issues,” said Justin Whitehouse.

Credibility of nominees The tax professionals featured in the guide are identified by researchers who conduct indepth evaluations of indirect tax practitioners worldwide. Leaders are chosen based on a nomination process as well as consultation with eminent industry professionals who express their views on the credibility of nominees.

94

Number of Deloitte member firm professionals certified as leading indirect tax advisers

Speaking about the new technology, Whitehouse said; “Deloitte is pleased to make this investment in response to our clients’ wish to create material savings using government sponsored tax refund schemes. We can now offer our clients a variety of technology-driven solutions that will help our clients drive tax efficiency or enable better tax risk management. Our investment in RevaticSmart increases the breadth and depth of Deloitte’s services to our Middle East clients.” It is widely estimated that every year businesses incur $1.8 billion of EU VAT which they should be entitled to recover. As this VAT is incurred in staff expenses, identifying and processing the claims is not cost efficient.

Cost effective basis The acquisition of the ‘RevaticSmart’ technology, with is optical character recognition software, enables Deloitte to compile information on thousands of invoices in a fraction of the time it would have taken in the past. This means that Deloitte can offer its clients the ability to recover this VAT on a cost effective basis - previously such work has been undertaken in a highly manual fashion. Deloitte’s Middle East VAT refund offering features:

Automated processing of VAT refund claims via extraction of data from invoices, quality checks and e-filing of VAT refund claims

A competitive pricing model which often means Deloitte fees are a proportion of the VAT recovered Transparent client reporting via a dedicated online portal Access to Deloitte’s award winning global network of indirect tax specialists

Local tax knowledge Deloitte member firms are part of a global network that includes approximately 28,000 member firm tax partners and professionals worldwide. The flexible service delivery model of Deloitte member firms and the global Deloitte network allows clients to choose a level of support that is right for them. Services can be provided using a local approach, a global or regionally coordinated approach, or a centralised approach to increase efficiency and control over tax activities.

Clients benefit from the global reach of the worldwide Deloitte network of member firms, while retaining access to local tax knowledge when and where they need it. This means enhanced relations with revenue authorities, fast responses to regulatory changes, and tax providers with a deep understanding of their issues and the environments in which they operate. 69


Grant Thornton Index

UAE AMONG TOP BUSINESS BEST Grant Thornton's Index ranks Emirates in seventh position globally, for the dynamism of its financing environment…

T

HE UAE offers the seventh best financing environment in the world for growing businesses, trailing only Singapore, Canada, Chile, Slovenia, Poland and Finland. The Grant Thornton Global Dynamism Index (GDI) 2013 takes into account many different factors in determining the strength of a country’s financing environment: the quality of the overall financial regulatory system; access of firms to medium-term capital; growth in value of inward Mergers & Acquisition deals; the value of inward M&A deals; private sector credit as percentage of GDP; inward direct investment growth; and corporate tax burden.

Value in M&A deals The UAE has risen 10 places for the dynamism of its financing environment from 2012. This is largely driven by improved access to finance, where the economy climbed from 26= to 4=, level with Hong Kong, Singapore and Sweden. The UAE also ranks 1= for both the corporate tax burden and private sector indebtedness, and climbed 28 places to 11= for growth in value of M&A deals from 2012. Hisham Farouk, Managing Partner of Grant Thornton UAE, said: “An entrepreneur needs finance to turn their idea into a business. And the business leader needs finance to achieve scalability. The global financial crisis provided clear evidence of the links between the financing environment and business growth.” “As the global economy slowly recovers, it is therefore pleasing to see the UAE improve its business growth environment in this important 70 October 2013

area. The lowest corporate tax burden and levels of private sector indebtedness in the world is quite an attraction to growing businesses. When combined with increasing access to finance, you can see why M&A activity in the UAE is up.” Top 20 countries Overall, the UAE ranked 35= in the 60 economy study, just below the UK. It scored well in economics and growth (20) but was let down by the dynamism of labour and human capital (58), ranking behind Turkey, Egypt and South Africa.

The top 20 countries with the best financing environment for a growing business, were as follows: 1 Singapore 82.2 2 Canada 75.1 3 Chile 71.1 4 Slovenia 70.8 5 Poland 69.8 6 Finland 68.6 7 UAE 67.0 8 New Zealand 64.8 9 Israel 63.5 10 Slovak Rep. 62.9 11 Australia 62.5 12 Norway 62.0 13 Switzerland 61.5 14 Brazil 61.2 15 Belgium 61.0 16 Malaysia 60.0 17 France 59.6 18 Turkey 59.0 19 Hungary 58.3 20 Sweden 57.7

Source: GDI 2013 Normalised score; max = 100, min = 0


Grant Thornton Index

Similarly, Cass Business School, part of City University London, has published a report entitled ‘Dubai as an International Financial Centre: Threats and Opportunities’, aimed at contributing to the body of knowledge on Dubai as an International Financial Centre and to lay out a road map for what steps need to be taken in order for Dubai to continue developing towards this goal. The report was sponsored by the Society for Worldwide Interbank Financial Telecommunication (SWIFT), a member-owned cooperative that provides financial messaging for more than 10,000 banks, securities institutions and corporate customers in 212 countries and territories.

Cass Business School’s Professor of Finance, Steve Thomas said: “Dubai is becoming increasingly important as a financial and trading entry-point for the Middle East and Africa, with its strong recovery from the financial crisis testimony to its energy and creativity. The continuing strengthening of institutions and markets is key to securing ongoing progress at a turbulent time for both the region and the global economy.” The report outlines the advantages of Dubai’s world class infrastructure, which has already attracted a diverse set of financial services companies. However, it also identifies areas where further work is needed, such as to improve the maturity of its equity and debt markets and its financial infrastructure.

Regional hub for trade The research, undertaken by Cass Consulting, outlines some additional steps that could help to attract further listings to the exchange and to encourage more foreign investors and financial firms to participate in Dubai’s financial markets. For example, conducting a self-assessment based

“As the global economy slowly recovers, it is pleasing to see the UAE improve its business growth environment. Lowest corporate tax burden and low levels of private sector indebtedness in the world is quite an attraction to growing businesses.”

Hisham Farouk, Managing Partner of Grant Thornton UAE

on the CPSS-IOSCO Principles of Financial Market Infrastructures is an important step to ensure that Dubai’s financial infrastructure adheres to industry best practices.

Alain Raes, Chief Executive, EMEA & APAC, SWIFT, said: “Dubai is growing in importance as a regional hub for trade and finance, and many businesses are building their presence here, SWIFT included. This report is important because it offers timely insights into Dubai’s competitors in the region and how it compares to international financial centres around the world. The report also identifies what Dubai needs to do to achieve its ambitions.” Sido Bestani, Head of Middle East & North Africa, SWIFT, said: “Against the background of rapid growth for Dubai’s financial sector, this research looks at the major themes facing all financial centres and helps position Dubai in the global IFC landscape.”

Ehsan Razavizadeh, Regional Director, MENA and Head of the Cass Dubai Centre said: “This report is a great example of the power of collaboration between a world class academic institution and an international organisation such as SWIFT. Cass Business School has long been a leader in finance and banking education and we are delighted to have had this opportunity to work with colleagues in SWIFT. As Dubai counts down to a decision on its Expo 2020 bid, this report serves to highlight the Emirate’s standing as a dynamic and thriving global financial centre.” 71


Corporate Treasury

THE

CONTEMPORARY TREASURER Today’s treasurers have their fingers in many pies, but their full strategic potential is still untapped, according to ACT research. Peter Matza explains…

I

N MANY organisations, treasurers struggle to gain full acceptance of their capabilities. They are often seen as cash managers, not as contributors to financial and business strategy. What’s more, the very definition of a treasurer varies significantly from company to company, and indeed from treasurer to treasurer. Recognising this, the ACT decided to undertake a comprehensive survey of members’ attitudes towards the evolving influence of treasurers on corporate strategy and business growth. The ACT Corporate Treasurer Survey, which was carried out earlier this year, is the first such research in the ACT’s 33-year history.

56%

Proportion of surveyed treasurers who believe there is too much financial regulation in the marketplace 72 October 2013

By questioning a representative sample of treasurers from large UK corporates at various career stages, the research aimed to understand who the contemporary treasurer is, how he or she spends the working day and how he or she interacts with the board. It also investigated how treasurers source funding, their thoughts on regulation, their interactions with financial institutions and how their organisations operate in emerging markets. Range of activities According to the research, treasurers manage their time across a range of activities, with that time split between functional duties (for instance, between cash and liquidity

A new research titled the ‘ACT Corporate Treasurer Survey’ has unveiled key insights about the evolving influence of treasurers on corporate strategy and business growth.

management and corporate finance), geographies (between domestic, pan-regional and emerging markets) and governance activities (between those that involve the board, annual reports and audit reporting).

Treasurers spend on average 34% of the working day on functional matters, such as cash management, and 24% on strategic issues, such as capital structure or corporate funding policy. The research found that respondents and their teams prepare reports for just over half of all board meetings, on average, and present at around a quarter of them. Board interactions take various formats, but, more often than not, boards act on the advice of their treasurers. Treasury plays a key role in determining an organisation’s financial strategy, working out how to finance business policy and manage the ensuing risks. So boards are interested in key financial metrics:


Corporate Treasury

business has been fairly treated, and 23% said treatment has been neither fair nor unfair.

More than half of respondents (56%) said they believe there is too much regulation, while 41% felt regulatory levels are about right. Only 1% of those surveyed thought there was too little regulation. The research uncovered that the questions treasurers should be addressing are: i) Will the proposal contribute to shareholder value? ii) How is it being measured?

iii) W ill the projected return exceed the cost of capital? iv) They are also concerned with potential risks and with corporate governance, legal and compliance issues.

Around 40% of business funding is through debt capital markets, with 33% from bank finance and 17% from equity capital markets.

Imbalance in perceptions Despite widespread vilification of banks and bankers, the vast majority of treasurers did not report feeling unfairly treated by financial institutions. Indeed, 73% claimed their

ACT Middle East

 

a) What do we invest in? b) How do we investment?

raise

funding

for

that

c) How do we control the risks associated with funding and investing cycles?

Treasurers need to be clear and concise when discussing appropriate choices, execution practicalities and likely outcomes. Depending on an organisation’s size and type, a treasurer may well need to respond to several different stakeholders, all of whom will need to be involved in the treasury process, on any given issue.

By demonstrating what, where and how today’s treasurers are contributing to their organisations, the ACT hopes that it has gone some way towards redressing the imbalance in perceptions about treasurers, their capabilities and their influence.

Key dates from the chartered body for treasury

We are committed to providing support to the treasury profession, with our events and training courses focusing on key issues facing treasurers in the Middle East region. They also provide an unrivalled opportunity for treasury, risk and finance professionals to come together for networking. Widen your potential by taking part in our upcoming key events for the region: • Effective Treasury Management (training course) 24-25 November 2013 | The Ritz-Carlton, DIFC, Dubai Here’s your chance to critically review key elements of your company’s treasury function and the means by which to add value and enhance efficiency. You will learn about current best practices, which will be supported with real-life case studies. www.treasurers.org/treasuryfundamentalsetm

Exclusive offer: FREE ACT Middle East Annual Conference place for registered training delegates on this course (worth up to $1599). Email training@treasurer.org for details quoting “Accountant ME”

• ACT Middle East Annual Conference 2013 26-27 November 2013 | The Ritz-Carlton, DIFC, Dubai Join over 400 professionals at the largest treasury conference and exhibition in the GCC. To help inspire your organisation’s growth plans, our thought provoking programme covers everything from innovations in cash and liquidity management to supply chain finance and investment strategy. www.actmiddleeast.org/annualconference Email actme@treasurer.org for full details quoting ‘Accountant ME’

73


Industry Appointments

APPOINTMENTS If you have made a new appointment, promotion or have any relevant hiring news, please email the details and a photo to accountancy@cpidubai.com

Osama El-Bakry joins Grant Thornton as Audit Director. He has over 15 years of experience gained within the ‘Big Four’, which has allowed him to develop extensive skills in auditing, international accounting standards, risk management and financial expertise in the Middle East and most of the Gulf. He has extensive sector and industry experience including the governmental sectors. Osama has also assisted in setting up the internal audit functions and developed policies and procedures for key operations for many clients. Commercial Bank of Dubai has announced the appointment of Murray Sims, as General Manager Personal Banking. In his new role, Murray will oversee all business and bank services in the field of Retail banking. Prior to his appointment and for over three decades, Murray has held key positions in a number of international banks such as HSBC Group, Standard Chartered, and banks in the Middle East, including RAK Bank, National Bank of Oman and most recently Saudi Hollandi Bank, Saudi Arabia.

Mandip Dulay has been promoted to the position of Director for the Marketing and Business Development function of Grant Thornton UAE. Mandip brings over 9 years of professional services experience, working in a regional office for PwC, and more recently a regional, national and international office for BDO in the UK. Previous to joining the Grant Thornton office in the UAE she had expanded her professional portfolio to include work spells in India, Dubai and Brussels where she spent her time developing sales and marketing strategies, coaching Partners, developing external brand building activities, tactically delivery marketing campaigns and implementing a global vision across 130 offices. Standard Chartered has appointed its Middle East, North Africa and Pakistan chief executive, Christos 74 October 2013

Papadopoulos, to head its Islamic banking arm. Papadopoulos will continue to based in Dubai and take over additional role as the chairman of Standard Chartered Saadiq Islamic Banking unit, the bank said. He will lead the bank's expansion in sharia-compliant banking given an increasing demand for Islamic products from emerging markets in Asia and the Middle East. Essa Kazim, the Chief Executive of the Dubai Financial Market, has been appointed as the Governor of the Dubai International Financial Centre (DIFC). Starting on January 1, he will replace Abdullah Saleh as the governor of the Emirate’s financial free zone. Kazim is also the chief executive of Bourse Dubai, the holding company for the DFM and Nasdaq Dubai. He Kazim obtained a bachelor’s degree in mathematics, economics and computer science from Coe College in the United States. He then pursued a master’s degree in economics from the University of Iowa. Gary Bauer has joined the Middle East Member firm of Protiviti, a global consulting firm as a Managing Director and Regional Head of Forensic Services. Gary will be based in UAE and will focus on helping clients in the areas of fraud and corruption investigations and assessments, fraud risk reviews and AML/Compliance. Prior to joining Protiviti, Gary led the Forensic & Dispute Services groups in Russia/ CIS and in the Balkan region for a global consulting firm. Gary holds a bachelor’s degree in commerce and law from the Australian National University. He is an Australian CPA and a certified Anti-Money Laundering Specialist. Danny McLaughlin has been promoted to the position of Partner for the Fraud and Forensic function of Grant Thornton UAE. Danny has

over 19 years of experience working in fraud investigations, fraud risk management and regulatory fields. He has worked in the UAE since early 2010 on engagements in a number of GCC countries. His international experience working for the Forensic practices of two of the Big Four in the UK and UAE has seen him working not only in the Middle East and UK, but much of Europe as well as USA, Latin America, North and West Africa and the Far East. Atul Varma has been promoted to the position of Director for the Business Process Outsourcing function of Grant Thornton UAE. Atul has over 10 years of professional experience and is well versed in outsourcing payroll and accounting services from various countries across the globe. He also has rich experience in direct and indirect taxation especially for the UAE and Oman Region. During his career he was involved in multi country payroll for his clients in GCC region of UAE, KSA, Kuwait, Oman and US, Egypt and Lebanon. Prior to joining Grant Thornton, he was working with outsourcing companies in UAE and India.

Anurag Chaturvedi has been promoted to the position of Senior Manager for the IT Advisory function of Grant Thornton UAE. Anurag has more than 8 years of experience in the field of Information & Technology covering IT Governance, Project Risk, Business Process Analysis, ERP (SAP and Oracle) controls review as well as helping organisations comply with requirements such as Sarbanes Oxley. Anurag’s experience spans various industries and clients in Middle East and India. He has core competencies in understanding the Business Processes, Project Risk Assessment, system architectural design and conducting product workshop trainings. Anurag has performed and managed engagements in ERP Implementation, Business Process Management and Project Risk Assessment.


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Accountant Middle East - October 2013