accountant middle east | june 2013

setting standards in financial auditing & accountancy June 2013

SAWYER’S MAKEOVER Respected guide book for Internal Auditors gets local treatment with launch of Arabic version

EMIRATISATION IN ACCOUNTING Attracting young locals into the industry facing real challenges

MID TIER MUSCLE How HLB-International is expanding tentacles in oligopolistic market

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BEYOND

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CRUNCHINGCommander of largest overseas Chapter of ICAI - James Mathew - reveals how the Institute is revamping itself from the ground up

PUBLICATION LICENSED BY IMPZ

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AT THE turn of the year, the UAE government designated 2013 as the ‘Year of Emiratisation’, in its effort to endevour to raise the numbers of Emiratis in the private sector and reduce the burden on the already bloated public sector.

While other sectors have seen significant numbers of local nationals joining the professional ranks, statistics in finance and accountancy remain grim.

This is blamed on a number of hurdles that are still holding back Emiratis, with majority of them citing low wages, long working hours and pressure situations as reasons dissuading them from pursuing careers in finance and accountancy. “Even those with great mathematical skills may be ill-suited to the rigors and monotony of the life of accountant,” Mohammad Zamani, a young Emirati working at KPMG told me at a recent breakfast meeting.

In our Emiratisation segment, read how concerned entities in the country are dealing with this challenge, and what measures are being put into motion to increase the involvement of local people in the industry.

Another important issue that we’ve had to adequately address is the usage of IT in financial reporting. The IT infrastructure is one of the most imperative elements in an ever-changing environment and fast-paced growth-oriented business. In our technology section, our tech experts from Oracle and Grant Thornton emphasise on the need to develop IT infrastructures that are much more reliable, acceptable and applicable within an ever changing, sophisticated and competitive business landscape.

Oligopoly. Do you know what it means? The ‘Big 4’ global firms have captured between 70% and 80% of audit revenue worldwide and in our exclusive interview with the CEO of HLB International, we get a deeper insight on how mid-tier firms continue to grow their market share amid intense competition.

Finally, we sit down with the Commander of the largest overseas Chapter of the Institute of Chartered Accountants of India, who reveals how the faculty is revamping itself from the ground up.

James Mathew heads the Dubai Chapter of the second largest professional accounting body in the world, where he encourages an open, transparent culture and is not afraid to roll up his sleeves and do the ‘unglamorous’ work that there is often no one else to do. This style of management extends to his ‘normal day job’ as the Managing Director of Crowe Horwath, where he has forged ahead and instituted new processes that have helped to keep the company’s books clean.

Have a good read.

Emiratisation in accountancy

Joyce NjeriEditor, Accountant Middle East

PublisherDominic De Sousa

Group COONadeem Hood

Managing DirectorRichard [email protected] +971 4 440 9126

EDITORIAL

EditorJoyce [email protected] +971 4 440 9140

ContributorShane Phillips

ADVERTISING

Commercial DirectorChris [email protected] +971 4 440 9138

PRODuCTION & CIRCuLATION

Production ManagerJames P [email protected] +971 4 440 9146

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Head of DesignFahed [email protected] +971 4 440 9148

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LinkedIn group: Accountant Middle East

setting standards in financial auditing & accountancy June 2013

SAWYER’S MAKEOVER Respected guide book for Internal Auditors gets local treatment with launch of Arabic version

EMIRATISATION IN ACCOUNTING Attracting young locals into the industry facing real challenges

MID TIER MUSCLE How HLB-International is expanding tentacles in oligopolistic market

UA

E A

ED

15

| Bah

rain

BH

D 1

.5 |

Qat

ar Q

R 1

5 | O

man

OR

1.5

| S

aud

i Ara

bia

SR

15

| Kuw

ait

KD

1.2

BEYOND

NUMBER

CRUNCHINGCommander of largest overseas Chapter of ICAI - James Mathew - reveals how the Institute is revamping itself from the ground up

PUBLICATION LICENSED BY IMPZ www.accountancyme.comSubscribe now

editor's audit

3

ContentsJUNE 2013

14Internal audIt: Sawyer’s gets Arabic makeover – Respected

guide book for Internal Auditors sees local treatment with launch of Arabic version.

18 Cover story: Beyond number crunching – Formal education

and professional qualifications such as becoming a Chartered Accountant will earn you a living. But self-education will make you a fortune, declares James Mathew, Managing Director at Crowe Horwath.

40 Movers & shakers: Mid-tier muscle – CEO of HLB International

gives an insight on how the firm continues to grow its market share amid intense competition in consultancy business.

18

Mai

n Fe

atur

es

404 June 2013

Current Affairs

Prof

essi

on W

atch

Spe

cial

Rep

orts

34

10

5

10 dIfferent dIMensIons:Are you just counting the beans? Please

stop! – Taking a break from all things tough and techy, Nusrate Ibrahim lifts the lid and asks a no-holds-barred question.

51 IPo WatCh: Low IPOs raise concern – Sluggish pace in

listings in GCC due to stricter regulatory measures and lack of liquidity, Deloitte says.

60 teChnology talk: Tech crunch – IT negligence seen as a major

constraint on businesses’ growth in the UAE.

74 Industry aPPoIntMents: Revolving door – Find out the latest movement

of professionals between roles, companies as well as new industry hires.

46Money launderIng: What’s it got to do with me? - In the second instalment

of our continuing series on Money Laundering, Sanctions and Terrorist Financing, Matthew Gamble explains the obligation of audit firms on illicit financial transactions.

62 CorPorate treasury: Putting a limit on losses – Will Spinney explains the

secrets of measuring and managing counterparty risk.

70 CredIt ManageMent: The ‘C’ connection – Andy Yiacoumi takes a closer look at

how a company needs to establish shared service centre for some of its processes in order to ensure cost efficiency for finance function.

3 edItor's audIt

7 neWs & vIeWs: ICAEW in strategic deal with AAA – Top professional bodies

have signed a Memorandum of Understanding to work closely together to advance the accounting profession in the UAE.

9 neWs & vIeWs: I Khan do it! – UAE resident and executive banker Raheela

Khan has been named a 2013 Yale World Fellow, announced Yale University President Richard C. Levin.

12 standards & PraCtICes:At what cost? - As IASB and FASB

propose to bring leases on-balance sheet, regional experts wary its impact on businesses.

26 eMIratIsatIon drIve: Challenges of Emiratisation in

accountancy - As the government steps up efforts to have local nationals join the professional ranks in various sectors, the finance and accountancy industry seems to be unattractive option for many.

36 tax WatCh: The new battleground - Developed

nations continue to drag down businesses with higher corporation taxes than BRICs, new report warns.

From the Experts

Interactions

Current AffairsPr

ofes

sion

Wat

ch

Spe

cial

Rep

orts

34

10

5

10 dIfferent dIMensIons:Are you just counting the beans? Please

stop! – Taking a break from all things tough and techy, Nusrate Ibrahim lifts the lid and asks a no-holds-barred question.

51 IPo WatCh: Low IPOs raise concern – Sluggish pace in

listings in GCC due to stricter regulatory measures and lack of liquidity, Deloitte says.

60 teChnology talk: Tech crunch – IT negligence seen as a major

constraint on businesses’ growth in the UAE.

74 Industry aPPoIntMents: Revolving door – Find out the latest movement

of professionals between roles, companies as well as new industry hires.

46Money launderIng: What’s it got to do with me? - In the second instalment

of our continuing series on Money Laundering, Sanctions and Terrorist Financing, Matthew Gamble explains the obligation of audit firms on illicit financial transactions.

62 CorPorate treasury: Putting a limit on losses – Will Spinney explains the

secrets of measuring and managing counterparty risk.

70 CredIt ManageMent: The ‘C’ connection – Andy Yiacoumi takes a closer look at

how a company needs to establish shared service centre for some of its processes in order to ensure cost efficiency for finance function.

3 edItor's audIt

7 neWs & vIeWs: ICAEW in strategic deal with AAA – Top professional bodies

have signed a Memorandum of Understanding to work closely together to advance the accounting profession in the UAE.

9 neWs & vIeWs: I Khan do it! – UAE resident and executive banker Raheela

Khan has been named a 2013 Yale World Fellow, announced Yale University President Richard C. Levin.

12 standards & PraCtICes:At what cost? - As IASB and FASB

propose to bring leases on-balance sheet, regional experts wary its impact on businesses.

26 eMIratIsatIon drIve: Challenges of Emiratisation in

accountancy - As the government steps up efforts to have local nationals join the professional ranks in various sectors, the finance and accountancy industry seems to be unattractive option for many.

36 tax WatCh: The new battleground - Developed

nations continue to drag down businesses with higher corporation taxes than BRICs, new report warns.

From the Experts

Interactions

ConneCting people, Building Bridges

ACCOUNTANTS SHOULD be high calibre professionals, upholding highest standards of integrity, independence and competence in their work, HH Sheikh Nahayan Mabarak Al Nahayan, has said.

The Minister made the call during the recent 31st Annual Conference organised by the Institute of Chartered Accountants of India - Dubai Chapter, at Dubai Men’s College. The theme of the conference was ‘Connecting People, Building Bridges, Together.’

ICAI - Dubai Chapter has provided a platform to share and disseminate knowledge amongst their members as well as promote the image of Indian Chartered Accountants in the Middle East.

Sheikh Nahayan, the Minister for Culture, Youth and Community Development was the Chief Guest and the Guests of Honour were CA Subhodh Kumar Agrawal and CA K. Raghu, President and Vice President of ICAI, respectively.

Addressing the participants, Chairman of ICAI - Dubai Chapter, James Mathew said; “Today the ICAI Dubai Chapter epitomises our theme of this conference - Connecting People, Building Bridges, Together.”

James quoted Freidrich Neitzche famous line – ‘invisible threads are the strongest ties’, saying that “we endeavour to bring our members together to create invisible threads which will then become strong ties and benefit the entire community.”

‘Absolutely everything card’

Deloitte aDvises fooD firm on Pe move

$500mworth of growth capital and buyout fund carlyle Mena

DELOITTE CORPORATE Finance

acted as the exclusive financial

adviser to Al-Nabil Food Industries,

on the sale of a significant minority

equity stake to Carlyle MENA

Partners, LP. The transaction marks

the first major global private equity

investment into Jordan.

In Nabil Foods, founded in 1945

by the Rassam family, is a leading

name in the frozen food industry

based in Jordan.

The company distributes its own

prominent brand of frozen food and

cold cuts in Jordan and across the

Middle East and Africa. The company

also provides premium quality

meat to international quick service

restaurants across the region.

Nabil Foods’ partnership with

Carlyle MENA, a $500 million

growth capital and buyout fund

focused on the Middle East, North

Africa and Turkey, will assist in

propelling its continued growth

and transforming the family owned

business into a corporation.

The process received

significant interest from global

and regional private equity firms,

family groups and trade buyers.

Deloitte managed the sales

process and led negotiations from

initiation to closing.

STATS FACT:

STANDARD CHARTERED has

launched, in partnership with

VISA, the Standard Chartered

VISA Infinite Credit Card. Available

to customers in the UAE, the card

has been designed to provide

benefits to cardholders including

access to the most exclusive

golf clubs in the UAE as well

as unlimited access to Fitness

First centres across the country.

The card also offers exclusive

concierge programme to cater to

the “every whim of a card holder”

from the most basic of tasks,

paying utility bills, to the more

extravagant request of booking

a private jet for a quick weekend

break.

For frequent

travelers, it

provides red

carpet treatment with unlimited

limousine and Marhaba 'Meet

and Greet' services at Dubai

International Airport.

Khalid El Gibaly, Regional Head

of Consumer Banking, UAE and

Middle East, Standard Chartered,

said: “We have conducted

extensive market research into

the financial and lifestyle needs of

high value existing and potential

customers and introduced

something that is designed to be

‘the absolutely everything card’.”

News

& Views

6 June 2013

ConneCting people, Building Bridges

ACCOUNTANTS SHOULD be high calibre professionals, upholding highest standards of integrity, independence and competence in their work, HH Sheikh Nahayan Mabarak Al Nahayan, has said.

The Minister made the call during the recent 31st Annual Conference organised by the Institute of Chartered Accountants of India - Dubai Chapter, at Dubai Men’s College. The theme of the conference was ‘Connecting People, Building Bridges, Together.’

ICAI - Dubai Chapter has provided a platform to share and disseminate knowledge amongst their members as well as promote the image of Indian Chartered Accountants in the Middle East.

Sheikh Nahayan, the Minister for Culture, Youth and Community Development was the Chief Guest and the Guests of Honour were CA Subhodh Kumar Agrawal and CA K. Raghu, President and Vice President of ICAI, respectively.

Addressing the participants, Chairman of ICAI - Dubai Chapter, James Mathew said; “Today the ICAI Dubai Chapter epitomises our theme of this conference - Connecting People, Building Bridges, Together.”

James quoted Freidrich Neitzche famous line – ‘invisible threads are the strongest ties’, saying that “we endeavour to bring our members together to create invisible threads which will then become strong ties and benefit the entire community.”

‘Absolutely everything card’

Deloitte aDvises fooD firm on Pe move

$500mworth of growth capital and buyout fund carlyle Mena

DELOITTE CORPORATE Finance

acted as the exclusive financial

adviser to Al-Nabil Food Industries,

on the sale of a significant minority

equity stake to Carlyle MENA

Partners, LP. The transaction marks

the first major global private equity

investment into Jordan.

In Nabil Foods, founded in 1945

by the Rassam family, is a leading

name in the frozen food industry

based in Jordan.

The company distributes its own

prominent brand of frozen food and

cold cuts in Jordan and across the

Middle East and Africa. The company

also provides premium quality

meat to international quick service

restaurants across the region.

Nabil Foods’ partnership with

Carlyle MENA, a $500 million

growth capital and buyout fund

focused on the Middle East, North

Africa and Turkey, will assist in

propelling its continued growth

and transforming the family owned

business into a corporation.

The process received

significant interest from global

and regional private equity firms,

family groups and trade buyers.

Deloitte managed the sales

process and led negotiations from

initiation to closing.

STATS FACT:

STANDARD CHARTERED has

launched, in partnership with

VISA, the Standard Chartered

VISA Infinite Credit Card. Available

to customers in the UAE, the card

has been designed to provide

benefits to cardholders including

access to the most exclusive

golf clubs in the UAE as well

as unlimited access to Fitness

First centres across the country.

The card also offers exclusive

concierge programme to cater to

the “every whim of a card holder”

from the most basic of tasks,

paying utility bills, to the more

extravagant request of booking

a private jet for a quick weekend

break.

For frequent

travelers, it

provides red

carpet treatment with unlimited

limousine and Marhaba 'Meet

and Greet' services at Dubai

International Airport.

Khalid El Gibaly, Regional Head

of Consumer Banking, UAE and

Middle East, Standard Chartered,

said: “We have conducted

extensive market research into

the financial and lifestyle needs of

high value existing and potential

customers and introduced

something that is designed to be

‘the absolutely everything card’.”

News

& Views

6 June 2013

iCAi-ABu dhABi’s new offiCe open

Game of numbers

DUBAI FINANCIAL Market (DFM)

recently honoured the winners

of its 11th Annual Stock Game,

the most popular educational

initiative amongst schools and

universities students in the UAE,

aiming at fostering the new

generation’s investment culture.

The top 13 participants

(pictured) achieved a return of

15.4% on average during the

competition, whilst the DFM

General Index was up 8.2%

during the same period.

Ahmed Tayseer from The

University of Sharjah came

first, snatching a cash prize of

AED15,000 followed by Zakir

Ali and Neha Patel, from Skyline

University College who came

second and third receiving

a cash prize of AED10,000

and AED5,000 respectively.

Additionally, all students from

the fourth to the thirteen places

received AED1000 each.

NEWLY ESTABLISHED office of the Institute of Chartered Accountants of India-Abu Dhabi Chapter will be operational from this month, the Chapter’s Chairman CA Padmanabha Acharya has revealed.

CA Acharya made the announcement recently during a professional development event organised by the Chapter, which was attended by over 120 plus strong audience of Chartered Accountants and other leading dignitaries. The event, sponsored by Mashreq Bank Abu Dhabi, covered two topics mainly, ‘Where to invest your next 100 Dollars’ and ‘Syndication and Corporate Finance’.

Karim Mahmoud, Executive Vice President and CEO of Mashreq Bank Abu Dhabi said he anticipated growth in relationship of the bank with ICAI members, noting that talent development and innovation are the key common aspects between Mashreq Bank and ICAI.

The first technical session was addressed by Abdul K. Hussain, the Chief Executive of Mashreq Bank's DIFC entity Mashreq Capital, where he presented his analysis on various economies of USA, China, Japan and Arabian markets with expected future prospects. Hussain said he anticipates that the regional stock markets would deliver healthy returns in line with the expected growth in earnings.

Artur Uluc, Director – Corporate Finance Mashreq Bank, addressed the next session, where he explained the concepts of syndication, and explicated primary and secondary loan markets with regards to recent developments in UAE. He mentioned that refinancing remained the major lending purpose in 2012.

ICAEW signs strategic deal with UAE's Triple 'A'THE ICAEW and the Accountants

& Auditors Association (AAA)

have signed a Memorandum of

Understanding (MoU) to work

closely together to advance the

accounting profession in the UAE.

The agreement between the two

bodies was signed in Dubai by AAA

Chairman Saif Bin Abed Al Muhairi

and Peter Beynon, Regional Director,

ICAEW Middle East (pictured both).

It establishes a framework for the

two bodies to work together, sharing

knowledge and expertise in order

to further the development of the

UAE’s accounting profession.

ICAEW and AAA will be

working together to continuously

improve professional standards

in the accountancy and audit

profession, across professional

practice and industry. They also

plan to raise issues of concern

to the profession and make

representations to concerned

parties and regulators where they

can offer guidance based on the

profession’s expertise.

Finally, both bodies will look

to provide training at all levels of

the profession.

7

News

& Views

QAtAr's BArwA lAunChes eQuity fund

Dfm achieves 100 % comPliance

Feel the future, now BARWA BANK, Qatar's fastest growing Shari'ah compliant banking service provider, recently launched its first equity fund: “The First Investor GCC Equity Opportunities Fund (Q)”. The Fund manager is The First Investor, (TFI), the investment division of Barwa Bank Group.

At the end of April 2013, the assets under management of the fund reached QAR 100 million for the first time since the launch through attracting subscriptions from new investors as well as recording considerable capital gain in the first quarter of 2013. The Fund is up by more than 8% since inception and has out-performed deposit rates, most fixed income investments and other similar investment schemes from competitors.

“The Fund is a very promising product and is expected to attract a large number of investors. Barwa Bank and TFI intend to launch more products targeting retail and institutional investors as well as government related entities in the near future,” said Steve Troop (pictured), CEO, of Barwa Bank Group.

2listed coMpanies punished by dfM, after Missing disclosure deadline

DUBAI FINANCIAL Market

(DFM) announced that its UAE

listed companies have showed

a 100% compliance to disclose

their first quarter of 2013 results

within the deadline of 45

days from the end of the first

quarter. Forty two UAE public

joint stock companies listed

on DFM successfully disclosed

their quarterly results, with the

exception of Amlak Finance due

to procedural reasons.

Meanwhile, DFM suspended

trading on 2 listed companies

that missed the deadline to

provide the exchange with full

and audited financial statements

as per the UAE Securities and

commodities Authority (SCA) and

DFM requirements.

DFM also submitted a detailed

report to (SCA) including

the disclosure dates and its

observations on the disclosures.

The suspended companies

are; Hits Telecom Holding and

National Industries Group.

STATS FACT:

MORE THAN 400 auditors,

accountants, and financial

professionals recently

converged in Dubai to discuss

the current and future trends

shaping the industry.

Dubbed ‘Knowledge Upgrade’,

the event was organised by

OpenThinking, an initiative

that helps companies integrate

training and excellence into

their ranks.

Iyad Mourtada (pictured),

Managing Director of

OpenThinking, revealed his

plans to provide online training

free of charge to support the

development of accounting

and financial professionals,

particularly in the area of social

media integration.

“We are

trying to build

a platform

for auditors,

accountants

and finance

professionals

to connect with each other

and share knowledge and

experiences. It is all about having

Open Thinking,” Iyad said.

Major professional bodies that

were represented include; the

ACCA (Association of Chartered

Certified Accountants), UAE

Accountants and Auditors

Association, the ICAEW (Institute

of Chartered Accountants in

England and Wales), IMA (Institute

of Management Accountants)

among others.

News

& Views

8 June 2013

QAtAr's BArwA lAunChes eQuity fund

Dfm achieves 100 % comPliance

Feel the future, now BARWA BANK, Qatar's fastest growing Shari'ah compliant banking service provider, recently launched its first equity fund: “The First Investor GCC Equity Opportunities Fund (Q)”. The Fund manager is The First Investor, (TFI), the investment division of Barwa Bank Group.

At the end of April 2013, the assets under management of the fund reached QAR 100 million for the first time since the launch through attracting subscriptions from new investors as well as recording considerable capital gain in the first quarter of 2013. The Fund is up by more than 8% since inception and has out-performed deposit rates, most fixed income investments and other similar investment schemes from competitors.

“The Fund is a very promising product and is expected to attract a large number of investors. Barwa Bank and TFI intend to launch more products targeting retail and institutional investors as well as government related entities in the near future,” said Steve Troop (pictured), CEO, of Barwa Bank Group.

2listed coMpanies punished by dfM, after Missing disclosure deadline

DUBAI FINANCIAL Market

(DFM) announced that its UAE

listed companies have showed

a 100% compliance to disclose

their first quarter of 2013 results

within the deadline of 45

days from the end of the first

quarter. Forty two UAE public

joint stock companies listed

on DFM successfully disclosed

their quarterly results, with the

exception of Amlak Finance due

to procedural reasons.

Meanwhile, DFM suspended

trading on 2 listed companies

that missed the deadline to

provide the exchange with full

and audited financial statements

as per the UAE Securities and

commodities Authority (SCA) and

DFM requirements.

DFM also submitted a detailed

report to (SCA) including

the disclosure dates and its

observations on the disclosures.

The suspended companies

are; Hits Telecom Holding and

National Industries Group.

STATS FACT:

MORE THAN 400 auditors,

accountants, and financial

professionals recently

converged in Dubai to discuss

the current and future trends

shaping the industry.

Dubbed ‘Knowledge Upgrade’,

the event was organised by

OpenThinking, an initiative

that helps companies integrate

training and excellence into

their ranks.

Iyad Mourtada (pictured),

Managing Director of

OpenThinking, revealed his

plans to provide online training

free of charge to support the

development of accounting

and financial professionals,

particularly in the area of social

media integration.

“We are

trying to build

a platform

for auditors,

accountants

and finance

professionals

to connect with each other

and share knowledge and

experiences. It is all about having

Open Thinking,” Iyad said.

Major professional bodies that

were represented include; the

ACCA (Association of Chartered

Certified Accountants), UAE

Accountants and Auditors

Association, the ICAEW (Institute

of Chartered Accountants in

England and Wales), IMA (Institute

of Management Accountants)

among others.

News

& Views

8 June 2013

saouD abDullah joins russell beDforD

i KhAn do it!

QATAR’S SAOUD Abdullah

Auditing Firm has been re-

branded as ‘RBSA Audit Firm’

on joining Russell Bedford

International, a global network of

independent firms of accountants,

auditors, tax advisers and

business consultants.

The new firm will provide

accounting, audit, tax and

management consultancy

services to companies

and organisations in the

manufacturing, real estate,

tourism, banking, insurance,

services, government and not-

for-profit sectors, and to inbound

investors seeking to establish or

grow their presence in Qatar.

Alan Bezzant, CEO of Russell

Bedford, said: “The Middle East

and Gulf markets are a crucial

area for us, and we are delighted

to establish our presence in Qatar

with one of the leading firms in

this market. We look forward

to working closely with RBSA

in supporting the needs of our

member firms in the region.”

Hani Mukhaimer. Managing

Partner, added: “After several

years of sustained growth it was

clear to us we needed the market

presence and resources of an

established international network

to continue to support our clients

in their domestic and cross-border

expansion.”

Established in Qatar in 2004,

Saoud Abdullah Auditing Firm

has developed into a full-service

firm specialising in audit, tax,

corporate finance, mergers and

acquisitions, insolvency, estate

planning, and transaction support.

UAE RESIDENT and executive banker Raheela Khan (pictured) has been named a 2013 Yale World Fellow, announced Yale University President Richard C. Levin.

Khan is Assistant Manager of Treasury and Investments for Doha Bank, a major Qatari financial institution. A Pakistani national born and raised in Dubai, Khan currently manages a portfolio in excess of $600 million. She is an experienced and knowledgeable professional with a deep understanding of the financial markets of Pakistan, UAE and Qatar.

In addition to her post graduate business education, Khan has attended the Oxford Advanced Management and Leadership Program at Said Business School, University of Oxford in 2012. Along with her professional interests, she is also passionate about social welfare and has launched a number of charitable programs in Pakistan.

Khan is among 16 World Fellows selected this year, from a pool of about 2,500 applicants. This year's cohort brings the total number of Yale World Fellows since the programme's inception in 2002 to 238 Fellows, representing 81 countries.

'We all have a role to play'ACCA (the Association of

Chartered Certified Accountants)

has responded to ‘A Framework

for Audit Quality’ a consultation

paper from the International

Auditing and Assurance Standards

Board (IAASB).

John Davies ACCA head of

technical, said: “The Framework

gives preparers, auditors,

shareholders, regulators and

others a shared understanding of

audit quality. The IAASB has set

down what is important to audit

quality and what is crystal clear

is that it's not about the auditor.

Although auditors have to comply

with stringent quality control

standards, all the stakeholders in

the corporate

reporting supply

chain have to

pull together to

maximise audit

quality. The

Framework communicates that

and, if the message gets across, it

will be of great value in improving

audit quality.”

ACCA's response notes that,

while the Framework primarily

has a communication role, its

success will ultimately be judged

by its contribution to the continual

improvement of audit quality to

meet the needs of society. ACCA

acknowledges that audit plays a

very important role in society.

9

News

& Views

Are you just counting the beAns? pleAse stop!

Managing Director, nti Business & training consultancy

nusrate iBrahiM

If you believe that accounting is adding sales and subtracting expenses then my friend you are not an accountant, you are a bean counter and you opened the wrong magazine!

We accountants or qualified as accountants should not be bean counters by any means.

Who are we then? We wear a number of hats and which ones we want to wear depends on the job we are carrying out or the career we want to pursue.

Accounting can be an end in itself or a means!

Helping business to succeedFor me, accounting meant opening of doors. It started with my experience with cargo business in the Middle East and North Africa (MENA) region

i AM An accountant! how boring can that be?

DIFFERENT

DIMENSIONS

10 June 2013

As an accountant, you wear many hats, make sure you understand the expectations attached to each hat you are wearing; because i can assure you that if the sky is your aim, then you better do much more than number crunching.

When you are thinking to fly with a big investment, he/she is thinking if you can first keep your feet on the ground with the payment of salaries and suppliers. He/she is not the ‘brake’, but he is the ‘clutch’ in a manual car, ensuring that before you change the speed gears, you are taking time to think through the decisions so that next move is smooth! In an automatic car, your organisation has accepted the business partner role of your FD and hence the organisation runs smoothly at a speed most convenient and well suited to its SWOT (Strengths, weaknesses, opportunities and threats).

As an accountant, you wear many hats, make sure you understand the expectations attached to each hat you are wearing; because I can assure you that if the sky is your aim, then you better do much more than number crunching and do not dare to be a ‘YES’ Sir/Madam accountant!

while being based in the UK British Airways Cargo offices in Heathrow. This Job made me realize where the business actually takes place and how I can help a business succeed. No doubt I was an overhead but how could I make my ‘overhead’ become a ‘value add’, this was my challenge and this is the challenge of every accountant.

Are you just counting the beans, then please stop! Ask yourself if that is what you burned the ‘midnight’ oil for, during the long nights as a professional student, while during the days you were working to earn a decent living.

My fellow accountant, the paths we tread are various, but one thing is for sure, you have to understand the story behind the numbers, you can be a number cruncher but more important is for you to know what these numbers are telling you about the business you are in! These numbers are like a traffic light system; they will tell you when to move, stop or to be cautious.

Mapping the futureMy fellow accountant, you are not only history; you are present and future also.

If financial accounting is about recording and evaluating the past and the present (actuals), then management accounting is about telling the story behind the present and mapping the way for the future.

If treasury and financial management are supporting a business to ensure adequate funding and investment in the business, then internal auditing is ensuring the right processes are in place for adequate running of the business.

If external auditors are evaluating your story by means of sample and substantive testing, then consultants are advising you on the way to turn around the business or doing the financial and risk checkup to see if you are fit for business.

The list of different hats in accounting is long… and it continues…so forth.

Think through the decisionsIf your Board has an accountant and he/she is your FD, he/she is going to be your partner in the decision-making; he/she is going to be sometimes the ‘nuisance’, the one who is going to say NO, when everyone else is nodding their head; he/she is going to be the sounding board, because his job is to look at the picture from both angles; ‘big’ and ‘detailed’.

DIFFERENT

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11

FUNDAMENTAL CHANGES to lease accounting proposed by the International Accounting Standards Board (IASB) and the

Financial Accounting Standards Board (FASB) would bring most leases on-balance sheet for lessees. Almost all companies in the UAE are engaged in leasing in one way or the other, and these proposals could have significant impact across all businesses.

Commenting on the publication of the Boards’ joint revised proposals, KPMG’s Regional Head of IFRS; Yusuf Hassan said: “It was always a goal of the standard setters to bring all leases onto the balance sheet and this proposal achieves that goal. It will be interesting to see whether these changes improve financial reporting from the existing leasing standards and whether the added cost and complexities of implementing these changes will exceed its benefits.”

New lease classificationMany lessee companies would see an increase in reported assets and liabilities, and the proposals would have significant impacts on

many different lease transactions – ranging from leases of ‘big-ticket’ items such as manufacturing facilities and aircraft, to leases of office space and smaller items such as company cars and computers.

In addition to bringing most leases on-balance sheet for lessees, the proposals would also

As IASB and FASB propose to bring leases on-balance sheet, regional experts wary its impact on businesses…

Yusuf Hassan, KPMG’s Regional Head of IFRS: “It was always a goal of the standard setters to bring all leases onto the balance sheet and this proposal achieves that goal.”

AT

WHAT

COST?

STANDARDS

AND PRACTICES

12 June 2013

“Implementing these proposals would be a real challenge for many organisations, as they would need to identify all their leases, extract key data, make new estimates and judgments, and perform new calculations.”

introduce a new lease classification test resulting in a ‘dual model’ for both lessees and lessors.

This would preserve straight-line expense recognition for most leases of property – that is, land and/or buildings – similar to operating leases today. However, there would be interest and amortisation expense recognition for most other leases, similar to finance leases today – that is, lease expense would not be recognised on a straight-line basis.

Transition to new proposalHassan continued: “Instead of a single model for lease accounting, we are left with a dual model, a model that feels like the old finance lease versus operating lease classification that the standard setters originally wanted to do away with. There is some reprieve for property lessors for whom the status quo may remain, but all other leasing arrangements will definitely be impacted by this proposal.”

The transition to the new proposals would require all existing leases and potential lease contracts to be re-analysed. There would also be an ongoing need for increased monitoring of leases to comply with the re-assessment requirements. For some – particularly lessors and lessees with large existing leasing portfolios – the system changes required are likely to be significant.

John McGaw, KPMG’s leasing standard implementation leader, said: “Implementing these proposals would be a real challenge for many organisations, as they would need to identify all their leases, extract key data, make new estimates and judgments, and perform new calculations. Companies will also need to consider how these proposals would affect their organisation and business practices.”

A conceptual compromiseThe proposals would impact a company’s ability to accurately predict and forecast assets and liabilities, due to the requirement to re-assess certain key estimates and judgments at the end of each reporting period. Such volatility could have a significant impact on a company’s compliance with debt covenants and its ability to pay dividends. Lessor accounting proposals involve considerable complexity, particularly for most leases of assets other than property.

Hassan concluded: “The Boards’ overall objective was to improve lease accounting. For some the proposed changes may be seen as a step forward - Others may see the proposals as an additional cost, added complexity and a conceptual compromise.

Ultimately, it is not clear whether these specific proposals will improve financial reporting regionally and satisfy the needs of our financial statement users. This version of the proposal is a much improved version from the previous one, but the question remains – Have they got it right this time?”

The proposals are open for comment until 13 September 2013.

STANDARDS

AND PRACTICES

13

SAWYER’S GETS

ARABIC MAKEOVER

“At IIA-UAE, we are always looking for new ways to advocate for the internal audit profession and help augment the skills of internal auditors particularly in the region.”

IN THEIR quest to continue to serve the profession on a wider scale rather than just within the UAE, the Board and Executive Committee of the

Institute of Internal Auditors-UAE Chapter recently launched the 6th Edition of the ‘Sawyer’s’, internal auditing’s most widely-acknowledged reference book.

Published by the Institute of Internal Auditors Research Foundation (IIARF), ‘Sawyer’s Guide for Internal Auditors’ has undergone a significant update and is now available in Arabic.

Draft copies of the translation, including a complete typesetting and printing that matched the exact standards of the original English version of the 6th edition of Sawyer’s were launched during the recent IIA UAE’s 14th Annual Regional Audit Conference in Abu Dhabi, which was inaugurated by the UAE’s Minister of Social Affairs Mariam Al-Roumi.

Augment skillsThe final copies are expected to be available to the public by the end of June 2013.

“At IIA-UAE, we are always looking for new ways to advocate for the internal audit profession and help augment the skills of internal auditors particularly in the region,” says Kevin Rafiq, the UAE Chapter’s CEO.

“As such, we have decided that it has become a necessity to share the wealth of knowledge contained within the pages of the newest edition of the Sawyer’s with internal audit professional in the Arab world,” Kevin added.

The IIA-UAE’s commitment to give back was highlighted by the unanimous vote to support the funding of the first ever translation of the 6th Edition of the Sawyer’s.

Technical aspectsKevin narrates the journey towards the successful Arabic makeover of Sawyer’s;

“As a first step, approval from the IIARF was secured and a solid translation, printing and marketing plan was prepared before embarking on the ambitious project. Once all the required administrative steps were finalised, a qualified translation firm was selected through rigorous

Larry Sawyer is renowned the world over as the ‘Father of Modern Internal Auditing’

InTERnAl

AudIT

14 June 2013

Respected guide book for Internal Auditors sees local treatment with launch of Arabic version...

SAWYER’S GETS

ARABIC MAKEOVER

“At IIA-UAE, we are always looking for new ways to advocate for the internal audit profession and help augment the skills of internal auditors particularly in the region.”

IN THEIR quest to continue to serve the profession on a wider scale rather than just within the UAE, the Board and Executive Committee of the

Institute of Internal Auditors-UAE Chapter recently launched the 6th Edition of the ‘Sawyer’s’, internal auditing’s most widely-acknowledged reference book.

Published by the Institute of Internal Auditors Research Foundation (IIARF), ‘Sawyer’s Guide for Internal Auditors’ has undergone a significant update and is now available in Arabic.

Draft copies of the translation, including a complete typesetting and printing that matched the exact standards of the original English version of the 6th edition of Sawyer’s were launched during the recent IIA UAE’s 14th Annual Regional Audit Conference in Abu Dhabi, which was inaugurated by the UAE’s Minister of Social Affairs Mariam Al-Roumi.

Augment skillsThe final copies are expected to be available to the public by the end of June 2013.

“At IIA-UAE, we are always looking for new ways to advocate for the internal audit profession and help augment the skills of internal auditors particularly in the region,” says Kevin Rafiq, the UAE Chapter’s CEO.

“As such, we have decided that it has become a necessity to share the wealth of knowledge contained within the pages of the newest edition of the Sawyer’s with internal audit professional in the Arab world,” Kevin added.

The IIA-UAE’s commitment to give back was highlighted by the unanimous vote to support the funding of the first ever translation of the 6th Edition of the Sawyer’s.

Technical aspectsKevin narrates the journey towards the successful Arabic makeover of Sawyer’s;

“As a first step, approval from the IIARF was secured and a solid translation, printing and marketing plan was prepared before embarking on the ambitious project. Once all the required administrative steps were finalised, a qualified translation firm was selected through rigorous

Larry Sawyer is renowned the world over as the ‘Father of Modern Internal Auditing’

InTERnAl

AudIT

14 June 2013

Respected guide book for Internal Auditors sees local treatment with launch of Arabic version...

a Brooklyn-born son of Russian immigrants who found his calling in internal auditing. He dedicated his life to sharing the value of the profession through speaking engagements and a host of publications that positioned him as one of the great visionaries of his time.

According to David McCabe, a member of The IIA Research Foundation’s (IIARF’s) Committee of Research and Education Advisors, “Larry Sawyer was a prophet and a futurist who could foresee and predict what others could not. His writings were a key factor for myself, and many others, in choosing a rewarding and meaningful career.”

Three core modulesThe original edition of Sawyer’s Guide for Internal Auditors came out in 1973, and it marked the first time that internal auditing was defined and explained in such a comprehensive and meaningful way. It quickly became – and has remained – one of the most valuable resources for internal audit practitioners at every level.

Later, the IIARF developed the sixth edition of the flagship publication, Sawyer’s Internal Auditing.

The IIA also updated the International Standards

request for proposal process, and work began shortly thereafter.”

“As part of their commitment to assure the quality of the translated work, a double layer of quality assurance reviews was scheduled for the project plan. The first layer was completed by the translation firm after the first external review, and once the required adjustments and editing were made, the final quality review was completed by a team of highly qualified and bilingual certified internal auditor and other practitioners.”

“Both levels of quality reviews included not only the language aspects of the translation but most importantly, the technical aspects in order to preserve the true meaning of the original English text,” Kevin says.

Value of professionAccording to Kevin, the June 2013 launch date of the final edition will make it possible for the participants of the Annual Chief Audit Executive conference to purchase copies for their respective organisations and clients.

“Enough copies will be printed to accommodate the need of Institute's leaders who are planning to attend the next Global Council scheduled for Dubai in March 2014. The total printed quantity will also satisfy the need of participants who plan to attend the 15th Annual Regional Audit Conference schedule immediately after the 2014 Global Council,” the CEO added.

The book is named after Lawrence B. Sawyer,

UAE’s Minister of Social Affairs, H.E. Mariam Al-Roumi and Abdulqader Obaid Ali, the President of the UAE Internal Audit Association hold the draft Arabic translation of the ‘Sawyer’s’, during the book’s launch at the recent 14th Annual Regional Audit Conference in UAE’s capital Abu Dhabi.

Kevin Rafiq, the Chief Executive of UAE IIA has particularly been instrumental in the translation process of the Arabic version of the 6th edition of the Sawyer's.

InTERnAl

AudIT

15

The IIA Research Foundation team is honoured with an award for the 6th edition of the Sawyer’s Project, during the recent annual conference organised by the UAE IIA in Abu Dhabi.

for the Professional Practice of Internal Auditing (Standards), new guidance was issued relating to fraud and information technology, and risk and control frameworks were developed.

The latest edition was released in the spring of 2012 and contains critical updates surrounding internal audit practices, guidance, and research.

This 6th edition addresses all of the earlier updates that were effected, as well as provide insights from the 2010 Common Body of Knowledge (CBOK) Study, the most comprehensive global study ever conducted on the profession of internal auditing.

It contains three core modules including internal audit basics, reporting and managing relationships, and information technology and emerging trends. In addition, a new section focusing on Governance, Risk Management, and Compliance (GRC) has been added.

The original edition of Sawyer’s Guide for Internal Auditors came out in 1973, and it marked the first time that internal auditing was defined and explained in such a comprehensive and meaningful way.

To learn more about Sawyer’s Guide for Internal Auditors, 6th edition, visit The IIARF Bookstore at http://www.theiia.org/bookstore/.

Sawyer’s Guide for Internal Auditors was first published in 1973. It is now in its 6th edition. This new three-volume series covers internal audit basics, reporting and managing relationships, information technology, emerging trends, and provides in-depth discussions on governance, risk management, and compliance.

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InTERnAl

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June 2013

Personality

& Practice

18 June 2013

BeyonD

nUMBer

crUncHinGFormal education and professional qualifications such as becoming a Chartered Accountant will earn you a living. But self-education will make you a fortune, declares James Mathew, Managing Director at Crowe Horwath. Mathew, who is also the Chairman of the Institute of Chartered Accountants of India, tells the story of his childhood, his steadfast morals and his thoughts on the role and future of the Indian Chartered Accountant in the UAE…

Managing Director, Shane PhilliPS conSultantS

Shane PhilliPS

HIS LIFE worked out in a way he once considered impossible. James Mathew was born and brought up in a middle class

family in a small Indian state, popularly known as ‘God’s Own Country’ – Kerala.

A good job with a decent lifestyle in Kerala was a distant dream back then, unless one decided to leave for overseas and try their luck elsewhere.

Mathew attributes his achievements to his mother, whom he says ‘has been my role model in every way’.

“She [mother], has gone through numerous tribulations but her insurmountable faith in God was her path out of the dark voids,” his eyes light up when talking about his mother.

Waxing philosophical, James continues; “According to my mom, difficulties and obstacles, minor or major, creep into your life almost on a daily basis. One should have the real courage and conviction to look at each ordeal and ascend over it, victorious; it all depends on your outlook.”

Education and immigrationDespite hailing from such a progressive city in the bustling Calicut, Kerala, it wasn’t until Mathew was in university that he knew what he wanted to pursue as a career, as a vocation.

He recalls; “In my first and second year, I regularly attained 100% scores in mathematics, and I was the only kid in the college who did so. My professor counselled me to become a Chartered Accountant so I followed his advice.”

To this very day, Mathew says he is still eternally grateful to his professor for that

MAN ON TOP:

James Mathew, Crowe Horwath Managing Director and Chairman of ICAI-UAE Dubai Chapter

Personality

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19

small piece of advice.

After receiving his degree in Mathematics, Mathew started his internship at a small firm. He completed that in just over three years, but then faced the dreaded exam with the Institute of Chartered Accountants in India (ICAI).

“The ICAI is one of the toughest exams,” James says.

In his true humorous form, the Chairman of the ICAI-Dubai Chapter quips; “Outside the Chennai Regional Office of Chartered Accountants, there was a Cross Church… where it was written: ‘Jesus Christ never fails’, so

someone who was doing his CA exam had gone and written, ‘Ask him to write the CA Exam’.”

Changing global economyIn former years in India, bright students aspired to be doctors and engineers. But now, in response to our changing global economy, the field of Chartered Accountancy has joined the ranks of the top professions.

“In the 80s and 90s the most prestigious jobs were to join the Civil Service or become a doctor. Engineering was the next best thing and those who did not make it to those three esteemed positions became accountants. We are now witnessing a drift of the brightest minds aspiring to become accountants because they see it as their passport into international business,” says Mathew.

Currently, one million students are studying in India to take the ICAI to become a Chartered Accountant, but only about 11,000 of the 400,000 final students will actually become successful.

Despite these unfavourable odds, James

CHANGING PERCEPTIONS:

“We are now witnessing a drift of the brightest minds aspiring to become accountants because they see it as their passport into international business.”

1,800 RegisteRed chaRteRed accountants in dubai’s chapteR of icai

In former years in India, bright students aspired to be doctors and engineers. But now, in response to our changing global economy, the field of Chartered Accountancy has joined the ranks of the top professions.

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Personality

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June 2013

small piece of advice.

After receiving his degree in Mathematics, Mathew started his internship at a small firm. He completed that in just over three years, but then faced the dreaded exam with the Institute of Chartered Accountants in India (ICAI).

“The ICAI is one of the toughest exams,” James says.

In his true humorous form, the Chairman of the ICAI-Dubai Chapter quips; “Outside the Chennai Regional Office of Chartered Accountants, there was a Cross Church… where it was written: ‘Jesus Christ never fails’, so

someone who was doing his CA exam had gone and written, ‘Ask him to write the CA Exam’.”

Changing global economyIn former years in India, bright students aspired to be doctors and engineers. But now, in response to our changing global economy, the field of Chartered Accountancy has joined the ranks of the top professions.

“In the 80s and 90s the most prestigious jobs were to join the Civil Service or become a doctor. Engineering was the next best thing and those who did not make it to those three esteemed positions became accountants. We are now witnessing a drift of the brightest minds aspiring to become accountants because they see it as their passport into international business,” says Mathew.


Despite these unfavourable odds, James

CHANGING PERCEPTIONS:

“We are now witnessing a drift of the brightest minds aspiring to become accountants because they see it as their passport into international business.”

1,800 RegisteRed chaRteRed accountants in dubai’s chapteR of icai

In former years in India, bright students aspired to be doctors and engineers. But now, in response to our changing global economy, the field of Chartered Accountancy has joined the ranks of the top professions.

20

Personality

& Practice

June 2013 21


survived the gruelling exam and then immediately immigrated to the UAE. Twenty-one years ago, in 1992, he arrived in Dubai and joined the accounting firm Mahendra Asher & Company.

Joining Crowe HorwathAfter five years there, he left to become a partner with Crowe Horwath. And for good reason – he is quite proud of Crowe Horwath: “Today we have 14 offices in the UAE serving over 2500 clients here and have employed 200 plus professionals. Crowe Horwath is an International network with 650 offices worldwide and currently ranked 9th largest accounting firm in the world.”

According to the UAE Embassy of India, in the 1970s and 80s, the vast majority of Indian immigrants in the UAE were blue collar and only a fraction of a per cent held professional jobs.

That changed in the early 90s, around the time James arrived in Dubai, and now that percentage is between 15 and 20%. Considering Indians comprise close to half of

LOCAL TALENT:

“There’s an urgent need for more UAE Nationals with accounting backgrounds to come into this profession as out of only 800 auditors licensed by the Ministry of Economy, only about 35% are Emiratis.”

the total workforce in the UAE, one can expect to see many in companies and firms as CFOs and accountants.

The changing marketBefore the global financial crisis, finding a job was easier for just about everyone, accountants included. But now securing a job is difficult, especially for immigrating workers.

“2008 was an employee’s market, now it is an employer’s market… Now one job posting gets you so many CVs…For one single job posting I put out, I receive about 650 CVs in response,” he says, with a look of concern in his face.

Personality

& Practice

Despite these daunting figures, he is confident that the fate of the Indian Chartered Accountant in the Middle East is ensured; “I think Indians are the largest community of CFOs in the Middle East, and that this will continue. UAE’s biggest trading partner is India. Companies will continue to book Indians as their CFO and as the market evolves the Indian CFO is becoming more sophisticated in the GCC.”

Career in private practiceMathew is aware there are barriers to overcome when hiring an Indian Chartered Accountant and he relates that the ICAI is taking measures to assist students. For example, they have recently added a course called ‘General Management and Communication Skills’ to help prepare students for managing at the Board level and to position them to develop as strategic partners with the CEO and Chairman.

The demand is impressive as the Institution is experiencing one of its fastest growth rates of all time; between the two chapters in the UAE, there are 4,500 Chartered Accountants, 50% of which are registered members.

Even though the economic climate has changed, the work has never been light or easy, especially as a Partner at Crowe Horwath firm.

Mathew details his career in private practice: “I started my practice in 1997 when I joined this firm, and ever since I work about 14 hours a day… I could have been sitting comfortably working seven or eight hours, but one of the driving factors is the extra work. I work six days a week, but the 6th day is a little lighter. We have clients who come in on a Friday from the West so you have to work on that day. Invariably… you have to take this on.”

What it means to be a CFO What differentiates an accountant who breaks away from the herd to become a strategic leader and critical value creator for the organisation?

When asked about the difference between a Controller and a CFO, Mathew mentions actions such as spearheading mergers and acquisitions transactions, leading initial public offerings, recommending and implementing divestments, allocating resources in the right areas, and changing the capital structure.

“These all require initiative on behalf of the CFO. However, companies in the Middle East have a different modus operandi in comparison to their western counterparts,” he observes.

“First, it is a tax-free jurisdiction so not many of the registered onshore companies keep their books to international standards. Second, the Middle Eastern businessman is adverse to debt relative to other geographies so few companies

The ICAI is taking measures to assist students, and has recently added a course called General Management and Communication Skills to help prepare students for managing at the Board level.

GOING EAST:

Indians constitute the largest community of CFOs in the Middle East, and this will continue, as companies continue to hire them as their CFO due to their outstanding credentials.”

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Despite these daunting figures, he is confident that the fate of the Indian Chartered Accountant in the Middle East is ensured; “I think Indians are the largest community of CFOs in the Middle East, and that this will continue. UAE’s biggest trading partner is India. Companies will continue to book Indians as their CFO and as the market evolves the Indian CFO is becoming more sophisticated in the GCC.”

Career in private practiceMathew is aware there are barriers to overcome when hiring an Indian Chartered Accountant and he relates that the ICAI is taking measures to assist students. For example, they have recently added a course called ‘General Management and Communication Skills’ to help prepare students for managing at the Board level and to position them to develop as strategic partners with the CEO and Chairman.

The demand is impressive as the Institution is experiencing one of its fastest growth rates of all time; between the two chapters in the UAE, there are 4,500 Chartered Accountants, 50% of which are registered members.

Even though the economic climate has changed, the work has never been light or easy, especially as a Partner at Crowe Horwath firm.

Mathew details his career in private practice: “I started my practice in 1997 when I joined this firm, and ever since I work about 14 hours a day… I could have been sitting comfortably working seven or eight hours, but one of the driving factors is the extra work. I work six days a week, but the 6th day is a little lighter. We have clients who come in on a Friday from the West so you have to work on that day. Invariably… you have to take this on.”

What it means to be a CFO What differentiates an accountant who breaks away from the herd to become a strategic leader and critical value creator for the organisation?

When asked about the difference between a Controller and a CFO, Mathew mentions actions such as spearheading mergers and acquisitions transactions, leading initial public offerings, recommending and implementing divestments, allocating resources in the right areas, and changing the capital structure.

“These all require initiative on behalf of the CFO. However, companies in the Middle East have a different modus operandi in comparison to their western counterparts,” he observes.

“First, it is a tax-free jurisdiction so not many of the registered onshore companies keep their books to international standards. Second, the Middle Eastern businessman is adverse to debt relative to other geographies so few companies

The ICAI is taking measures to assist students, and has recently added a course called General Management and Communication Skills to help prepare students for managing at the Board level.

GOING EAST:

Indians constitute the largest community of CFOs in the Middle East, and this will continue, as companies continue to hire them as their CFO due to their outstanding credentials.”

22

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June 2013

are strategically manipulating their balance sheets to create value; tax free geographies just make debt less attractive.”

“Third, there is very little M&A activity and almost no IPO activity in the market, so the Controller who wants to make the jump to become a CFO has to have an unusual amount of gumption in the GCC.”

“They have to be self-driven and be focused on developing themselves because their companies and the market won’t necessarily do that for them,” says Mathew.

Changing role of accountantsMathew mentions the role of Chartered Accountants has in the recent years changed in many ways than one, due to the increasing expectations of clients.

Audits, for example, are on the rise, he says. The accountant also estimates that, “Out of around 300,000 registered companies across the UAE,

[not including the Free Zones], not more than 60% of the companies maintain proper books of accounts. A lot of companies don’t bother getting audited unless you are getting bank finance. As the Chartered Accountancy profession [goes up] you will see more and more people getting their books audited.”

He urges more UAE Nationals with accounting backgrounds to come into this profession as out of only 800 auditors licensed by the Ministry of Economy, only about 35% are Nationals. There are discussions in the region of setting up a UAE body of Professional Accountants, an effort which will possibly be assisted by the Indian Chartered Accountants.

When asked about the future of the Indian Chartered Accountant, Mathew says, “You will see them become very close to the Board. I think this is beyond just number crunching… we are now supporting the Board in their decisions. I think a much larger role is expected from Accountants.”

“Finance is an integral part of running a business. As the Middle East continues to compete on the global stage, Boards are demanding strategic value creation from their finance team. This has to happen if they are going to be competitive. So there is a clear change in demand on the skill set and in reaction a new cadre of CFO emerging from the GCC.”

Standing in good steadThe basic values of life were his early lessons that he still cherishes and after almost 21 years in practice as a Chartered Accountant, he considers these values will always stand you in good stead.

Sincerity and commitment in whatever you do

Putting yourself in someone else’s shoes

Compassion

Maintaining… and not burning the bridges

A coin has two sides and likewise any matter has the positive and negative side. Try to focus only the positive side; be optimistic

Being humble and polite

These principles steered him to the road he is on right now and hopefully, it only goes uphill.

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WITH OVER 10 funds and close to $1.7 trillion worth of assets under management, the GCC is home to the

highest concentration of global Sovereign Wealth Funds.

With an aim to diversify, benefit from international investment opportunities and maintain balanced investment portfolios, GCC SWFs have historically been willing to invest internationally and across a wide range of industries and asset classes.

Through a number of high profile, yet economically motivated investments into the West and Asia, GCC SWFs made headlines and gained prominence as serious investors on the world stage.

To some extent, the global financial crisis did little to slow the pace of GCC SWF investments.

In fact, since the beginning of the financial crisis, GCC funds continued to invest outside the region and played a key role in the global investment landscape. However, more recently, an increasing appetite to invest in local economies has become a feature of this region’s SWF landscape.

Global SWF investment statistics suggest a near 70% increase in GCC focused investments by regional SWFs. Therefore, the question then arises; what has driven this apparent shift in the SWF investment paradigm?

Regional mega-development projects The GCC region plans to spend approximately $142 billion on infrastructure projects between 2013 and 2020, the majority of which relates

30% ProPortion rePresenting gCC sWFs out oF the total global sWF Funds

KPMG Partner Vikas Papriwal explains how diversification and investment strategies in the GCC countries are evolving…

EMERGING TRENDS IN SWF LANDSCAPE

‘GeoGraphic allocation of investments by Gcc sWfs’ from this link

to rail and road projects. This is in addition to planned mega projects in the region such as the US$86 billion King Abdullah Economic City in KSA, Qatar’s $70 billion 2022 FIFA World cup related infrastructure and the UAE’s $20 billion Masdar City development.

GCC SWFs have historically demonstrated keen interest in infrastructure and real estate investments. The proportion of infrastructure/real estate related assets under management of GCC SWFs is likely to increase as GCC governments redirect a greater portion of their sovereign wealth to SWFs with local development objectives.

Invesco’s Middle East Asset Management study for 2012 suggests that the value of assets

KPMG - Partner and Head of SovereiGn WealtH fundS and Private equity, uae and oMan

viKaS PaPriWal

Sovereign

Wealth Fund

24 June 2013

WITH OVER 10 funds and close to $1.7 trillion worth of assets under management, the GCC is home to the

highest concentration of global Sovereign Wealth Funds.

With an aim to diversify, benefit from international investment opportunities and maintain balanced investment portfolios, GCC SWFs have historically been willing to invest internationally and across a wide range of industries and asset classes.

Through a number of high profile, yet economically motivated investments into the West and Asia, GCC SWFs made headlines and gained prominence as serious investors on the world stage.

To some extent, the global financial crisis did little to slow the pace of GCC SWF investments.

In fact, since the beginning of the financial crisis, GCC funds continued to invest outside the region and played a key role in the global investment landscape. However, more recently, an increasing appetite to invest in local economies has become a feature of this region’s SWF landscape.

Global SWF investment statistics suggest a near 70% increase in GCC focused investments by regional SWFs. Therefore, the question then arises; what has driven this apparent shift in the SWF investment paradigm?

Regional mega-development projects The GCC region plans to spend approximately $142 billion on infrastructure projects between 2013 and 2020, the majority of which relates

30% ProPortion rePresenting gCC sWFs out oF the total global sWF Funds

KPMG Partner Vikas Papriwal explains how diversification and investment strategies in the GCC countries are evolving…

EMERGING TRENDS IN SWF LANDSCAPE

‘GeoGraphic allocation of investments by Gcc sWfs’ from this link

to rail and road projects. This is in addition to planned mega projects in the region such as the US$86 billion King Abdullah Economic City in KSA, Qatar’s $70 billion 2022 FIFA World cup related infrastructure and the UAE’s $20 billion Masdar City development.

GCC SWFs have historically demonstrated keen interest in infrastructure and real estate investments. The proportion of infrastructure/real estate related assets under management of GCC SWFs is likely to increase as GCC governments redirect a greater portion of their sovereign wealth to SWFs with local development objectives.

Invesco’s Middle East Asset Management study for 2012 suggests that the value of assets

KPMG - Partner and Head of SovereiGn WealtH fundS and Private equity, uae and oMan

viKaS PaPriWal

Sovereign

Wealth Fund

24 June 2013 25

The GCC region plans to spend approximately $142 billion on infrastructure projects between 2013 and 2020, the majority of which relates to rail and road projects.

allocated to those SWFs which are investing locally (including into infrastructure) have risen by 10% from 2011. In contrast, despite a near 30% increase in the revenues of GCC economies, assets allocated to SWFs that invest primarily outside the region has fallen by 1%.

It is anticipated that this apparent redirection of sovereign wealth will source a stable flow of funds into the region’s infrastructure aspirations and will facilitate growth and development of the local economies over the medium term.

Increased public spending In stark contrast to other parts of the world where governments are promoting austerity and introducing significant cuts to public spending, high oil prices have enabled GCC governments to increase public expenditure.

A number of GCC governments including those of Bahrain, Qatar and KSA have introduced considerable public stimulus programmes during the past 18 months.

With a seemingly renewed focus on unemployment, education, and healthcare, regional governments are making considerable efforts to invest and promote development within their own countries. Consequently, sovereign wealth that may have otherwise been

used to fund investments outside the region, is being invested back into local economies.

The Eurozone crisis Continental Europe has always been a popular investment destination for cash rich GCC SWFs. From iconic car brands, to prestige real estate, top of the league football clubs, and financial institutions, Europe has historically seen a number of its most precious assets on the radar of ambitious GCC SWFs.

While the Euro zone’s own sovereign debt crisis has not completely halted Middle Eastern interest, GCC SWFs are becoming increasingly selective and cautious in their assessment of the continent’s offerings.

A number of GCC SWFs are adopting a ‘wait and see’ approach to Europe as a considerable level of uncertainty continues to exist. Higher growth markets (including local economies) are gradually taking priority as reduced confidence and decreased performance from existing European portfolios has meant that GCC SWFs are less inclined to invest.

Expectations from GCC SWFs As the shift towards local investments appears to be gathering momentum, the question remains whether this nascent position is a transitory trend or a strategic direction for the long term.

While SWFs in the GCC are unlikely to become vehicles of regional investment only, it is probable that international economics will continue to drive the allocation of their funds towards local economies.

The question as to whether GCC economies are able to absorb large sovereign fund investments while providing SWFs with a suitable risk/return profile is an entirely separate matter. However, regardless of how GCC SWF investment strategies evolve, one thing is for sure: their billions of dollars of investable cash reserves will continue to ensure that they remain a key interest to the global investment community.

Sovereign

Wealth Fund

CHALLENGES OF

EMIRATISATION

IN ACCOUNTING As the government steps up efforts to have local nationals join the professional ranks in various sectors, the finance and accountancy industry seems to be unattractive option for many…

Senior Lecturer in Finance and accounting - american univerSity oF Sharjah

jeannette vinke

ALL OVER the world, qualified accountants make up a large percentage of CEOs and CFOs in organisations.

In the UAE the profession does not appear to have that same profile. The country is facing a serious problem with not enough Emiratis currently in the pipeline training to become future leaders in accounting.

In a recent panel discussion organised by the Institute of Chartered Accountants in England and Wales (ICAEW) and the Dubai Financial Services Authority (DFSA) the challenges of attracting young nationals to the industry was

adequately addressed.

Good monthly salariesKhaled Al Zaabi, a successful young Emirati, explained that he studied accounting in the US, but when he came back the UAE he was shocked to learn that salaries in accounting firms, at entry level, were half of what had been offered to him in the US. At that point, he decided to give up on his plans of joining a ‘Big 4’ audit company, and instead joined the Internal Audit Department at Dubai Holding.

He also mentioned that “when you see your siblings and your cousins taking home good monthly salaries and experiencing a great

Panel experts discuss the challenges of attracting Emirati nationals in finance and accountancy, at an event organised by the Institute of Chartered Accountants in England and Wales (ICAEW) and the Dubai Financial Services Authority (DFSA).

40% Emiratisation quota for banks in thE uaE

PHOTO: COURTESY OMAR SIKANDER

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Often bookkeepers and accounting technicians are confused with the qualified accountants who are involved in strategic business decisions rather than merely matching debits and credits.

work-life balance, it is difficult to explain why you would want to pursue a profession where you will be expected to work long hours for very little money and study hard for many years.”

Ahmed al Maqtari, a very successful Emirati accountant running his own company and advisory practice, senses a level of discrimination within the profession against Emiratis. He explained that none of his five sons are interested in following in his footsteps.

A numbers gameAccording to Peter Beynon, ICAEW Middle East Director, “the issues with Emiratisation are in large part a numbers game.”

Beynon explained that there are around 225,000 Emiratis currently in the workforce in the UAE.

“With around 90% of these working for the government, that leaves a relatively small pool for the private sector. Since banks have a 40% Emiratisation quota, they offer very attractive packages and conditions to ensure they can meet that quota. This leaves a rarified few nationals able and willing to join the profession,” said Peter.

The director suggested that a change in government policy would assist in addressing the issues.

Another issue discussed, which I face frequently

as a teacher, is the lack of profile of the profession in the region. Students and their parents often are unaware of the fantastic long-term opportunities the profession offers. This is due to a variety of reasons.

Lack of awarenessFirstly, there is a lack of awareness of the importance of what a qualified accountant means. Often bookkeepers and accounting technicians are confused with the qualified accountants who are involved in strategic business decisions rather than merely matching debits and credits. This is in part due to the overall lack of importance given to financial reporting, as well as a misunderstanding of what it means to be professionally qualified.

Secondly, the profession remains a stranger to Emirati families. Audit firms do not generally advertise, and with the lack of nationals in the profession there is a dearth of role models.

There currently are three accounting professions prevalent in the UAE, the two British qualifications from the ICAEW and the ACCA, as

Peter Beynon, ICAEW Middle East Director: “The issues with Emiratisation are in large part a numbers game. With around 90% of local nationals for the government, it leaves a relatively small pool for the private sector.”

Durdana Rizvi Course Director, DSR Training: “Despite the hard work they put in, my Emirati students are at a huge disadvantage due to language and have to work twice as hard as any native English speaker. Accounting bodies should take ESL students (English as a Second Language) into account when expanding globally.”

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Edward Quinlan: “Audit firms need to match the packages paid by other private companies like banks and oil & gas companies. If we triple salaries, we not only are more likely to attract talent, we also make a statement of our long-term strategic commitment to the country.”

well as the CPA from the USA. There is no clear UAE identity for the profession, and perhaps a local qualification could bring the profession within the comfort zone of more nationals.

However, as Peter Beynon pointed out: “the international language of business is English, and it may not be unreasonable of professionals to be expected to be able to sit exams in English.”

Overcoming language barrierDurdana Rizvi from DSR Training echoed the same sentiments: “Despite the hard work they put in, my Emirati students are at a huge disadvantage due to language and have to work twice as hard as any native English speaker. Accounting bodies should take ESL students (English as a Second Language) into account when expanding globally.”

For the long-term economic viability of the UAE, having a strong profession is critical. Young Emiratis need to be prepared and groomed now to take the lead in future. How can this be accomplished?

In my opinion, very little will happen unless all stakeholders work together and bold steps are taken.

Firstly, let’s consider the accounting firms. Edward Quinlan, one of the regions’ most respected accountants has bold views: “Audit firms need to match the packages paid by other private companies like banks and oil & gas companies. If we triple salaries, we not only are more likely to attract talent, we also make a statement of our long-term strategic commitment to the country.”

Case for governmental actionAnis Sadek, Managing Partner from Deloitte &

Touche recognises that the profession can do more, for instance through raising awareness already at secondary school level, as well as creating even closer links with universities.

“So the audit company’s task would be to increase salaries drastically, as well as reflect on the work-life balance a career offers. With these two issues tackled, motivated young people will in future be able to stand tall in front of their peers when working in the profession,” he said.

Secondly, government involvement. Al Maqtari made a strong case for governmental action. He proposed that government may consider recognising Emirati accounting trainees as students, and hence providing financial support. Awareness within government and society in general need to be raised about the importance of professional qualifications.

Thirdly, the accounting bodies need to lead. The ICAEW has been running its Emiratisation Scholarship Scheme successfully for the last few years, but more can be done. Currently accounting firms tend to focus on accounting and finance graduates – but for example in the UK many top accountants studied for instance engineering, mathematics or history at University.

Encouraging firms to open their minds to similar set-ups would increase the pool of available talent.

Fourthly, schools and universities need to play their part in educating and preparing students to understand the benefits of our great profession, as well as being academically and mentally equipped for its challenges.

Fifthly, and most importantly, young Emiratis need to be ready to take a long-term view. A strong country will depend on a strong economy. It is critical that future leaders have excellent finance and accounting skills, and for those who are ready to take the challenge, surely a great future lies ahead.

Jeannette Vinke is a Senior Lecturer in Finance and Accounting at the American University of Sharjah and a member of the ICAEW’s Middle Eastern advisory Board. The above is her own opinion and may not reflect the views of either AUS or the ICAEW.

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Edward Quinlan: “Audit firms need to match the packages paid by other private companies like banks and oil & gas companies. If we triple salaries, we not only are more likely to attract talent, we also make a statement of our long-term strategic commitment to the country.”

well as the CPA from the USA. There is no clear UAE identity for the profession, and perhaps a local qualification could bring the profession within the comfort zone of more nationals.

However, as Peter Beynon pointed out: “the international language of business is English, and it may not be unreasonable of professionals to be expected to be able to sit exams in English.”

Overcoming language barrierDurdana Rizvi from DSR Training echoed the same sentiments: “Despite the hard work they put in, my Emirati students are at a huge disadvantage due to language and have to work twice as hard as any native English speaker. Accounting bodies should take ESL students (English as a Second Language) into account when expanding globally.”

For the long-term economic viability of the UAE, having a strong profession is critical. Young Emiratis need to be prepared and groomed now to take the lead in future. How can this be accomplished?

In my opinion, very little will happen unless all stakeholders work together and bold steps are taken.

Firstly, let’s consider the accounting firms. Edward Quinlan, one of the regions’ most respected accountants has bold views: “Audit firms need to match the packages paid by other private companies like banks and oil & gas companies. If we triple salaries, we not only are more likely to attract talent, we also make a statement of our long-term strategic commitment to the country.”

Case for governmental actionAnis Sadek, Managing Partner from Deloitte &

Touche recognises that the profession can do more, for instance through raising awareness already at secondary school level, as well as creating even closer links with universities.

“So the audit company’s task would be to increase salaries drastically, as well as reflect on the work-life balance a career offers. With these two issues tackled, motivated young people will in future be able to stand tall in front of their peers when working in the profession,” he said.

Secondly, government involvement. Al Maqtari made a strong case for governmental action. He proposed that government may consider recognising Emirati accounting trainees as students, and hence providing financial support. Awareness within government and society in general need to be raised about the importance of professional qualifications.

Thirdly, the accounting bodies need to lead. The ICAEW has been running its Emiratisation Scholarship Scheme successfully for the last few years, but more can be done. Currently accounting firms tend to focus on accounting and finance graduates – but for example in the UK many top accountants studied for instance engineering, mathematics or history at University.

Encouraging firms to open their minds to similar set-ups would increase the pool of available talent.

Fourthly, schools and universities need to play their part in educating and preparing students to understand the benefits of our great profession, as well as being academically and mentally equipped for its challenges.

Fifthly, and most importantly, young Emiratis need to be ready to take a long-term view. A strong country will depend on a strong economy. It is critical that future leaders have excellent finance and accounting skills, and for those who are ready to take the challenge, surely a great future lies ahead.

Jeannette Vinke is a Senior Lecturer in Finance and Accounting at the American University of Sharjah and a member of the ICAEW’s Middle Eastern advisory Board. The above is her own opinion and may not reflect the views of either AUS or the ICAEW.

28 June 2013

EMIRATISATION

DRIVE

EMPOWERING

LOCAL TALENTErnst & Young launches new training programme targeting UAE nationals, initiative aims to drive Emiratisation agenda…

Abdulaziz Al-Sowailim, Chairman and CEO, Ernst &Young MENA: “Our new programme will equip Emiratis with leadership skills and will also help them gain valuable experience in building a truly international, knowledge-based economy.”

Bassam Hage, MENA Markets Leader, Ernst & Young, addresses participants at the launch of the UAE National Development Programme, in Abu Dhabi.

ERNST & YOUNG has launched the UAE National Development Programme in Abu Dhabi, an initiative that seeks to assist

organisations drive their Emiratisation agenda and also focus on developing the skills of university graduates, newly hired employees and employed UAE nationals.

Under the patronage of HH Sheikh Nahyan Bin Mubarak Al Nahyan, Minister of Culture, Youth and Community Development, the UAE National Development Programme will consist of four separate frameworks with training in accounting and finance, soft skills, and industry knowledge. There will be technical training and an internship programme for a minimum of 30 days with Ernst & Young.

Abdulaziz Al-Sowailim, Chairman and CEO, Ernst &Young MENA, said: “We thank HH Sheikh Nahyan

Bin Mubarak Al Nahyan for his continuous support for Emiratisation initiatives. Ernst & Young’s new UAE National Development Programme aims to further empower Emiratis, providing them with enhanced industry and leadership skills and will help them gain valuable experience in building a truly international, knowledge-based economy.”

The Absher initiativeThe course is aligned with recent UAE government initiatives. It supports the ‘Absher’ initiative, launched by HH Sheikh Khalifa Bin Zayed Al Nayan, President of the UAE, and highlighted by HH Sheikh Mansour Bin Zayed Al Nahyan, Deputy Prime Minister of the United Arab Emirates and Minister of Presidential Affairs, during his speech at the 2013 Government Summit in Dubai.

“UAE nationals bring unique skills and diverse perspectives to the workplace which fuels innovation, creativity, relationships, and better business outcomes and solutions for our communities.”

“Attracting, developing and retaining national talent should be especially high on the agendas for organisations that remain committed to the long term sustainability of their operations in the region,” added Al-Sowailim.

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CATCH ‘EM

YOUNGAttracting young Emiratis into the finance and accounting industry is a real challenge. Rita Aoun Rizk advocates for a fresher approach, by raising awareness and knowledge about the profession at school level…30 June 2013

EMirATisATiON

drivE

CATCH ‘EM

YOUNGAttracting young Emiratis into the finance and accounting industry is a real challenge. Rita Aoun Rizk advocates for a fresher approach, by raising awareness and knowledge about the profession at school level…30 June 2013

EMirATisATiON

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Managing Partner – taMayyaz

rita aoun rizk

Strengthening the links between schools and universities which provide finance and accounting degrees is essential for an effective outcome for this initiative and it must be sustained to have full impact.

THE CONTEXT for the debate about Emiratisation is a rapidly changing business and employment landscape driven

by macro-economic policy, increased competition to attract and retain talent, and the need for diversity in the workplace to improve performance at all levels.

Recently, a joint ICAEW/DFSA Breakfast meeting sought to address the topic of attracting Emirati talent to the Finance Sector, where a diverse group of stakeholders recognised that this is a real challenge and at the same time an opportunity not just for the finance sector, but for all industry sectors.

The UAE labour market is becoming more sophisticated, and thanks to an open and diverse economy, global employers are increasingly focusing on this country offering new careers, and it seems ever increasing compensation packages to attract the best talent.

Emirati graduates are being courted to enter new and exciting industry sectors and they have multiple career choices like never before. In short, the UAE is no different to the reality highlighted in the PwC Global CEO Survey 2012, which found

that talent management remains the number one priority for businesses leaders around the globe.

Against this backdrop, the solution to attract Emirati talent into the finance sector perhaps lies in a fresh approach compared to traditional methods, comprising a range of measures implemented and championed by government, the major accounting firms, professional bodies, educators and Emirati leaders. Together, these stakeholders can act in unison to attract young Emiratis considering their future careers.

Raising awarenessA key place to start is at school level in order to raise awareness and knowledge about the accounting and finance profession. Most of us will

Recently, a joint ICAEW/DFSA Breakfast meeting sought to address the topic of attracting Emirati talent to the Finance Sector.

PH

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MA

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The solution to attract Emirati talent into the finance sector perhaps lies in a fresh approach compared to traditional methods, comprising a range of measures implemented and championed by government and the major accounting firms.

remember being inspired to make career choices at school age, and a co-ordinated approach to educate and inspire young Emiratis will help to remove some of the barriers and out-dated perceptions about the profession.

In particular, explaining the many varied paths of a finance career, the value of a professional qualification for future personal growth, and contributing the development of the UAE economy and society overall are crucial themes to engage young hearts and minds.

Strengthening the links between schools and universities which provide finance and accounting degrees is essential for an effective outcome for this initiative and it must be sustained to have full impact.

RemunerationCommentators have widely differing views on the importance of remuneration in attracting Emirati talent, especially the divergence between the salary levels paid to young Emiratis entering the state sector compared to the private sector.

Moreover, the hours and commitment required to finish studies in the finance sector whilst holding down a full time job are sometimes seen by some as a deterrent.

However, evidence suggests that if a young graduate has a passion for the job, they will work unlimited hours hungry to learn and develop – witness the long hours worked by young employees at Google, Facebook and Apple. In the end, it is about making the employer brands and the careers they offer attractive, flexible and exciting.

Creative remuneration and terms of employment specifically targeted at young Emiratis will encourage them to join the profession rather than

the traditional ‘one size fits all’ approach. This is a challenge for accounting and finance companies to think ‘out of the box’ and re-examine existing policies. More broadly it is an industry challenge that requires co-ordination to avoid wild variations among employers or long-term adverse cost consequences.

At the same time, the discrepancy between state sector and private sector remuneration may be addressed to encourage Emiratis to pursue careers in the private sector. Specific financial support such as scholarships or bursaries targeted at the finance sector, building on the programmes of the ICAEW, will help encourage Emiratis to enter the profession and bridge the gap in a planned way.

Again, creative thinking between government, employers and the professional bodies will be required to implement such a policy successfully and broadly.

Retention & DevelopmentIt is a basic truism that it is much cheaper in the long-run to retain staff rather than to constantly replace leavers disenchanted with their careers. Employers may consider using more rounded and tailored evaluation processes to more accurately identify new Emirati entrants who are suited to the profession, including such aspects as emotional intelligence and natural career preferences.

This starts from the recruitment stage where it is vital to ensure that entrants have been assessed thoroughly as being suited for a career in the profession. Perhaps in the past there has been too much reliance on the hard skills side of the equation and not enough emphasis placed on the soft or behavioural skills side.

Ultimately, there will always be an ebb and flow of entrants and leavers in the accounting and finance sphere just like any other industry or profession.

However, when Emiratis leave to move into more senior roles in the state and private sectors, it should be viewed as a success rather than a failure. This is the case for example in the oil and gas sector in the UAE where the sustained training and development of young nationals over many years has created a benchmark talent pool.

Why not seek to do the same and establish the

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Creative remuneration and terms of employment specifically targeted at young Emiratis will encourage them to join the profession rather than the traditional ‘one size fits all’ approach.

finance and accounting alumni as a benchmark talent pool of future Emirati leaders?

Mentoring & Role ModelsWhether it is Richard Branson in the aviation sector, Steve Jobs in IT, or Warren Buffet in Investment, all have inspired young entrants into their respective industries through their example and their charisma.

More subtly but just as importantly, many of us have stayed the course in the ups and downs of our careers thanks to timely counsel from mentors both inside and outside the workplace. The opportunity to develop Emirati mentors and role models in the finance sector must be taken more seriously in order to inspire younger Emiratis. Their success is the most solid evidence and proof that a finance career can in fact be compelling and real.

Training senior Emiratis in the industry to act as mentors and coaches to impart their skills and expertise requires recognising their achievements and asking them to re-invest in younger emerging talent. It is a contribution to society as well as the industry which will develop future leaders in the community. This initiative requires provision of specialist training to develop and support the talent pool of mentors and role models.

Task ForceIn conclusion, the above measures could form the basis of an integrated strategy to position the finance and accounting sector as an attractive and long-term career path for Emiratis.

To be successful, there needs to be a new level of co-ordination and co-operation between the various stakeholders such that scare resources in a competitive industry are wisely used, and a clear, positive message is communicated to Emiratis who have multiple career choices.

A joint stakeholder task force could be formed to make the start and develop these strategies in more depth. In the end, the profession will have its rightful place as a vital and key contributor to the long-term development of the UAE economy and wider society.

Quite simply, the challenge is too important to be ignored.

Rita Aoun Rizk is a qualified occupational psychologist with a passion to improve human capital performance and well-being at work. As a managing partner of Tamayyaz, she and her team have developed a range of tailored programmes targeted at the development of nationals as future leaders. Her educational background and extensive experience in the region has allowed her to help people achieve and sustain real behavioural change.

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Low pay, long working hours, rigorous professional qualifications, some of the major hindrances for UAE nationals wanting to pursue careers in finance and accounting, says top Emirati auditor Ahmed Al Maqtari…

I HESITATED a lot before writing this article mainly because my mother tongue is not English and I may not be able to express exactly

how passionately I feel about the topic of this matter.

Well then, you may ask. How do I feel about the profession?

Quite frankly, disappointment may be an understatement.

I feel disappointed and often times frustrated because a lot of injustices and harm has been caused to the finance/accountancy and audit professional. The high qualifications that this profession demands has mainly caused many Emiratis to shy away from it.

WHO’S TO

BLAME?

WHO’S TO

BLAME?

Let me attempt to explain the history of this profession in the UAE, its current status and what can be done to attract local nationals to go for it.

Jobs for expatsWhen the UAE gained its independence in 1971 the financial/accountancy services in the country were virtually confined to expatriates back then. No higher education was available locally and the finance profession was almost unheard of.

The Government relied on expatriates to provide audit and other financial services, the oil industry depended on shareholder secondees to manage their finances and fiscal matters and the private sector was generally relying on accounting clerks recruited from the Indian sub-continent who provided basic single-entry book-keeping services.

PROUD ACCOUNTANT:

Ahmed Al Maqtari, a successful Emirati accountant running his own company and advisory practice, senses a level of discrimination within the profession against Emiratis. He says none of his five sons are interested in following in his footsteps.

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No guarantees of a secured and rewarding job after qualifying from a course.

No attraction/appeal to the profession which is always wrongly portrayed as a difficult and boring industry.

Mingling of the good, the bad and the ugly in the employment/professional market is still prevalent, where a junior book-keeper or equated to a qualified CA or an ACCA.

Going into public practice by an Emirati is virtually an extremely risky venture within the harsh monopolistic conditions brought about by the dominance of the ‘Big Four’, and also by other expatriate firms which all appear to share a common goal of fending off any competition from a qualified local entity.

The above list is by no means exhaustive but it constitutes an indicator that there is a serious problem on the road map to Emiratisation of the financial profession and it is, therefore, the purpose of this article to provoke all concerned including: The Government in general, the UAE Ministry of Higher Education, the Ministry of Economy (who is in charge of the applicable laws regulating the profession), the Universities, the ‘Big Four’, The UAE Accountants and Auditors Association etc - to form a common platform to discuss the existing difficulties, hurdles and brick walls facing Emiratisation, with a common objective of designing a solid solution to this problem.

I take this opportunity to commend the efforts that the Institute of Chartered Accountants in England and Wales (ICAEW) and the Dubai Financial Services Authority (DFSA) have demonstrated to bring full awareness of the challenges of Emiratisation that this profession is facing.

TÊTE-À-TÊTE:

Ahmed Al Maqtari engages the Editor of Accountant Middle East publication, Joyce Njeri in a discussion, during a recent breakfast meeting on Emiratisation drive in the accountancy industry.

Some businesses back then, didn’t even maintain accounting records and were content with money-in money-out through the till. To such businesses, recruiting an accountant for a monthly salary of AED1000 was seen as an extravagant venture.

From 1971 onwards, the late Father of the Nation H.H. Sheikh Zayed Bin Sultan Al Nahyan exerted gigantic efforts to catch up with the rest of the world in every aspect and education was at the top of his priorities. The country witnessed the establishment of thousands of schools at all levels and his dream of establishing a UAE University came true in 1976. Afterwards, the campuses under the umbrella of Higher Colleges of Technology were established throughout the country followed by a tremendous upsurge of academic institutions in all the Emirates.

Practicing in publicSadly, the financial professional education and its dominant renowned institutions were not on that train. Who then was to blame? The answer is worthy of being investigated.

As a consequence, the Emiratis still shy away from the profession, many believed and still believe that the profession merely supplies accounting clerks, book-keepers and accounting technicians. It is a fact that until today, book-keepers, basic accounting graduates with some experience and accounting technicians all rank pari-passu (at par) with the CA’s, ACCA’s and equivalents and all are granted licenses to practice in public. Most of the private sector recruit the least qualified and it is unfortunate that such employers wrongly believe that they are saving costs that way.

One can write endlessly on many reasons that lead to the refrainment of Emiratis from the profession. But to sum up… it is best to enumerate some important factors that significantly contribute to such adverse attitude:

Lack of recognition/status of the professional financial qualifications.

No adequate information on what a professional qualification really means and how important it is to the nation.

Lack of information of available resources that provide education for such qualifications.

No adequate scholarships available to Emiratis to opt for such qualifications, compared to most of the other fields of education. PHOTOS: COURTESY OMAR SIKANDER

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IS THIS THE NEW

BATTLEGROUND?

Comparatively, high corporation tax rates put businesses in developed economies at a serious disadvantage compared to those based in emerging markets.

SOME DEVELOPED nations are still dragging their economies down with far higher corporation tax rates than emerging

economies, according to research by UHY, the international accounting and consultancy network.

On taxable profits of $1,000,000, the G7*group of developed economies takes an average of 32.6% of corporate profits in tax, compared to an average of 30.3% in the BRIC** economies (Brazil, Russia, India and China).

UHY says that comparatively high corporation tax rates put businesses in developed economies at a serious disadvantage compared to those based in emerging markets, and risk suppressing economic growth in developed economies.

Level playing fieldLadislav Hornan, Chairman of UHY, says: “Corporation taxes are a signif icant burden for businesses, and that burden is far higher in developed economies than in emerging markets. High corporation taxes mean businesses in developed economies cannot compete on a level playing f ield, suppressing growth in economies that are already struggling.”

“The low corporation tax rates in emerging markets or lower-tax economies mean businesses can plough much more of their profits back into business or product development. More investment and lower costs can give businesses in places like China a competitive advantage on price and product quality when it comes to exporting to developed economies or competing with imports.”

Ladislav Hornan adds: “The benefits of being based in a developed economy – better infrastructure and well-established supply chains – count for less and less as emerging

TAX

WATCH

36 June 2013

Developed nations continue to drag down businesses with higher corporation taxes than BRICs, new report warns...

IS THIS THE NEW

BATTLEGROUND?

Comparatively, high corporation tax rates put businesses in developed economies at a serious disadvantage compared to those based in emerging markets.

SOME DEVELOPED nations are still dragging their economies down with far higher corporation tax rates than emerging

economies, according to research by UHY, the international accounting and consultancy network.

On taxable profits of $1,000,000, the G7*group of developed economies takes an average of 32.6% of corporate profits in tax, compared to an average of 30.3% in the BRIC** economies (Brazil, Russia, India and China).

UHY says that comparatively high corporation tax rates put businesses in developed economies at a serious disadvantage compared to those based in emerging markets, and risk suppressing economic growth in developed economies.

Level playing fieldLadislav Hornan, Chairman of UHY, says: “Corporation taxes are a signif icant burden for businesses, and that burden is far higher in developed economies than in emerging markets. High corporation taxes mean businesses in developed economies cannot compete on a level playing f ield, suppressing growth in economies that are already struggling.”

“The low corporation tax rates in emerging markets or lower-tax economies mean businesses can plough much more of their profits back into business or product development. More investment and lower costs can give businesses in places like China a competitive advantage on price and product quality when it comes to exporting to developed economies or competing with imports.”

Ladislav Hornan adds: “The benefits of being based in a developed economy – better infrastructure and well-established supply chains – count for less and less as emerging

TAX

WATCH

36 June 2013

Developed nations continue to drag down businesses with higher corporation taxes than BRICs, new report warns...

25.6% The average global Tax on profiTs of $100,000

Ladislav Hornan, Chairman of UHY: “Corporation taxes are a significant burden for businesses.”

economies improve their infrastructure, tax systems, and business communities.”

“As emerging economies catch up to developed economies, the disadvantages of developed economies – more red tape and higher taxes – increasingly stand out. Without action on the kinds of things that suppress growth, such as overly complex regulation or high taxes, businesses based in developed economies will begin to look closely at relocating.”

No tax on corporate profitsUHY tax professionals studied tax data in 26 countries across its international network, including all members of the G7, as well as key emerging economies. UHY calculated the corporation taxes due on taxable profits of $100,000 and $1,000,000

The firm says that, of the countries included in the study, Japan charges the highest taxes on corporate profits of $100,000 (43%). The UAE charges no tax on corporate profits, while the Irish government takes just 12.5% of corporate profits in tax.

The average global tax on profits of $100,000 is 25.6%, while the BRIC average is 27.8%, and the G7 average is 30.2%.

Ladislav Hornan says: “There are some emerging economies with high corporation taxes, such as India. However, these countries support their businesses in other ways. India, for example,

has exceptionally low taxes on employment.”

“Outside of the BRICs, corporation taxes in emerging markets such as eastern

European countries or in Malaysia are much lower than average.”

Boosting competitivenessUHY adds that some G7 countries have taken steps to reduce their corporation tax rate.

Ladislav Hornan says: “Japan, Canada, and the UK have all

recognised the importance of cutting the headline corporation

tax rate, with each country cutting their rate in the last year – although

Japan still has the highest corporation tax rate in the G7.”

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37

“Cut t ing t he headline cor porat ion t a x rate rat her t han t r y ing to boost compet it iveness t hrough int roducing new rel iefs has several advant ages for bot h business and government .”

Ladislav Hornan ex plains: “Int roducing new t a x rel iefs w il l benef it some businesses, but t hey int roduce added complexit y to t he t a x system. This creates new burdens for businesses as t hey work out which rel iefs t hey can and can’t quali f y for, and it creates scope for disputes w it h t a x aut horit ies .”

Rajiv Saxena, Managing Partner at UHY-Saxena: “Businesses in the UAE benefit from a very generous tax regime.”

“Businesses will base their decision on where to have their tax base on a range of factors, but cuts in the headline corporate tax rate can send a strong, clear signal to businesses that a government is ‘business-friendly’.”

Attracting major investmentsRecent UHY studies have found G7 countries lagging behind BRIC countries on a range of business and tax burdens.

One UHY study in 2012 found that G7 countries took an average of 29.7% of their GDP in tax, while BRIC countries took an average of 27.7%.

An earlier 2013 study on employment taxes found that G7 employers paid an average added 23.8% of an employee’s $75,000 salary in social security contributions, compared to 22% for an employer in a BRIC economy.

Roisin Duffy, Tax Director at UHY FarrellyDawe White Limited in Ireland, a member firm of UHY, says: “Despite the difficult f inancial situation the government is in, it has fought hard to maintain a very low headline rate of corporation tax. This is a major factor in helping attract and keep major global companies like Google and Facebook in Ireland.”

Generous tax regimeAndrea D’Amico of FiderConsultSrl, member firm of UHY in Italy, says: “Italian businesses are struggling under a high tax and regulatory burden. Whether it is employment taxes, taxes on profits, or bureaucracy, Italy does not compare well to either developed or developing economies.”

“While the Italian corporate tax rate is around 30% in theory, companies may end up paying far higher taxes because of the way the tax system works. It ’s important that the Government take urgent measures to address this. Cutting the headline corporate tax rate would be a step in the right direction.”

Rajiv Saxena, Managing Partner at UHY, a partnership in UAE and member of UHY, says: “Businesses in the UAE benefit from a very generous tax regime. Business activities attract very little, or, more often than not, no tax charge. The low costs of doing business have helped turn the UAE into a major global business hub.”

High corporation taxes mean businesses in developed economies cannot compete on a level playing field, suppressing growth in economies that are already struggling.

38 June 2013

TAX

WATCH

“Cut t ing t he headline cor porat ion t a x rate rat her t han t r y ing to boost compet it iveness t hrough int roducing new rel iefs has several advant ages for bot h business and government .”

Ladislav Hornan ex plains: “Int roducing new t a x rel iefs w il l benef it some businesses, but t hey int roduce added complexit y to t he t a x system. This creates new burdens for businesses as t hey work out which rel iefs t hey can and can’t quali f y for, and it creates scope for disputes w it h t a x aut horit ies .”

Rajiv Saxena, Managing Partner at UHY-Saxena: “Businesses in the UAE benefit from a very generous tax regime.”

“Businesses will base their decision on where to have their tax base on a range of factors, but cuts in the headline corporate tax rate can send a strong, clear signal to businesses that a government is ‘business-friendly’.”

Attracting major investmentsRecent UHY studies have found G7 countries lagging behind BRIC countries on a range of business and tax burdens.

One UHY study in 2012 found that G7 countries took an average of 29.7% of their GDP in tax, while BRIC countries took an average of 27.7%.

An earlier 2013 study on employment taxes found that G7 employers paid an average added 23.8% of an employee’s $75,000 salary in social security contributions, compared to 22% for an employer in a BRIC economy.

Roisin Duffy, Tax Director at UHY FarrellyDawe White Limited in Ireland, a member firm of UHY, says: “Despite the difficult f inancial situation the government is in, it has fought hard to maintain a very low headline rate of corporation tax. This is a major factor in helping attract and keep major global companies like Google and Facebook in Ireland.”

Generous tax regimeAndrea D’Amico of FiderConsultSrl, member firm of UHY in Italy, says: “Italian businesses are struggling under a high tax and regulatory burden. Whether it is employment taxes, taxes on profits, or bureaucracy, Italy does not compare well to either developed or developing economies.”

“While the Italian corporate tax rate is around 30% in theory, companies may end up paying far higher taxes because of the way the tax system works. It ’s important that the Government take urgent measures to address this. Cutting the headline corporate tax rate would be a step in the right direction.”

Rajiv Saxena, Managing Partner at UHY, a partnership in UAE and member of UHY, says: “Businesses in the UAE benefit from a very generous tax regime. Business activities attract very little, or, more often than not, no tax charge. The low costs of doing business have helped turn the UAE into a major global business hub.”

High corporation taxes mean businesses in developed economies cannot compete on a level playing field, suppressing growth in economies that are already struggling.

38 June 2013

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39

TAX

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country

Value of tax charged on taxable corporate profits of $100,000 and $1,000,000 in 2012-13

usd 100,000 country usd 1,000,000

Japan††

India

Argentina

France

Germany

Italy

Nigeria

G7

Australia

Mexico

BRIC

Canada††

All

Spain

China

Malaysia

Denmark

Austria

USA††

Brazil†

Slovakia

Netherlands

UK

Russia

Czech Republic

Romania

Ireland

UAE

India

Japan††

USA††

Argentina

France

Brazil†

G7

Germany

Italy

Nigeria

BRIC

Australia

Mexico

Spain

All

Canada††

China

Malaysia

Denmark

Austria

Netherlands

Slovakia

UK

Russia

Czech Republic

Romania

Ireland

UAE

$ 43,020.91

$ 42,110.00

$35,000.00

$ 33,330.00

$ 32,450.00

$ 32,320.00

$ 32,000.00

$ 30,238.70

$ 30,000.00

$ 30,000.00

$ 27,777.50

$ 26,500.00

$ 25,592.70

$ 25,000.00

$ 25,000.00

$ 25,000.00

$ 25,000.00

$ 25,000.00

$ 24,050.00

$ 24,000.00

$ 23,000.00

$ 20,000.00

$ 20,000.00

$ 20,000.00

$ 18,997.77

$ 16,000.00

$ 12,500.00

$ -

$ 434,041.00

$ 410,945.41

$ 400,000.00

$ 350,000.00

$ 333,300.00

$ 327,778.49

$ 326,328.60

$ 324,500.00

$ 323,200.00

$ 320,000.00

$ 302,954.87

$ 300,000.00

$ 300,000.00

$ 280,446.09

$ 269,889.54

$ 265,000.00

$ 250,000.00

$ 250,000.00

$ 250,000.00

$ 250,000.00

$ 236,964.06

$ 230,000.00

$ 227,354.77

$ 200,000.00

$ 189,997.09

$ 160,000.00

$ 125,000.00

$ -

43.02%

42.11%

35.00%

33.33%

32.45%

32.32%

32.00%

30.24%

30.00%

30.00%

27.78%

26.50%

25.59%

25.00%

25.00%

25.00%

25.00%

25.00%

24.05%

24.00%

23.00%

20.00%

20.00%

20.00%

19.00%

16.00%

12.50%

0.00%

43.40%

41.09%

40.00%

35.00%

33.33%

32.78%

32.63%

32.45%

32.32%

32.00%

30.29%

30.00%

30.00%

28.04%

26.88%

26.50%

25.00%

25.00%

25.00%

25.00%

23.70%

23.00%

22.70%

20.00%

19.00%

16.00%

12.50%

0.00%

* USA, Canada, Japan, UK, France, Germany, Italy** Brazil, Russia, India, China† Rate may vary depending on revenue reported by company†† Includes local or state level taxes

Rob Tautges, Chief Executive Officer of HLB International

Movers

& shakers

40 June 2013

COMPETITION IN consultancy business is healthy and robust and although the audit market is dominated by the Big Four

accounting firms, mid-tier entities should feel really good about their business prospects.

This is because when your largest competitors have a stranglehold on the largest clients, it’s probably nice to see how much opportunity they are passing up. One man who knows this just too well is Rob Tautges, the Chief Executive Officer of HLB International, a network of independent professional accounting firms and business advisers.

Rob took over the reins as chief executive of HLB International from Peter Frost in November, 2009 and his present role involves driving, developing and promoting the network’s global presence. Formed in 1969, HLB International network has 15,676-strong staff based in 447 offices in more than 100 countries. The firm is the 12th-largest accounting network in the world.

Earlier, Rob was a senior partner at Minnesota-based firm HLB Tautges Redpath from 1995 to 2009 before joining the international network. He was Chairman of HLBI, a volunteer-type position… but he was still managing his practice.

Towards the end of his chairmanship, Frost was retiring and that’s when Rob stepped in.

The London-based CEO was recently in Dubai where he spoke exclusively to Accountant Middle East about how the network continues to spread its tentacles in the region as well as internationally; Excerpts of the interview…

Here in the Middle East, most top listed companies are audited by the ‘Big 4’ accountancy firms. As the region experiences growth particularly in the oil and gas, telecoms and financial services, do you think there’s room for other independent financial consultancies entering the market?

There’s definitely room for new players. It is true that the ‘Big 4’s dominance is maintained by institutional preference, however, mid-tier firms view the oligopoly of these large audit companies as non-threatening. Most governments, banks, stock markets and other institutions require that their major clients use only a ‘Big 4’ auditor, and when you get to other listed companies there’s no reason why a mid-tier network cannot be able to service it. Firms such as HLB, UHY, PKF, BDO, and Grant Thornton among others have demonstrated they are big enough to conduct effective audits on large organisations, and continue to do so.

Movers

& shakers

41

MID-TIer

MUsCLe Oligopoly. Do you know what it means? The ‘Big 4’ global firms have captured between 70% and 80% of audit revenue worldwide and in this exclusive interview with the CEO of HLB International, Joyce Njeri delves deeper to find out how the firm continues to grow its market share amid intense competition…

12THGlobal standinG of Hlb international in tHe rankinG of audit firms

SWIMMING WITH THE SHARKS:

“It is true that the ‘Big 4’s dominance is maintained by institutional preference, however, mid-tier firms view the oligopoly of these large audit companies as non-threatening.”

We certainly have witnessed intense competition in the recent years, which has actually worked in favour of mid-tier firms. The growth of the private sector, the oil and gas, telecoms and financial services has also encouraged greater competition. This competition has fueled the natural process of consolidation and organic growth of mid-tier companies. At HLB, we have managed to rank top after being able to invest heavily in systems, recruit the best caliber staff, effectively manage risk of failure and certainly adopting the international standards as demanded by institutions like the International Accounting Standards Board (IASB).

HLB’s audit services range from IT, HR to finance. As organisations today work

towards managing risks and cutting down unnecessary expenditure, what do you regard as the critical operational areas to be watched in the everyday running of the business?

When you look back to some of the catastrophic events that businesses have encountered in the recent past, it is evident enough that all facets of a business need to be well looked after. Take for instance the oil spill in the Gulf of Mexico. The leak and its attendant damage cost BP and several other companies billions of money. Last month, hackers stole ATM card personal information from millions of people and used the information to rob money. We have also witnessed how badly constructed buildings have collapsed, putting people’s lives at risk and causing businesses unprecedented losses.

With supply chains, global trade and financial markets all intricately linked, risks become apparent and with significant impacts on company operations. So, what do you need to counter this? We cannot over emphasise the importance that auditors/accountants play in risk management.

Businesses need to be nimble, they need to be flexible, and they need to be able to respond to

The regulatory environment is becoming tight. Factors that likely have led to the current markets regulation include the existence of reputation effects (both positive and negative), liability risks and insurance costs.

Movers

& shakers

42 June 2013 43

matters as they occur and to anticipate them as well. This is referred to as risk management. When you have a trusted adviser who can assist you in seeing what’s around the corner, you would be able to take very specific steps to minimise the effects.

Governments have been putting measures in place in an effort to minimise bad reporting mistakes and fraudulent deals, particularly following the financial crisis. With major audit firms like HLB which market themselves as seamless global firms, I’m sure some of these legislations are putting auditors in a bind. For instance, your firm here in the UAE can do things that are forbidden in, say, in the UK, despite their common membership in the HLBI network. In your opinion, how are these country-specific legislations affecting the operations of HLB’s string of legally independent local partnerships?

The regulatory environment is becoming tight. Factors that likely have led to the current markets regulation include the existence of reputation effects (both positive and negative), liability risks and insurance costs. Countries have legislated limited liability for auditors.

One main challenge arising from this is that of liability of audit firms in the event of negligence. Damage claims arising from alleged professional negligence are increasing, and if you remember the scandal of Enron and the collapse of Andersen & Co, what this means effectively, is that auditors are compelled to accept the business risk of their clients. On the other hand, these regulations have favoured big accounting firms, with greater liabilities being imposed on auditors and directors.

The very foundation of public accounting is to win and earn trust and something that is so foundational to the profession at most fronts… looks to welcoming those rules and regulations. The side that we have to stay balanced with though, is the practicality of some of the regulations and the cost.

If the regulation is such that it would increase a typical audit cost by a certain percentage, we expect the authorities that are introducing the regulations to understand the full impact of what is really is. When we look at different countries there are basic professional principles that we expect them to adhere to even if their

(firms) local country has asked for a regulation in that particular area.

All HLB member firms for instance, we expect them to comply with IASB standards. Some countries have passed regulations by requiring international standards for audit, but for

The credit crunch of 2008-2010 and debt crises have introduced the world to a new order of magnitude in financials. Businesses have been forced to establish new models to cope and stay liquid and competitive.

WORDS OF WISDOM:

Businesses need to be nimble, they need to be flexible, and they need to be able to respond to matters as they occur and to anticipate them as well. This is referred to as risk management.

Movers

& shakers

43

matters as they occur and to anticipate them as well. This is referred to as risk management. When you have a trusted adviser who can assist you in seeing what’s around the corner, you would be able to take very specific steps to minimise the effects.

Governments have been putting measures in place in an effort to minimise bad reporting mistakes and fraudulent deals, particularly following the financial crisis. With major audit firms like HLB which market themselves as seamless global firms, I’m sure some of these legislations are putting auditors in a bind. For instance, your firm here in the UAE can do things that are forbidden in, say, in the UK, despite their common membership in the HLBI network. In your opinion, how are these country-specific legislations affecting the operations of HLB’s string of legally independent local partnerships?

The regulatory environment is becoming tight. Factors that likely have led to the current markets regulation include the existence of reputation effects (both positive and negative), liability risks and insurance costs. Countries have legislated limited liability for auditors.

One main challenge arising from this is that of liability of audit firms in the event of negligence. Damage claims arising from alleged professional negligence are increasing, and if you remember the scandal of Enron and the collapse of Andersen & Co, what this means effectively, is that auditors are compelled to accept the business risk of their clients. On the other hand, these regulations have favoured big accounting firms, with greater liabilities being imposed on auditors and directors.

The very foundation of public accounting is to win and earn trust and something that is so foundational to the profession at most fronts… looks to welcoming those rules and regulations. The side that we have to stay balanced with though, is the practicality of some of the regulations and the cost.

If the regulation is such that it would increase a typical audit cost by a certain percentage, we expect the authorities that are introducing the regulations to understand the full impact of what is really is. When we look at different countries there are basic professional principles that we expect them to adhere to even if their

(firms) local country has asked for a regulation in that particular area.

All HLB member firms for instance, we expect them to comply with IASB standards. Some countries have passed regulations by requiring international standards for audit, but for

The credit crunch of 2008-2010 and debt crises have introduced the world to a new order of magnitude in financials. Businesses have been forced to establish new models to cope and stay liquid and competitive.

WORDS OF WISDOM:

Businesses need to be nimble, they need to be flexible, and they need to be able to respond to matters as they occur and to anticipate them as well. This is referred to as risk management.

Movers

& shakers

HLB member firms, we set our standard at that minimum. The regulations that are more troublesome for me are those that want to somehow tip the natural forces of competition. Some are saying that perhaps others are too dominant or regulations move work away from networks. The major policy challenge is to identify and remove the restrictions which are unnecessary or disproportionate to achieve public interest goals.

Still on the same issue, with an aim to crack whip on tax, audit and investment advisors possibly indulging in unfair trade practices, some governments as well as regulatory authorities are putting in place strict operational policies and laws for them, including putting a ceiling on fees charged by them. What is your take on this?

My feeling is that putting a ceiling on fees charged is a gross mistake. If so many procedures need to be done in the business to protect public interest, to be able to give a very clear audit opinion, and then the regulators come in and say you have to do all these within a certain ceiling… it puts pressure on the accounting firm to stay profitable and to hire qualified staff. And if that plays out, at the end of the day it may lead to lower quality report that doesn’t protect the public interest.

The credit crunch of 2008-2010 and debt crises have introduced the world to a new order of magnitude in financials. Businesses have been forced to establish new models to cope and stay liquid and competitive. What in your assessment are the most common challenges financial consulting businesses are facing in today’s competitive marketplace?

Accountancy firms are facing the same issues that other businesses are, that is, if many of their clients’ needs are less or are out of business… that means the revenue of the accountancy firm

is down. So they need to consider the efficiency of procedures that they put in place, they also need to right-size their resources for the business, and they also need to identity greater opportunities and diversify their services.

Most of the market zones where HLB has established operations are still going through financial and economic challenges. For instance here in the Middle East we have countries that are still restive following the infamous Arab Spring. The UK and the entire Euro zone have lately been in the news as economies deploy mechanisms for recovery. Kindly share with us how HLB continues to grow its revenues internationally under these conditions.

As I talk with our firms around the world and specifically here in the Middle East, the economic downturn is certainly troublesome, but it also creates opportunities. Of course on the face of things, the downturn and sluggish jobs market should be a concern for all professionals, however, the value of a chartered accountant in an economic downturn goes up.

The measures that their clients need to survive and thrive really relies on sound and solid advice.

Businesses and organisations of all sizes recognise the importance of financial experts in times of prosperity and of hardship, and this means there are always opportunities for accountants. Firms become even more conscious of their finances during an economic downturn as they look to deploy anything they can do to improve the health of the bottom line, or simply gain strategic insight from the balance sheet.

As such, businesses recognise the need to hire accountants to maintain up-to-date records. Similarly, during the economic crisis, governments impose tough corporate governance and regulatory rules. In this case, accountancy professionals play an important role in helping businesses to deal with complex rules and regulations.

HLB has greatly capitalised on this fact and the worldwide expansion of our network has largely appeared to be recession proof, as we continue to hire on all continents to operate effectively in a globalised business world and increase our presence, particularly is emerging markets.

Businesses and organisations of all sizes recognise the importance of financial experts in times of prosperity and of hardship, and this means there are always opportunities for accountants.

Movers

& shakers

44 June 2013

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finD

CFO ad 270x207.indd 1 12/9/12 6:08:37 PM

Matthew GaMble

IN MY first part of this series, I offered a refresher on money laundering, terrorist financing and sanctions. In this second part, I

want to explore what I believe a prudent accounting / auditing firm should be doing to meet its obligations.

Perhaps the most important obligat ion is the reporting of suspicious act ivit ies and or transactions.

It is my intention in this part to discuss suspicious activities and or transactions and what to do with them as well as the important role that the Money Laundering Reporting Officer (MLRO) plays.

The best tool against money launderers, terrorist financiers and sanction busters is transparency. These criminals work in the shadows of commerce, hiding their true identities and real reasons for the transactions. William O. Douglas said “Sunlight is the best disinfectant .”

Two-pronged approachIt is the same with transparency and corruption. It is for this very reason that the Financial Action Task Force on money laundering (FATF) recommends the need to require the mandatory disclosure of suspicious

Director, SuperviSion anD HeaD of anti-Money LaunDering, Dubai financiaL ServiceS autHority

transactions and the ability for governments to share information. Only with mandatory sharing of information about criminal activities can governments work together to fight criminals who circumnavigate sanctions, finance terrorism and hide their ill-gotten gains.

This two pronged approach of disclosing and information sharing is ref lected in FATF recommendations which in turn should inf luence each country’s legislation.

Let me take you through the path of mandatory disclosure and sharing of information regimes from FATF to UAE law and then finally describe how it is reflected in the Dubai Financial Services Authority (DFSA) laws and regulations.

DisclosureFATF Recommendation 20 - reporting of suspicious transactions;

If a financial institution suspects or has reasonable grounds to suspect that funds are the

From the

experts

46 June 2013

In this second instalment of our continuing series on Money Laundering, Sanctions and Terrorist Financing, Matthew Gamble explains the obligation of audit firms on illicit financial transactions…

WhAt’s It

Got to Do

WIth me?

proceeds of a criminal activity, or are related to terrorist financing, it should be required, by law, to report promptly its suspicions to the Financial Intelligence Unit (FIU).

FATF Recommendation 23 states that FATF Recommendation 20 also applies to the non-financial sector namely Designated Non-Financial Businesses and Professions (DNFBPs) which as covered in part 1… includes accountants and auditors.

In the UAE Article 15 of the Federal Law No. 4 of 2002 titled “Criminalisation of Money Laundering” states:

Chairmen, directors, managers and employees of Financial Institutions or Other Financial, Commercial and Economic Establishments who know of, yet fail to report to the Unit stated in Article (7) hereof any act that occurred within their establishments and was related to the Money Laundering offence, shall be punished by imprisonment or by a fine not exceeding AED 100,000 (UAE dirhams hundred thousand)

and not less than AED 10,000 (UAE dirhams ten thousand) or by both penalties.

The FIU in the UAE is named the Anti-money Laundering Suspicious Cases Unit (AMLSCU) and resides in the UAE Central Bank.

In the Dubai International Financial Centre (DIFC), accountants who operate in or from the DIFC and auditors registered with the DFSA are subject to ASP Rule 6.6.2, which requires an accountant or auditor, if it’s Anti-Money Laundering Reporting Officer (AMLO) determines a report must be made, to make a report to the AMLSCU.

The appointment and duties of a MLRO or AMLO for accountants is discussed below.

The most important aspect I want to emphasis in Article 15 of the UAE law is the obligation on those who know of, yet fail to report any act that occurred within their establishment and that was related to money laundering. The penalty for a breach may include imprisonment, fines or both. Accountants and auditors need to consider this obligation carefully and what systems and controls should be in place to ensure compliance.

Ignorance is not an excuse. I do not believe that it is a valid defence to say that you were unaware. The test, I believe, will be: would an ordinary accountant / auditor faced with similar facts report their suspicion?

The test, therefore, is not one of reasonable doubt or on the balance of probabilities but merely having a suspicion. Most firms will have systems and controls in place that appoint a MLRO to carry out the task of forming a view as to whether a particular scenario is suspicious. In fact, in most jurisdictions the legislation will require the appointment of a MLRO.

Only with mandatory sharing of information about criminal activities can governments work together to fight criminals who circumnavigate sanctions, finance terrorism and hide their ill-gotten gains.

From the

experts

47

From my own personal experience, I have seen firms argue that they only need to file a report on a suspicious transaction and therefore, if an enquiry does not develop into a transaction, then there is no need to file. In my opinion, this is a blinkered view and does not meet the spirit of what is trying to be achieved.

If an individual comes to you with a proposal that “smells like money laundering” you cannot simply wash your hands by turning him or her away. That individual will only seek a less suspecting accountant to carry out the proposal. It is for this very reason that FATF has said that the reporting should be for any activity whether or not a transaction results.

The AMLSCU has repeated the same in a number of outreach sessions over the last few years have. The DFSA proposes to amend its current AML rules to ref lect this as well.

Information SharingThe second limb is sharing of information between governments FIUs. Criminals do not recognise borders of countries. In fact they actively seek to have their transactions occur across multiple jurisdictions in order to obfuscate their activities. Governments cannot work in isolation but need to work together to combat this.

FATF Recommendation 29 - financial intelligence units;

Countries should establish a Financial Intelligence Unit (FIU) that serves as a national centre for the receipt and analysis of:

(a) suspicious transaction reports; and

(b) other information relevant to money laundering, associated predicate offences

and terrorist financing, and for the dissemination of the results of that analysis.

The FIU should be able to obtain additional information from reporting entities, and should have access on a timely basis to the financial, administrative and law enforcement information that it requires to undertake its functions properly.

Article 7 of the Federal Law No. 4 of 2002 states:

There shall be established, within the Central Bank, a “Financial Information Unit” to deal with Money Laundering and suspicious cases, and to which reports of suspicious transactions shall be sent from all Financial Institutions and Other Financial, Commercial and Economic Establishments. The Committee shall determine the format for reporting suspicious transactions and the methods of communicating reports to the said Unit. The said Unit shall make information available to law enforcement agencies to facilitate their investigations. The said Unit may exchange information on suspicious transactions with their counterparts in other countries in accordance with international

If a financial institution suspects or has reasonable grounds to suspect that funds are the proceeds of a criminal activity, or are related to terrorist financing, it should be required, by law, to report promptly.

48

From the

experts

June 2013 49

conventions to which the State is a party, or on the basis of reciprocity.

FIUs usually come under four models:

i) The Judicial Model is established within the judicial branch of government wherein “disclosures” of suspicious financial activity are received by the investigative agencies of a country from its financial sector such that the judicial powers can be brought into play, for instance, seizing funds, freezing accounts, conducting interrogations, detaining people, conducting searches, among others.

ii) The Law Enforcement Model implements anti-money laundering measures alongside existing law enforcement systems, supporting the efforts of multiple law enforcement or judicial authorities with concurrent or sometimes competing jurisdictional authority to investigate money laundering.

iii) The Administrative Model is a centralised, independent, administrative authority, which receives and processes information from the financial sector and

transmits disclosures to judicial or law enforcement authorities for prosecution. It functions as a “buffer” between the financial and the law enforcement communities.

iv) The Hybrid Model serves as a disclosure intermediary and a link to both judicial and law enforcement authorities.

One mechanism for the sharing of information is the Egmont Group.

In 1995, a group of FIUs met at the Egmont Arenberg Palace in Brussels and established an informal group for the stimulation of international co-operation. Now known as the Egmont Group of Financial Intelligence Units, these FIUs meet on a regular basis to co-operate, exchange information, provide training and share their expertise and experiences. The AMLSCU is a member of the Egmont Group.

Role of MLROAs mentioned above, it is common practice to appoint a Money Laundering Reporting Officer (MLRO) to carry out a number of functions on behalf of a firm, the most important I believe is determining whether or not there are sufficient grounds to report a suspicious activity or transaction.

It is imperative that this function is carried out expeditiously as quick actions may result in the seizing of ill-gotten money or assets and the apprehension of the perpetrators.

That being said, it is an important function and should only be performed by persons with the utmost integrity and possessing the relevant skills and experience.

There are traps to consider, tipping-off being the most important. Due the very nature of the suspicion it is imperative that the person to whom the suspicion relates to cannot be told that a report has been made about him or her. The usual process is to file the report of the suspicion and await a response from the FIU. In the majority of cases the FIU will respond and say that the report has been recorded in their database and that will be the end of the matter. It will then be a matter for the firm to decide whether or not to continue the relationship but this will be based on the firm’s own risk appetite.

ILLEGAL:

Money launderers do not recognise borders of countries. In fact, they actively seek to have their transactions occur across multiple jurisdictions in order to obscure their illicit activities.

From the

experts

49

conventions to which the State is a party, or on the basis of reciprocity.

FIUs usually come under four models:

i) The Judicial Model is established within the judicial branch of government wherein “disclosures” of suspicious financial activity are received by the investigative agencies of a country from its financial sector such that the judicial powers can be brought into play, for instance, seizing funds, freezing accounts, conducting interrogations, detaining people, conducting searches, among others.

ii) The Law Enforcement Model implements anti-money laundering measures alongside existing law enforcement systems, supporting the efforts of multiple law enforcement or judicial authorities with concurrent or sometimes competing jurisdictional authority to investigate money laundering.

iii) The Administrative Model is a centralised, independent, administrative authority, which receives and processes information from the financial sector and

transmits disclosures to judicial or law enforcement authorities for prosecution. It functions as a “buffer” between the financial and the law enforcement communities.

iv) The Hybrid Model serves as a disclosure intermediary and a link to both judicial and law enforcement authorities.

One mechanism for the sharing of information is the Egmont Group.

In 1995, a group of FIUs met at the Egmont Arenberg Palace in Brussels and established an informal group for the stimulation of international co-operation. Now known as the Egmont Group of Financial Intelligence Units, these FIUs meet on a regular basis to co-operate, exchange information, provide training and share their expertise and experiences. The AMLSCU is a member of the Egmont Group.

Role of MLROAs mentioned above, it is common practice to appoint a Money Laundering Reporting Officer (MLRO) to carry out a number of functions on behalf of a firm, the most important I believe is determining whether or not there are sufficient grounds to report a suspicious activity or transaction.

It is imperative that this function is carried out expeditiously as quick actions may result in the seizing of ill-gotten money or assets and the apprehension of the perpetrators.

That being said, it is an important function and should only be performed by persons with the utmost integrity and possessing the relevant skills and experience.

There are traps to consider, tipping-off being the most important. Due the very nature of the suspicion it is imperative that the person to whom the suspicion relates to cannot be told that a report has been made about him or her. The usual process is to file the report of the suspicion and await a response from the FIU. In the majority of cases the FIU will respond and say that the report has been recorded in their database and that will be the end of the matter. It will then be a matter for the firm to decide whether or not to continue the relationship but this will be based on the firm’s own risk appetite.

ILLEGAL:

Money launderers do not recognise borders of countries. In fact, they actively seek to have their transactions occur across multiple jurisdictions in order to obscure their illicit activities.

From the

experts

However, there will be those occasions where the FIU or an enforcement authority will want to take action such as freezing or seizing the assets or money. In this instance a firm may be placed in limbo. Not being able to continue with the transaction or turn the client away for fear that this may amount to tipping-off.

FATF Recommendat ion 21 - t ipping-of f and conf ident ia l it y :

Financial institutions, their directors, officers and employees should be:

(a) protected by law from criminal and civil liability for breach of any restriction on disclosure of information imposed by contract or by any legislative, regulatory or administrative provision, if they report their suspicions in good faith to the FIU, even if they did not know precisely what the underlying criminal activity was, and regardless of whether illegal activity actually occurred; and

(b) prohibited by law from disclosing (“tipping-off ”) the fact that a suspicious transaction report (STR) or related information is being f iled with the FIU.

Article 16 of the Federal Law No. 4 of 2002 ref lects this recommendation and states:

Whoever informs any person that his transactions are being scrutinised for possible involvement in suspicious operations, or that securit y authorities or other competent authorities are investigating his possible involvement in suspicious operations, shall be punished by imprisonment for a term not exceeding one year, or by a f ine not exceeding AED 50,000 (UAE dirhams f if t y thousand) and not less than AED 5,000 (UAE dirhams f ive thousand) or by both penalties .

Tipping-off has always been a dilemma for accountants and for that matter for all persons who are acting on behalf of a client . How does one stall an irate client insisting that work be completed while awaiting guidance or clearance from the FIU?

A recent case in the UK brought this dilemma to the forefront and explored how an MLRO should determine his or her suspicion. This case was that of Shah versus HSBC (Shah -v- HSBC Private Bank (UK) Limited [2012] EWHC 1283). It is worth reading.

ConclusionIn this second part , Part 2, the intention was to explore suspicious act ivit ies and how they are reported, what happens to them and the role played by the MLRO.

In the next part , I want to explore how an accountant or auditor would go about developing a set of systems and controls to meet its obligat ions in respect of AML, terrorist f inancing and sanctions.

Disclaimer:Any opinions, statements or other information or content expressed or made in this article are those of the author and not the DFSA, and the author's opinions, statements or other information or content expressed in this article should not be viewed as any indication of the opinion, view or policy of the DFSA.

Chairmen, directors, managers and employees of Financial Institutions who know of, yet fail to report any act related to the Money Laundering offence, face a fine not exceeding AED100,000.

UPRIGHTNESS:

A Money Laundering Reporting function should only be performed by persons with the utmost integrity and possessing the relevant skills and experience.

50 June 2013

From the

experts

WITH ANOTHER relatively slow 12 months for actual equity issuances in the GCC, and with Saudi Arabia leading the league

table with five listings over $100 million, a number of factors are responsible for the low volume of IPOs, according to experts from Deloitte in the Middle East.

These include stricter regulatory scrutiny of companies with plans to list, a lack of liquidity in certain markets, changes in capital raising regulations, and regional unrest in some Middle East and North Africa (MENA) countries. However one thing is clear, there is a strong pipeline of issuers looking to launch an IPO as soon as the right window of opportunity arises.

“We continue to see successful regional management teams coming to us to discuss their potential IPO options, both in the region and internationally. There is a noticeable increase as compared to last year,” says Declan Hayes, managing director at Deloitte Corporate Finance Limited in the MENA region.

“There is an encouraging number of corporates looking to raise equity capital on international stock exchanges, such as London and Singapore, both due to their equity story and the interest that the Middle East region is attracting from both Western and Far Eastern investors,” he added.

Need to prepare wellDeloitte were advisors to the Board and management on the successful premium listing of NMC Healthcare, an Abu Dhabi based healthcare provider on the London Stock Exchange which raised $180 million and placed NMC in the FTSE 250 rankings.

Deloitte’s role involved advising and assisting NMC management throughout the pre-listing and listing process to ensure the transition from a private to a publicly listed company took place with the least amount of disruption to the business, and that activities were well coordinated with the Sponsor and other advisors.

$100m Saudi arabia’S equity liStingS in laSt 12 monthS

Sluggish pace in listings in GCC due to stricter regulatory measures and lack of liquidity, Deloitte says…

51

LOW IPOs RAISE CONCERN

“Corporate management teams and private shareholders are recognising the need to prepare well ahead of a potential listing to increase their chances of maximising value for shareholders and to avoid major disruption to the day-to-day running of the business,” says Adnan Fazli, director in the capital markets team at Deloitte in the Middle East.

“We are actively working with the management teams at a number of clients looking to fast track their internal readiness to list.”

Key differentiating factorThe AsiaCell IPO on the Iraq Stock Exchange which raised $$1.3 billion in January 2013 – the biggest in the Middle East since 2008 – is a validation of the positive impact readiness can have on the speed of clearing regulatory reviews and the valuation achieved.

“Of the corporates we are working with, at least five would likely have a market cap of over $1 billion in a 2015 listing on an international stock exchange while a number of others are likely to be regional issuers on the local stock markets,” according to Hayes.

“Whether a business is contemplating a listing on the Tadawul, ADX, Bourse Dubai, MSM or a future SME market (as has been tabled in Doha and Dubai), a company’s readiness to list will be the key differentiating factor between those that are first past the finish line when the IPO window opens,” he concludes.

“There is an encouraging number of corporates in the region looking to raise equity capital on international stock exchanges.” - Declan Hayes, Managing Director at Deloitte Corporate Finance Limited in the MENA region.

Many companies in the region are shying away from listing due to stricter regulatory scrutiny, a lack of liquidity in certain markets and changes in capital raising regulations.

IPO

WAtCh

84% proportion of Cfos in Mideast who say it is diffiCult to Control the quality of finanCial data

Arun Khehar, Oracle Corporation Vice President - Retail & Manufacturing Sector, Middle East and Africa.

FUTURE-PROOFING DATA

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52 June 2013

CFOs strategic role to business must be supported by strong integration of data and reporting systems…

84% proportion of Cfos in Mideast who say it is diffiCult to Control the quality of finanCial data

Arun Khehar, Oracle Corporation Vice President - Retail & Manufacturing Sector, Middle East and Africa.

FUTURE-PROOFING DATA

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52 June 2013

CFOs strategic role to business must be supported by strong integration of data and reporting systems…

Overall findings: 12% of businesses in the survey have invested in just one of the three reporting phases (close, reporting and filing); 10% have invested in two of them; 25% have invested in all three.

MAJORITY OF companies worldwide have made substantial investments in financial reporting systems

intended to improve their close, reporting and filing processes, according to research commissioned by Oracle and Accenture.

However, these investments have been made ad hoc, leaving businesses with ineffective solutions and a lack of visibility, quality and confidence in their financial data. The survey, conducted by Dynamic Markets, included input from more than 1,100 large organisations across the US, Europe, Middle East and Africa.

The research focuses on end-of-period financial reporting, but its findings, particularly for the Middle East, suggest that Chief Financial Officers (CFOs) who want to step into a more strategic role in the business will find the inability to deliver accurate reports on-time a barrier to adding more value to the business.

“From the Accenture and Oracle survey, we found that CFOs are frustrated with IT that they feel does not deliver on what they need. CFOs have long complained about the ongoing struggle with older IT systems that are poorly integrated and expensive to maintain,” says Arun Khehar, Oracle Corporation Vice President - Retail & Manufacturing Sector, Middle East and Africa.

country Invested In one of the three processes

Invested In two of the three processes

Invested In all three processes

UK

USA

Benelux

France

Germany

Italy

Middle East

Nordics

Russia

South Africa

Spain

Nigeria

16%

10%

12%

15%

9%

17%

2%

0%

14%

20%

8%

16%

14%

15%

14%

9%

9%

9%

10%

0%

15%

5%

6%

0%

29%

30%

18%

23%

35%

22%

6%

24%

35%

4%

44%

2%

Asked about the aspects of their company’s technology that causes them greatest concern, respondents pointed to the cost of maintenance, the cost of integration and the lack of integration between systems as their top three concerns. Other problems, such as the age of current systems, data quality and integrity, and system complexity, also rank highly.

In the Middle East, companies lag significantly behind the rest of Europe:

68% report inadequate visibility, and 84% say it is difficult to control the quality of financial data and other supporting information

21% report increased costs of financial reporting in the past three years, and 60% are unable to articulate the total costs for their organisation

88% have experienced delays in the last 12 months when executing financial close, reporting and filing, mainly due to data-related issues

Late changes have affected 80% of companies in the last three years and as a direct result, 22% have missed formal reporting deadlines

Lack of investment in financial systems“Fewer businesses in the Middle East recognise the need to invest in new financial reporting

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53

systems to address efficiency challenges,” added Arun.

“Only 68% of surveyed companies have made changes over the last three years to their close, filing and reporting processes – the lowest percentage among those surveyed.”

Meanwhile, only 18% have invested substantially in at least one of these three areas over the past 12 months, the lowest in the survey along with Nigeria.

Only 2% of businesses in the survey have invested in just one of the three financial reporting phases (close, reporting and filings); 10% have invested in two of them; 6% have invested in all three. Unsurprisingly, spreadsheets (76%) and emails (82%) are heavily used to track and manage reporting on a daily basis.

Increased costs and uncertaintyTwenty five per cent of finance teams claim to have seen their costs rise across the financial close, reporting and filing processes.

“Importantly, the situation is so opaque that managers across the finance function are unable to fully understand the financial impact/cost implications of managing and publicising their company’s financial results,” the executive said.

Only 41% of Middle East respondents admitted they did not know the total cost of managing and publicising financial results, whereas 60% of companies globally confessed that they were unable to put a figure to the cost.

Due to inadequate reporting systems, the majority of businesses reported that they still face significant problems with financial reporting. 92% of respondents admitted that they have inadequate visibility of reporting processes as compared with 68% globally, while 80% of finance managers reported that they find it difficult to control the quality of financial data across the course of their reporting, highlighting that additional attention should be paid to performance management.

Unrealistic confidenceDespite the challenges presented by unreliable and opaque data, finance teams are sanguine about how effectively they can do their jobs. Only 53% of finance managers feel their effectiveness is limited in some way by data analysis-related issues, despite most admitting they did not have adequate visibility of reporting processes.

“One of the issues that finance professionals face is consistency, and the more disparate a company is the harder it is to control this aspect,” said Arun.

Indeed, one example is the chart of accounts, where 88 per cent of finance managers say changes to them cause problems across the business for the finance team when it comes to closing the books. On average, it takes a company 21 man-days to reconcile and update the chart of accounts, and the average figure is much higher for companies with international offices (26.8 mandays), compared to those with just national offices (13.5 man-days).

“It is not surprising then that 84 per cent of finance managers say it is difficult to control the quality of financial data and other supporting information across the entire process, from close to filing,” he added.

“Integrate, automate, create a single version of the truth” is a mantra Oracle has been chanting for more than a decade. Today its verity has moved from “good advice” to “fail to do it at your peril”.

Encouragingly, businesses are intending to take steps to improve financial reporting methods, with 86% of companies likely to make a significant investment over the next five years. 71% of businesses are due to overhaul all three phases of reporting, a significantly

country fIndIng: percentage of respondents cItIng Inadequate vIsIbIlIty of reportIng process:

54

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55

“CFOs have long complained about the ongoing struggle with older IT systems that are poorly integrated and expensive to maintain," says Arun Khehar.

percentage of companIes due to overhaul all three phases of closIng, reportIng and fIlIng

higher percentage than the global average (46%), an approach which may address many of the challenges they currently face, and bring their reporting processes into line with their performance expectations.

The results suggest that integrating and automating as far as possible these three processes go a long way to eliminating many of the obstacles preventing a CFO from stepping up into a leading role in defining business in the new age of economic stress and new opportunities.

Scott Brennan, Executive Director, Accenture Finance & Enterprise Performance Consulting Group said: “These results mirror what we see and experience, and they’re illustrative of why companies increasingly find it necessary in today’s age of volatility to invest in their performance management.”

“Those that tend to be happiest with the results of their enterprise performance management are those that have a vision – they understand their company’s strategy; they have a clear view of the metrics they need to monitor and they know the importance of integrating an enterprise-wide EPM solution.”

Brennans’ emphasis on “those that have a vision – they understand the company’s strategy” – is telling. There is no doubt that today’s CFOs are in a unique position to be instrumental in taking business to the next level. Many industries are realising that the ways in which they made money in the past are unlikely to be appropriate in the future.

Timely financial reportsMoreover, the pace of change is now so rapid that companies must constantly be rethinking their operating and business models and adapting them to suit an evolving external environment. Change, therefore, is becoming the norm rather than the exception. With strong, accurate, timely financial reports CFOs are in a powerful position to lead change and manage its disruptive impact to the minimum.

The new information technologies such as mobile, social media, cloud computing and Big Data and analytics change the way customers interact with companies, and also change the way companies use their data to bring products to market and deliver services.

More and more lines of business within the organisation are asking for technologies to launch new business channels they themselves may use at home, such as online shopping, or talking about a product on social media, or purchasing using a mobile phone. Apply good technology to bad data and you’ll get bad information upon which to make undoubtedly bad decisions.

Note:All interviews were conducted between 10th February and 15th March 2012. Dynamic Markets interviewed 1,123 finance professionals in large organizations (250+ employees) in 12 countries around the world. For full findings and research data, please go to: http://bit.ly/JCndwW

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LAST MONTH, I had the pleasure of meeting Asif Siddique, who was invited to speak at the 3rd Annual National Conference of

the Institute of Internal Auditors-Qatar Chapter, which was held in Doha.

A Certified Public Accountant, Siddique has over 20 years of experience in Management Consulting, Enterprise Risk Management, Corporate Governance as well as implementing and enhancing enterprise technology infrastructure. He is a graduate of Top-10 accounting programme in the

Asif Siddique, Business Assessment & Audit, Oracle Corporation – Redwood Shores, California, US

United States and has been recognised by the Governor’s Office for establishing transparency practices in various sectors in Ohio State.

Currently, at Oracle Corporation in California, he serves as the Senior Director in the Business Assessment and Audit group, where he oversees audit activities of various global business processes, technology deployment and compliance with global regulatory requirements.

Inherent business risksMy discussion with Siddique ranged from his personal life, where he talked about his two daughters growing up in California all the way to his professional activities and accomplishments in the United States.

Later in the day, I heard his presentation which touched upon Oracle’s technology deployment, breadth and depth of its product lines, its various lines of business and international presence. The presentation also talked about inherent risks of such business and a methodology to develop Internal Audit

ORACLE(S)

THAT WORK!

TECHnOLOgy

TALK

56 June 2013

Asif Siddique, Oracle Corporation’s Senior Director of Business Assessment and Audit, gives Joyce Njeri an inside exclusive of how the technology giant has been able to develop and deploy business processes that support world-class internal audit function…

LAST MONTH, I had the pleasure of meeting Asif Siddique, who was invited to speak at the 3rd Annual National Conference of

the Institute of Internal Auditors-Qatar Chapter, which was held in Doha.

A Certified Public Accountant, Siddique has over 20 years of experience in Management Consulting, Enterprise Risk Management, Corporate Governance as well as implementing and enhancing enterprise technology infrastructure. He is a graduate of Top-10 accounting programme in the

Asif Siddique, Business Assessment & Audit, Oracle Corporation – Redwood Shores, California, US

United States and has been recognised by the Governor’s Office for establishing transparency practices in various sectors in Ohio State.

Currently, at Oracle Corporation in California, he serves as the Senior Director in the Business Assessment and Audit group, where he oversees audit activities of various global business processes, technology deployment and compliance with global regulatory requirements.

Inherent business risksMy discussion with Siddique ranged from his personal life, where he talked about his two daughters growing up in California all the way to his professional activities and accomplishments in the United States.

Later in the day, I heard his presentation which touched upon Oracle’s technology deployment, breadth and depth of its product lines, its various lines of business and international presence. The presentation also talked about inherent risks of such business and a methodology to develop Internal Audit

ORACLE(S)

THAT WORK!

TECHnOLOgy

TALK

56 June 2013

Asif Siddique, Oracle Corporation’s Senior Director of Business Assessment and Audit, gives Joyce Njeri an inside exclusive of how the technology giant has been able to develop and deploy business processes that support world-class internal audit function…

functions in fast paced environments which constantly change.

Siddique mentioned that he used his consulting experience as a platform to design the technology and business auditing process, which he constantly modified to meet the changing business needs.

A risk awareness cultureThe three building blocks which Oracle’s Business Assessment and Audit management team focuses on are People, Customer and Process. Along with these, they work with management as needed in enhancing a risk awareness culture within each business units as well as simplify, centralise and standardise their own auditing practices to develop consistency within the team.

Siddique also emphasised that these building blocks have helped him and his team to formalise an audit methodology that reviews various business processes globally, plan and scope areas based on advanced analytics, provide value-add information to management and are based on leading standards.

These building blocks have helped Oracle’s Business Assessment and Audit group develop a world class internal audit function whose employees have cultivated a ‘can do’ attitude and are constantly thriving for excellence.

These building blocks can be summarised as following:

People: The aim of this building block is to build a world-class team with highly motivated and competent professionals. This objective can be achieved by performing the following:

Create and manage a f lexible staffing plan that balances resources to meet company risks/needs (SW, HW, Cloud)

Motivate and retain talent to create continuity and maintain quality.

Enhance accountability, communication and ‘can-do’ attitude in the team

Institute a culture where team’s success is the leading performance indicator.

Customer: This building block ensures that the group is meeting or exceeding customer’s satisfaction. Following are the cornerstones of this building block.

Understand needs and objectives of key stakeholders.

Develop and complete a risk based audit plan with stakeholder’s input.

Provide quality information to key stakeholders.

Actively seek feedback and incorporate improvement opportunities into the process.

Process: This building block sets the platform for all other blocks as well as the one which requires constant monitoring. The objective of this building block is to continuously improve audit’s efficiency and effectiveness.

Conduct quality audit work that adheres to industry standards and methodology.

Actively seek and implement best practices and current trends.

CENTRE OF TECHNOLOGY: The headquarters of Oracle Corporation in Parkway Redwood Shores, CA

TECHnOLOgy

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57

Integrate technology to support audit objective and automate reporting.

During the presentation, Siddique also mentioned that in a changing environment, it is important for any audit team to constantly review its expertise and enhance them to be in-line with the corporate direction. In his experience, “the groups that cannot successfully monitor and change as needed to provide value add-service, eventually get extinct or lose momentum.”

Siddique also noted that the importance of risk mitigation culture should constantly be communicated to business units and they should be assisted (while keeping IA’s independence intact) in developing such initiatives. Few pointers to accomplish this are summarised below:

Detail the results of the findings which can be understood at all levels.

Develop a formal follow-up process which creates accountability to mitigate risk.

Hold formal Transfer of Information sessions.

Partner with other risk management functions and incorporate results.

Invite key constituents to audit committee meetings.

Provide a value-add solution which is based on real life examples.

During the question and answer session, the executive answered a lot of questions, but the ones which brought a lot of at tention were about information security. He mentioned that most people think about the technology group when it comes to information security; however he believes

that it is everybody’s responsibility when it comes to secure information.

It is true, that information technology groups are responsible to ensure the security of the infrastructure which hosts the data but business units are also responsible for securing information once it is printed or downloaded. Information classification and corresponding level of security should also be defined by the Information Security Governance group and be communicated to the entire company for adherence.

As the audience at the conference wanted to learn more about integrated audits as well as developing technology audit groups, Siddique gave pointers on how process auditors can assist technology auditors in meeting audit objectives. The three major areas he talked about were:

Contract Compliance

• Internal - Treatment of Customer Information when trusted with it.

• Business/Contractual requirements and corresponding technology controls.

• Contractual Reviews – Supplier Security Standards (T/C)

Data Security (Beyond System Controls)

• Data Transmission Requirements.

• Data Hosting Services – What are employees clicking through?

• Non IT Managed System – Security, Availability, Reliability.

Regulatory Requirements

• Global Record Retention Requirements

• Security/Privacy: PII Guidelines, HIPPA Requirements; Worker’s Council

• Gover nment : DOD, Federa l Infor mat ion Sec ur it y Management Ac t ( FISM A), ITA R , GTC .

Asif Siddique can be reached at [email protected] for further discussions or Q&A.

The three building blocks which Oracle’s Business Assessment and Audit management team focuses on are People, Customer and Process.

58 June 2013

TECHnOLOgy

TALK

Find out why9 out of 10 clients would recommend our services...

© 2013 Robert Half. An Equal Opportunity Employer.

For more information visit roberthalf.aeRobert Half Dubai: T + 971 (0) 4 382 6700Robert Half Abu Dhabi: T + 971 (0) 2 406 9669Robert Half Doha: T + 974 (0) 4 429 2393

Access to the best candidates Working with Robert Half opens the door to a global network of over three million finance and accounting professionals and teams dedicated to the specialist areas you require.

Fulfilling your business needsWe get to know your organisation and exact requirements from the moment we start working with you.

More than just recruitersWe also provide a full consultancy service, giving advice on recruitment strategies. Each year we publish a free salary guide specifically for the region which provides a forecast of salaries for accounting and finance staff.

Robert-Half-AME-Ad-AW.indd 1 02/05/2013 18:44

Integrate technology to support audit objective and automate reporting.

During the presentation, Siddique also mentioned that in a changing environment, it is important for any audit team to constantly review its expertise and enhance them to be in-line with the corporate direction. In his experience, “the groups that cannot successfully monitor and change as needed to provide value add-service, eventually get extinct or lose momentum.”

Siddique also noted that the importance of risk mitigation culture should constantly be communicated to business units and they should be assisted (while keeping IA’s independence intact) in developing such initiatives. Few pointers to accomplish this are summarised below:

Detail the results of the findings which can be understood at all levels.

Develop a formal follow-up process which creates accountability to mitigate risk.

Hold formal Transfer of Information sessions.

Partner with other risk management functions and incorporate results.

Invite key constituents to audit committee meetings.

Provide a value-add solution which is based on real life examples.

During the question and answer session, the executive answered a lot of questions, but the ones which brought a lot of at tention were about information security. He mentioned that most people think about the technology group when it comes to information security; however he believes

that it is everybody’s responsibilit y when it comes to secure information.

It is true, that information technology groups are responsible to ensure the security of the infrastructure which hosts the data but business units are also responsible for securing information once it is printed or downloaded. Information classification and corresponding level of security should also be defined by the Information Security Governance group and be communicated to the entire company for adherence.

As the audience at the conference wanted to learn more about integrated audits as well as developing technology audit groups, Siddique gave pointers on how process auditors can assist technology auditors in meeting audit objectives. The three major areas he talked about were:

Contract Compliance

• Internal - Treatment of Customer Information when trusted with it.

• Business/Contractual requirements and corresponding technology controls.

• Contractual Reviews – Supplier Security Standards (T/C)

Data Security (Beyond System Controls)

• Data Transmission Requirements.

• Data Hosting Services – What are employees clicking through?

• Non IT Managed System – Security, Availability, Reliability.

Regulatory Requirements

• Global Record Retention Requirements

• Security/Privacy: PII Guidelines, HIPPA Requirements; Worker’s Council

• Gover nment : DOD, Federa l Infor mat ion Sec ur it y Management Ac t ( FISM A), ITA R , GTC .

Asif Siddique can be reached at [email protected] for further discussions or Q&A.

The three building blocks which Oracle’s Business Assessment and Audit management team focuses on are People, Customer and Process.

58 June 2013

TECHnOLOgy

TALK

Find out why9 out of 10 clients would recommend our services...

© 2013 Robert Half. An Equal Opportunity Employer.

For more information visit roberthalf.aeRobert Half Dubai: T + 971 (0) 4 382 6700Robert Half Abu Dhabi: T + 971 (0) 2 406 9669Robert Half Doha: T + 974 (0) 4 429 2393

Access to the best candidates Working with Robert Half opens the door to a global network of over three million finance and accounting professionals and teams dedicated to the specialist areas you require.

Fulfilling your business needsWe get to know your organisation and exact requirements from the moment we start working with you.

More than just recruitersWe also provide a full consultancy service, giving advice on recruitment strategies. Each year we publish a free salary guide specifically for the region which provides a forecast of salaries for accounting and finance staff.

Robert-Half-AME-Ad-AW.indd 1 02/05/2013 18:44

88% PROPORTION Of busINesses RePORTINg OPTImIsTIc OuTlOOk fOR ecONOmy OveR NexT 12 mONThs

THE UAE business community has been identified as the third most confident business community in the world, according to the

Grant Thornton International Business Report (IBR), a quarterly survey of more than 3,000 businesses in 44 countries.

Eighty eight per cent of UAE based businesses highlighted that they have an optimistic outlook for the economy over the next 12 months, with figures showing greater optimism than the UK and USA.

Forty eight per cent of businesses expect to hire employees which indicated double rate growth than that of the global average (24%) and expectations for increasing profits are up from 60% to 72% over the past three months further highlighting positive results for the future economic outlook.

Central hub of businessThe area of concern which UAE businesses do need to address is the lack of Information Technology (IT). IT was identified by 58% of UAE businesses as being a major constraint on growth.

The IT infrastructure is one of the most imperative elements in an ever-changing environment and fast paced growth oriented business.

IT is no longer just an enabler of information transmission but has become the central hub of many businesses, supporting their strategic growth, securing their commercial intelligence and interacting and managing clients far beyond the traditional methods which were once adopted.

A number of firms view IT as an overhead and therefore offer minimal investment and development which results in a basic platform being embedded into the business. In these cases IT is seen as a facilitator as opposed to a value added enabler.

Grant Thornton’s IT advisory specialist, Anurag Chaturvedi, talks about the elements which need to be considered in order to remove the constraints to growth.

i) Move IT from an operational aspect to a strategic element:

TECH

CRUNCH VALUE ADD: IT is no longer just an enabler of information transmission but has become the central hub of many businesses, supporting their strategic growth.

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IT negligence seen as a major constraint on businesses’ growth in the UAE...

Grant Thornton’s IT advisory specialist, Anurag Chaturvedi

A number of firms often position their IT department into an operational function which is seen as a back office helpdesk. Such positioning is often detrimental to the growth aspirations of a firm given the fact that front-line strategic tactics often involve reaching and communicating with clients in a much more innovative way which involves the development and use of IT.

For firms who have an aspiration for growth it is essential to move the IT function from an operational back office discipline to a much more strategic input of the firms vision and growth plans.

ii) Investing for future growth

In order to move the f irm forward investment in IT is essential, no longer are decentralised business solutions, basic security setup, and IT infrastructures acceptable or applicable within an ever changing and competit ive landscape.

Technology is much more sophisticated now that it has ever been before with the introduction and implementation of once thought about concepts such as business intelligence tools, smart phones, app worlds, E-commerce and much more. The reality is that many concepts which we once thought were not possible are today in place because of IT. In order to grow your business and to become dynamic in your reach and approach the investment of IT is essential.

iii) Realigning your IT platforms

It is essential for a business to understand how IT can play a wider role in addressing the needs of the business. In order to realign the IT platforms a business will need to process re-engineer, ascertain whether the software is up-to-date and applicable, information security addresses entity and environmental risk and ensure a business continuity plan and disaster recovery plan is in place alongside ensuring there is a clear identification of the solutions needed to meet the current needs of the business alongside those for the future.

iv) Ensuring you protect your firms intellectual property

IT development and effective implementation

is essential in order to protect the intellectual property of a business. A business has a number of operational assets which need to be protected in order to ensure the security is not breached; these include but are not limited to the financial and strategic information, client relationship database, critical business insights and business information.

If any aspect of a business is compromised due to insuff icient security parameters not being in place the cost both reputationally and operationally is very high to repair. As businesses grow the need to have a strong stringent IT platform too becomes just as important in order to protect from fraudsters or manipulation. There are a number of IT security policies and governance systems which can be applied to protect a f irm from unauthorised access and intruder attacks.

IT is not only the enabler of information transmission but is also the central hub of a whole host of strategic and operational aspects which relate to clients, staff and the management team. The appropriate development, investment and security protection will enable a business to move forward in their growth plans without concerns of compromise or inadequate weak platforms.

At Grant Thornton we advise a number of regional dynamic clients who have an aspiration for growth; we offer IT advisory consultancy and implementation from our highly technical specialists who offer hands on support and actionable advice to support growth within dynamic businesses.

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Grant Thornton’s IT advisory specialist, Anurag Chaturvedi

A number of firms often position their IT department into an operational function which is seen as a back office helpdesk. Such positioning is often detrimental to the growth aspirations of a firm given the fact that front-line strategic tactics often involve reaching and communicating with clients in a much more innovative way which involves the development and use of IT.

For firms who have an aspiration for growth it is essential to move the IT function from an operational back office discipline to a much more strategic input of the firms vision and growth plans.

ii) Investing for future growth

In order to move the f irm forward investment in IT is essential, no longer are decentralised business solutions, basic securit y setup, and IT infrastructures acceptable or applicable within an ever changing and competit ive landscape.

Technology is much more sophisticated now that it has ever been before with the introduction and implementation of once thought about concepts such as business intelligence tools, smart phones, app worlds, E-commerce and much more. The reality is that many concepts which we once thought were not possible are today in place because of IT. In order to grow your business and to become dynamic in your reach and approach the investment of IT is essential.

iii) Realigning your IT platforms

It is essential for a business to understand how IT can play a wider role in addressing the needs of the business. In order to realign the IT platforms a business will need to process re-engineer, ascertain whether the software is up-to-date and applicable, information security addresses entity and environmental risk and ensure a business continuity plan and disaster recovery plan is in place alongside ensuring there is a clear identification of the solutions needed to meet the current needs of the business alongside those for the future.

iv) Ensuring you protect your firms intellectual property

IT development and effective implementation

is essential in order to protect the intellectual property of a business. A business has a number of operational assets which need to be protected in order to ensure the security is not breached; these include but are not limited to the financial and strategic information, client relationship database, critical business insights and business information.

If any aspect of a business is compromised due to insuff icient security parameters not being in place the cost both reputationally and operationally is very high to repair. As businesses grow the need to have a strong stringent IT platform too becomes just as important in order to protect from fraudsters or manipulation. There are a number of IT security policies and governance systems which can be applied to protect a f irm from unauthorised access and intruder attacks.

IT is not only the enabler of information transmission but is also the central hub of a whole host of strategic and operational aspects which relate to clients, staff and the management team. The appropriate development, investment and security protection will enable a business to move forward in their growth plans without concerns of compromise or inadequate weak platforms.

At Grant Thornton we advise a number of regional dynamic clients who have an aspiration for growth; we offer IT advisory consultancy and implementation from our highly technical specialists who offer hands on support and actionable advice to support growth within dynamic businesses.

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Indeed, in many surveys of treasurers, it is cited as one of the top three risks facing the treasurer or company. That’s not to say that the subject was not considered important prior to the crisis – it was, but it was just not assessed with the same rigour seen today.

Two major factors are behind this increased focus on counterparty risk.

Firstly, the creditworthiness of banks has fallen as they are no longer seen as incapable of failure.

Secondly, there is a rise in cash holdings by many of the world’s corporations (both large and small) as they hold back on capital expenditure in an uncertain economic environment and protect against future liquidity risk.

Loss-given defaultInvesting cash is probably the most obvious activity where counterparty risk is considered. It is by no means the only one, however, and banks are not the only class of counterparty where risk arises.

Counterparty risk is the risk that a counterparty to a contract will not perform their part of the agreement, such as repay a deposit of cash, settle an invoice or supply goods when due. This is called ‘default risk’. It also refers to how much of the contract is performed. In some defaults, all the amounts at risk might be received (for example, in a secured lending), or just some might, or indeed none at all. The total amount of funds lost is known as ‘loss given default’.

In this article, we will look at how counterparty risk arises, how we might measure it and, finally, how we might manage it.

Before we can establish a policy for managing counterparty risk, such as setting an objective and assigning responsibilities, we need some way to measure these risks.

There are two key dimensions to this. Firstly, we must measure the size of the risk. Secondly, we must measure the likelihood of default and any subsequent loss.

Counterparty risk can arise for a corporation in the following most important ways:

PUTTING A LIMIT

ON LOSSES Will Spinney explains the secrets of measuring and managing counterparty risk...

CO U N T E R PA R T Y R I S K h a s increased in importance since the financial crisis.

AssociAte Director of eDucAtion - AssociAtion of corporAte treAsurers

Will spinney

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62 June 2013

Indeed, in many surveys of treasurers, it is cited as one of the top three risks facing the treasurer or company. That’s not to say that the subject was not considered important prior to the crisis – it was, but it was just not assessed with the same rigour seen today.

Two major factors are behind this increased focus on counterparty risk.

Firstly, the creditworthiness of banks has fallen as they are no longer seen as incapable of failure.

Secondly, there is a rise in cash holdings by many of the world’s corporations (both large and small) as they hold back on capital expenditure in an uncertain economic environment and protect against future liquidity risk.

Loss-given defaultInvesting cash is probably the most obvious activity where counterparty risk is considered. It is by no means the only one, however, and banks are not the only class of counterparty where risk arises.

Counterparty risk is the risk that a counterparty to a contract will not perform their part of the agreement, such as repay a deposit of cash, settle an invoice or supply goods when due. This is called ‘default risk’. It also refers to how much of the contract is performed. In some defaults, all the amounts at risk might be received (for example, in a secured lending), or just some might, or indeed none at all. The total amount of funds lost is known as ‘loss given default’.

In this article, we will look at how counterparty risk arises, how we might measure it and, finally, how we might manage it.

Before we can establish a policy for managing counterparty risk, such as setting an objective and assigning responsibilities, we need some way to measure these risks.

There are two key dimensions to this. Firstly, we must measure the size of the risk. Secondly, we must measure the likelihood of default and any subsequent loss.

Counterparty risk can arise for a corporation in the following most important ways:

PUTTING A LIMIT

ON LOSSES Will Spinney explains the secrets of measuring and managing counterparty risk...

CO U N T E R PA R T Y R I S K h a s increased in importance since the financial crisis.

AssociAte Director of eDucAtion - AssociAtion of corporAte treAsurers

Will spinney

COrPOrATE

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62 June 2013

PUTTING A LIMIT

ON LOSSES Cash deposits

Cash in the process of payment

Having no cash management bank

Cash in set-off arrangements

The risk that an instruction to pay given to a bank may not be executed before bank failure.

The risk that there are no collection or payment facilities for a company.

The risk that balances in notional pooling and concentration systems might not be mixed on bank failure.

The risk that cash paid into a bank account might not be able to be withdrawn prior to bank failure.

Description

The risk that the bank fails to repay the deposit and interest.

General set-off arrangements

Derivative contracts in the money

Derivative settlement

Letters of credit and bank guarantees receivable, underwriting agreements

Letters of credit and bank guarantees payable

Failure to lend

Custodianship failure

The risk that loans must be repaid, but that deposits with the same bank may also not be repaid.

The risk that a derivative contract in the money will not be honoured. This also includes the risk of replacing such a contract.

The risk that only one principal will be paid in settlement of derivatives. Also known as daylight or Herstatt risk.

The risk that instruments given by a bank in support of a third party (reduction of third-party credit risk) will not be honoured.

The risk that, if a bank that has issued instruments for a third party’s benefit (reduction of own credit risk to a third party) fails, the beneficiary will seek a replacement.

The risk that a bank with an obligation to lend will not do so following failure.

The risk that investments are not delivered when required.

COUNTERPARTY RISK REGISTER – BANKS AND SHADOW BANKS

Type of risk

Cash in the process of collection

Explanation

Term deposits, call deposits, current (checking) account balances, certificates of deposit and bonds.

Cheques, wires (especially batch-processed wires, non-real-time gross settlement), automated clearing house and cards.

A bank funded in the morning may only pay out on instructions late in the day, giving time for the bank to fail.

If a bank fails, the company must find a replacement cash management bank.

Cash in notional pooling and concentration systems prior to concentration. Credit and debit balances might be treated differently. Concentration systems generally work overnight, giving time for the risk of bank failure.

Generally, refers to cash deposits and current account balances. Banking law often allows banks to set off credit and debt balances, but not for customers to do the same.

Any FX, equity, credit, interest rate or commodity derivative in the money for the corporate, together with purchased options.

Any derivative where principals are exchanged at maturity.

Letters of credit (and similar instruments) and bank guarantees received to cover liabilities or as bid, advance payment or performance guarantees and underwriting agreements. These are only as good as the bank.

Letters of credit (and similar instruments) and bank guarantees given to cover liabilities or as bid, advance payment or performance guarantees and underwriting agreements. Also covers cash used to secure the issuance.

Participation in revolving credit facility, overdrafts, asset finance, supply chain finance, card-acquiring services.

Most investment arrangements, including segregated cash, repos, money market fund assets as well as investment funds.

Note: Shadow banking includes activities such as money market funds and hedge funds, although it also involves securitisation and collateral

intermediation. Firms that mimic banks, for example, in providing FX derivatives, would also fall into this category

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NON-FINANCIAL COMPANIES

Bad debts

Long-term customer loyalty

Suppliers

The risk that an invoice raised on a customer on open account (or similar) is unpaid.

The risk that a customer forming a large part of turnover fails.

The risk that a supplier fails to deliver a service or goods and the risk of having to find an alternative.

All receivables and a classic risk. Also applies to goods in manufacture and goods not delivered if made specially.

This will include receivables, but also the amount invested in the customer, such as tooling, design, etc.

All supply contracts for goods and services such as software and consultancy. Has short-term and long-term elements.

INSURANCE COMPANIES

Type of risk

Claim failure

Description

The risk that an insurance company fails before a claim is paid.

Explanation

All insurance contracts.

Measurement of risk We can measure the exposures relatively easily (for example, size of term deposit or derivative valuation) although the measurement of long-term customer or supplier risk, for example, is a bit more difficult. There are also some other complications to be aware of, which take into account the complexity of banking groups.

When measuring counterparty risk size, this should be done by:

Legal entity;

Country (foreign branches may not be covered in entity review);

Overall group;

Subordination within legal entity;

Instrument, especially to capture the liquidity of the instrument; and Maturity, to cover the time over which the risk occurs.

A further dimension to consider is type of counterparty. For example, when measuring investments, types might include:

Commercial banks;

Investment banks;

Sovereigns; or

Non-financials (which could also be broken down further).

Measurement of likelihood of default This measurement is arguably more challenging and amounts to an assessment of credit risk of the counterparty. We will restrict ourselves to measuring bank credit risk, although the same principles broadly apply to other types of counterparty.

A particularly useful way to analyse some of this data is to use it against a benchmark of the sector. So if, for example, the CDS price of a bank was rising (worse credit risk) faster than its peers… that would be a warning sign. Similarly, if the share price was falling (worse risk) faster than its peers, that would also be a warning sign.

One positive aspect of assessing bank credit risk is that there is plenty of data available to use:

Limits Having measured the size and likelihood of an

Counterparty risk is the risk that a counterparty to a contract will not perform their part of the agreement, such as repay a deposit of cash, settle an invoice or supply goods when due.

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64 June 2013

NON-FINANCIAL COMPANIES

Bad debts

Long-term customer loyalty

Suppliers

The risk that an invoice raised on a customer on open account (or similar) is unpaid.

The risk that a customer forming a large part of turnover fails.

The risk that a supplier fails to deliver a service or goods and the risk of having to find an alternative.

All receivables and a classic risk. Also applies to goods in manufacture and goods not delivered if made specially.

This will include receivables, but also the amount invested in the customer, such as tooling, design, etc.

All supply contracts for goods and services such as software and consultancy. Has short-term and long-term elements.

INSURANCE COMPANIES

Type of risk

Claim failure

Description

The risk that an insurance company fails before a claim is paid.

Explanation

All insurance contracts.

Measurement of risk We can measure the exposures relatively easily (for example, size of term deposit or derivative valuation) although the measurement of long-term customer or supplier risk, for example, is a bit more difficult. There are also some other complications to be aware of, which take into account the complexity of banking groups.

When measuring counterparty risk size, this should be done by:

Legal entity;

Country (foreign branches may not be covered in entity review);

Overall group;

Subordination within legal entity;

Instrument, especially to capture the liquidity of the instrument; and Maturity, to cover the time over which the risk occurs.

A further dimension to consider is type of counterparty. For example, when measuring investments, types might include:

Commercial banks;

Investment banks;

Sovereigns; or

Non-financials (which could also be broken down further).

Measurement of likelihood of default This measurement is arguably more challenging and amounts to an assessment of credit risk of the counterparty. We will restrict ourselves to measuring bank credit risk, although the same principles broadly apply to other types of counterparty.

A particularly useful way to analyse some of this data is to use it against a benchmark of the sector. So if, for example, the CDS price of a bank was rising (worse credit risk) faster than its peers… that would be a warning sign. Similarly, if the share price was falling (worse risk) faster than its peers, that would also be a warning sign.

One positive aspect of assessing bank credit risk is that there is plenty of data available to use:

Limits Having measured the size and likelihood of an

Counterparty risk is the risk that a counterparty to a contract will not perform their part of the agreement, such as repay a deposit of cash, settle an invoice or supply goods when due.

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Share price

Data piece

MEASURING BANK CREDIT RISK

Credit rating

Credit default swap (CDS) price

Debt prices

Fundamental analysis

Description and comment

Every bank is rated and the rating agencies specialise in credit risk assessment. They have been known to be slow to react to events, however, and bank failures happen very quickly. As well as the rating itself, both long-and short-term, the outlook should also be considered.

The price of bank debt (for example, bonds, commercial paper, money market pricing) will reflect the market view of the bank’s credit risk. The higher the yield, the greater the risk. This can form part of an assessment of a ‘market-implied rating’ where a certain yield implies a certain rating, whatever the actual rating is.

The CDS price reflects the price of credit in the same way that bank debt does, but is arguably more liquid and immediate than debt prices, thus adding signalling power.

The share price is an easily available measure that can be expected to react quickly to events and so has high signalling power.

Proper fundamental analysis is almost certainly beyond the capability of most treasuries, but simple measures of balance sheets can be made, such as the leverage measure used by regulators. One problem with this type of analysis is that it is out of date very quickly.

Share price

exposure, then the next stage in counterparty risk management is to establish a set of limits, which is the typical response to this risk. Limits should be set within an overall risk management approach using the concepts of risk tolerance, appetite and budgeting.

Companies taking high business risk might decide to take minimal counterparty risk and invest only in ‘risk-free’ sovereign instruments. Some companies may take different amounts of risk with different cash segments, such as core long-term cash, compared with cash needed for paying wages or suppliers.

Limits should be set, taking into account the following:

Overall group;

Entity within a group;

Country;

Subordination within a group;

Instrument;

Maturity;

Credit risk (by whatever measure or combination of measures); and

Industry sector/bank type.

Limits should be aggregated across the company so that limits are not broken by two parts of the organisation acting independently. Risks should be measured on a regular basis and there should be an ability to react to changes in risk quickly, bearing in mind how quickly banks, in particular, can fail. Some companies use a traffic light system, based on a combination of the measures in the table above left, which can be used as a trigger for action.

It is impossible to eliminate credit risk, but a company should understand the risks it faces and be in control of them.

The ACT is delighted to announce the dates of the next Middle East annual conference. Currently in its fourth year, this flagship event for the region builds upon the series of events we run across the GCC, providing the perfect platform for the region’s treasury and finance community to share and promote treasury best practice. Look out for the preview programme in May. For a glimpse of what to expect from this year’s annual conference take a look at the 2012 conference overview here: www.actmiddleeast.org/annualconference.Special rates are available for all Accountant Middle East readers. To submit your interest in sponsoring, exhibiting, attending or speaking at this year’s ACT Middle East Annual, simply visit the website: www.actmiddleast.org/annualconference2013 or email [email protected].

ACT Middle East Annual Conference 201326-27 November 2013 |The Ritz-Carlton, DIFC, Dubai

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37%proportion of survey respondents who described their company’s risk management programme as ‘robust and mature’

IN THE last annual regional conference organised by the UAE’s Institute of Internal Audit in Abu Dhabi, KPMG held two half-day

workshops titled; “Expectations from Risk and Control Functions – Insights and Recent Trends”.

The workshop’s aim was to provide the participants with a practical understanding of the key developments and evolving expectations on Risk and Control-related matters from an Audit Committee and Senior Management perspective within the region, as well as from a global perspective.

The key questions that KPMG aimed to address during the workshop include:

i) What can be done to transform a compliance obligation into a real business advantage

ii) How Assurance Functions can deliver significant and quantifiable operational and financial value from the budgets allocated

iii) How we can enhance efficiencies in the risk and controls management processes

Module OneThe workshop’s first module focused on sharing the results of KPMG’s Global Audit Committee Survey which was conducted in January 2013 where 1800 Audit Committee Members from around the world were asked a total of 36 multiple choice questions on the evolution of risks and controls.

To ensure that the participants derived the most value from this module, KPMG selected

seven key questions from the survey and provided the participants with voting pads so they too could answer the questions and compare their results with Audit Committee members around the world and in the Middle East specifically.

The results of this exercise proved to be very interesting and initiated many interactive discussions whereby participants shared their own experiences on how they view Risk and Control’s role, and how it is evolving in the current phase of economic recovery.

“We did witness however, a slight difference between the responses of the participants and the Audit Committee survey,” says Karl Hendricks, a Risk Consulting Partner at KPMG.

The key reasons for such a perception gap according to the participants centered on challenges faced in the region such as Audit Committee awareness and support on Risk and Compliance related matters.

They key outcomes of these discussions can be summarised as follows:

Oversight of risk—including the quality of risk information, crisis readiness, and understanding the audit committee’s risk oversight role— continues to pose challenges.

Many audit committees are sharpening their focus on global compliance—particularly in light of stepped-up enforcement.

Thirty-seven per cent of survey respondents describe the company’s risk management programme as ‘robust and

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KPMG’s modules reveal significant swing in the role of Risk and Compliance functions, to a more strategic role...

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mature’, nearly half say their programme requires ‘substantial work’.

While largely satisfied with audit quality, audit committees are looking to the Risk and Compliance functions for value and a sharper focus on key risks.

Less than 50% of survey respondents are satisfied that Risk and Compliance delivers the value to the company that it should, and that the internal audit plan properly focuses on the “critical risks to the enterprise.”

To ensure that these concerns are addressed KPMG suggested the following solutions:

- Management should consider redefining Risk and Compliance’s (RC) Role. As RC moves to higher value added model, it shall become an increasingly valuable model to the Audit Committee.

- Clear expectations should be set to ensure RC is properly focused and fully utilised.

- There should be a focus on key areas of Risk as well as the adequacy of the company’s Enterprise Risk Management processes. Companies should reassess and clarify the risk oversight responsibilities to ensure alignment and coverage.

- Companies should ensure that RC has the resources, skills and expertise to succeed.

- Audit Committees should ensure that a mechanism is in place to hear views from those below and beyond senior management about the risks and challenges facing the company.

- Setting the tone and closely monitoring leadership’s commitment to that tone, as well as the organisation’s culture is key to the success of RC Functions.

- Audit Committees should make time to visit company facilities and attend employee functions to get a good sense of the culture in the company.

Module TwoThe second module of the presentation shifted the focus from the perspective of Audit Committee members to the views of C-Suite Level Executives.

During this module, KPMG shared the key outcomes of another survey titled ‘Global C-Suite Survey’ which was conducted for KPMG International through the assistance of the Economist Intelligence Unit. This survey focused on face to face interviews with 1,092 C-suite executives from around the world and included over 300 C- Level Executives from the Middle East.

The results of this survey were of particular interest to the workshop participants who provided insights on their own management’s perception towards Risk and Control Functions and focused their key concerns from a C-Level standpoint on the following:

Many audit committees are sharpening their focus on global compliance—particularly in light of stepped-up enforcement.

“Oversight of risk, crisis readiness and understanding the audit committee’s risk oversight role continues to pose challenges,” says Karl Hendricks, Risk Consulting Partner at KPMG

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To ensure that the Risk and Compliance debate remains centre-stage, KPMG intends to hold breakfast sessions during the year, whereby more discussions around this important survey are held with various members of the UAE Business Community. If any of the Accountant Middle East readers are interested in the same, they can get in touch with the organisers at [email protected] or [email protected]

a) Return on Investment - Risk management is viewed as making a key contribution to the business; however, organisations need to improve how they measure risk management’s return on investment, and how they communicate its processes, value and effectiveness to key stakeholders.

b) Assessing risk exposures - Executives continue to struggle with assessing enterprise-wide risk exposures

c) Articulating risk appetite - The C-suite sees risk management as critically important but few organisations are articulating their risk appetite.

d) Three lines of defense – Management believes business units are more adept than risk management departments, compliance and internal audit in assessing and managing risk

e) Barriers to convergence – There is a lack of human resources/expertise impedes convergence of risk and control functions

f) Investment in risk management - Spending to enhance risk management will continue to

increase over the next three years

Module ThreeTo summarise the outcomes of both surveys, the last module focused on sharing the key trends in the Middle East specifically as well as the emerging challenges in the region.

We have witnessed in the last few years that many companies have opted for establishing multiple Assurance Functions including Internal Audit, Risk Management, Compliance, Internal Controls and Quality. In some cases this was driven by Corporate Governance regulations such as those issued by the Securities and Commodities Authority in the UAE.

However, we have noticed a trend of non-regulated companies opting for similar arrangements to align themselves to leading practices.

Having said that, the key challenges for regulated companies have been centered on alignment to multiple regulations whilst eliminating duplication of efforts in their respective assurance functions.

Further, due to the fact that regulations and guidelines have only recently been introduced and are evolving themselves, there are cases whereby there is lack of clarity on accountability and ambiguities that remain to be clarified.

ConclusionThere is no doubt that there is an appetite for a paradigm shift in risks and controls and the role of Risk and Compliance functions to a more strategic role. However, the reality is that the right tools, competencies, structures and culture are imperative to achieve this change.

Audit Committees should make time to visit company facilities and attend employee functions to get a good sense of the culture in the company.

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SALES EDITORIALChristopher Stevenson Joyce NjeriTel 04 440 9138 Tel 04 440 9140Email [email protected] Email [email protected]

HAVING WORKED in sales and finance functions at various organisations in the past, I understand well the

different focus and mechanisms of each department.

The main bone of contention between the two divisions mostly revolves around a credit approval or payment problems with the client. So what is the solution so that both departments work effectively together rather than confrontation?

The very first thing that will need to be accepted is that the Ownership of the Company/Management will have to agree to principles regarding Credit Policy so that the company and employees are all working for the same cause, that is, the profitability of the company. Without the ‘buy in’ from the top, no Credit Policy will work and the result will be two key departments involved in persistent infighting.

Working in harmonyThe first thing that needs to be addressed is a Credit Policy that incorporates both departments and their role with the client and how they work together internally. Without such a policy each department will not work in harmony when needs arise to solve client payment problems. It is important that each understands the role of each function and how bad decisions can impact the whole company, not just a department or person.

Andy Yiacoumi takes a closer look at how a company should establish shared service centre for some of its business processes in order to ensure cost efficiency for finance function…

The CReDIT

CONNeCTION

The sales personnel will need to understand that it is in everyone’s interest to find quality companies to work with rather than a haphazard approach of any old client. The bad will drag down the company and affect the overall performance. If you waste too much time collecting from bad companies then your service levels/lack of resources will ultimately affect the good companies too.

Offering credit will always carry a risk to any business. There will never be a guarantee of avoiding bad debt… but by following a strict policy you will certainly minimise losses and have a positive impact on profitability.

Managing Consultant DeCol Debt ColleCtions llC

anDy yiaCouMi

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When you are considering offering credit to any client you are effectively performing the role of a bank. No bank will loan money to individuals or companies without being satisfied of their ability to pay back the credit.

Resistance from sales divisionIn the policy it must be clear that in order for Finance to consider approving any Credit account the salesperson will have to gather complete information so that the application can be considered. There is always resistance from many in the Sales division but it must be clear that they cannot even request Credit without a complete application and supporting documents. If you allow them f lexibility then inevitably application forms will come to you half completed and with missing supporting documents.

The targets set for the Sales department need to be a combination of new sales, retained sales and collections. Furthermore all commission payments to Sales need to be on collected amounts not just invoiced. Once this is enforced you will definitely have the co-operation of the sales team.

This will ensure you have an ally when you are facing problems with client payments. If you don’t have their co-operation you will have to deal with a salesperson effectively protecting the client rather than your company. He will effectively be protecting his own pocket and targets against any potential return of commissions and lost revenue for non-payment.

A different perspectiveAnother very important part of the Credit Policy is for salespersons and Credit Controllers to have a direct relationship with the client. I strongly advise that Credit Controllers/Finance Managers also visit the potential client once they have applied for Credit. Two heads are better than one. Sales and Finance will inevitably look at things from a different angle.

This is also an important element of the Credit approval process. It will also help to build a strong relationship and when collecting outstanding payments. It is much harder for any client to delay payments when they know who is at the end of the phone line. The Finance Department should be present with the salesperson at least a few times per year for any medium-to-large Credit clients.

The closer you are the less possibility of default later. It is also a show of professionalism and commitment that you are interested in the clients you work with. This sends out

an important signal to the market that you take seriously who you work with and are not a soft target for potential fraudsters and unprofessional companies.

Ability to pay backWhen you are considering offering credit to any client you are effectively performing the role of a bank. No bank will loan money to individuals or companies without being satisfied of their ability to pay back the credit. Why should your company act differently? In order to assess the application you will need information and supporting documents. You will also need to consider some form of external report to help you as part of that review. There are a number of reports that are available varying in the information provided.

The role of a Credit/Finance Manager will also to a certain degree be similar to a Researcher. He/she will have to look at any application impartially and then make a decision based purely on fact. He/she should never feel intimidated or under pressure to say yes without feeling positive.

If the decision isn’t impartial then sooner or later there will be problems which will affect the profitability of the company. Offering Credit will always carry a risk to any business. There will never be a guarantee of avoiding bad debt but by following a strict policy you will certainly minimise losses and have a positive impact on profitability.

• Decol Debt Collections firm is recognised as one of the top Debt Recovery - Credit Service Agency in the UAE. The Company’s comprehensive services are offered and utilised by many organisations, locally and international. For further details on how Decol can assist with the above please contact us directly for a consultation.

CReDIT

MANAGeMeNT

THE MACROECONOMIC backdrop is evolving much as we expected at the start of this year; global growth is firming, monetary policy

remains accommodative, and globally, inflation remains largely benign.

Moreover, risks of country events spilling over and derailing the global economy have declined.

Despite uncertainty about the US fiscal outlook and the expiry of the payroll tax cuts, the US economy was surprisingly resilient in the first quarter of 2012 with strong retail data suggesting the US consumer carried on regardless.

With an already low US savings rate, we expect the sequester cuts to drag on US prospects in Q2 as consumers adjust to their changed incomes. Unlike previous years, however, we expect the deceleration in Q2 to be modest and short lived. We continue to expect the US to be an important driver of global growth this year.

Going into Q1 we were unconvinced about European growth prospects. We were right.

According to survey data, economic conditions in the euro area have deteriorated this year. We expect more of the same in Q2 and believe

0.9% expected economic growth in developed markets by end of 2013

Sara Yates, Global Currency Strategist at JP Morgan Private Bank, provides a macroeconomic overview and highlights of what she believes are good-carry currencies in the year ahead…

SHOW ME THE MONEY

the ECB’s bias is towards looser policy. In our opinion, economic stabilisation and a clearer political landscape will be reserved for Q3 at the earliest. However, we believe the most aggressive loosening policy will come from the Bank of Japan – although we only expect developed markets to grow at 0.9% this year.

On the other hand, China will continue to grow at around 8% this year.

USD DiversificationWe believe the US dollar is unlikely to be the weakest currency this year, expecting the Japanese yen to achieve that accolade instead. In such an environment, USD diversification is as much about what non-USD currencies investors buy as it is about what other currencies they fund from.

USD – The USD should stay supported against low-yielding G4 currencies this year.

JPY – We expect the JPY to be the weakest currency this year. Japanese yields are already low and we think the main impetus for further JPY weakness will come from increased domestic participation. Longer term, we expect the JPY to continue to underperform as firmer US growth in the second half of the year supports US yields and a stronger USD.

GBP & EUR – Just looking at European data and the loosening bias it implies suggests a weaker EUR and GBP versus the USD. However, the near-term moderation of the US economy and potential flows into Europe on the back of loose external policy may limit the downside for the EUR and GBP. In fact, we believe how EURUSD and GBPUSD perform is likely to depend on how dovishly the ECB and BoE act.

CHF – We think the CHF is another good alternative funding currency to the USD. Unlike the EUR, we expect the CHF to underperform the USD in the second half of 2013. Switzerland

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The past 30 years have largely been a story of a declining US dollar. We believe this year will be different.

remains expensive on a purchasing power parity basis. We expect this to gradually unwind this year, helped by further deflation and a stronger USD in the second half.

Carry currenciesAs well as diversifying away from the USD as a funding currency, it remains as important as ever to diversify out of USDs and into currencies that offer a better expected return. Our favourite carry currencies are the INR, CLP, BRL and MXN:

INR – Offers a great carry that may not be around for long. With the authorities pushing ahead with their fiscal austerity programme, there is scope for the Indian central bank to cut the repo rate. With less carry, the country’s poor fundamentals would make the currency less appealing.

CLP – Is an excellent currency to hold for long-term carry. Chilean activity is robust and the central bank expects the economy to grow at 4.5 to 5.5% this year. With relatively low inflation, CLP offers the highest real carry in our currency universe.

MXN – Remains a great currency long. Domestically, survey evidence suggests growth is solid, while inflation is benign. Other positives include robust macro-financial fundamentals. And with Pena’s government pushing through structural reforms at a rapid pace, we see scope for FDI flows to increase, potentially helping USDMXN push below 12.

BRL – We think the high and potentially rising carry makes it an attractive currency to hold for now.

Emerging Markets AsiaIn Asia, we believe the market has overreacted to the impact a weaker JPY could have on other currencies in the region. We see value and carry opportunities in many Asian currencies. Our preferred Asian longs are KRW, CNY, MYR and INR.

KRW – A weaker JPY and elevated geopolitical concerns dragged on the KRW’s performance in Q1. While we expect JPY weakness to continue, we believe a run of resilient Korean economic data will lessen market concerns about possible intervention to protect the economy.

The supplementary budget is likely to be another positive in the second half. In the very near term, however, concerns about North Korea are likely to remain a drag. We expect the current US-South Korean manoeuvres to end by the start of May. After that, the geo-political noise may subside somewhat, providing scope for USDKRW to move lower.

CNY & CNH – With the economy expected to grow at around 8% this year, a large current account surplus and inflows likely to continue we expect the authorities to allow the CNY to drift higher versus the USD this year. In fact, we believe the possibility of strong inflows on the back of externally loose monetary policy poses upside risks to inflation and may encourage the authorities to let the currency appreciate sooner or by more than our forecast.

MYR – Robust growth, a current account surplus and a cheap valuation are just some of the reasons we like this currency. We expect the upcoming elections to result in the incumbent remaining in power. Assuming this occurs, we expect the MYR to strengthen as political uncertainty fades. The possibility of an alternative outcome is a downside risk to our forecast.

INR – The INR’s high interest rate combined with our expectation for a sideways move in the currency makes this an attractive carry currency, in our opinion.

Sara Yates, Global Currency Strategist at J.P. Morgan Private Bank

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Real estate developer and services provider - Deyaar Development - has announced the appointment of Hawary Marshad

as the company’s new Chief Financial Officer. In his previous role, Marshad held the position of Chief Financial Officer at Zabeel Investments LLC in Dubai, and earlier at AMS Baeshen & Co in Jeddah. Earlier, he enjoyed an 11-year association with Ernst & Young in Dubai in the Audit and Assurance Department. He holds a bachelor’s degree in Business Administration with a major in Finance from the University of Houston, Texas. He also holds a Certified Public Accounting (CPA) qualification from the Montana State Board of Accountancy. As part of his role, Marshad will provide both operational and strategic support to the organisation, on matters relating to the management, sourcing and deployment of capital; preparation and review of financial statements and ensuring regulatory compliance, with the overall objective of facilitating business growth and profitability.

Deutsche Bank has announced the appointment of Ziyad Al Ashaikh as General Manager of its branch in the Kingdom of Saudi Arabia. As General

Manager of Deutsche Bank’s branch in the Kingdom, Al Ashaikh has oversight over all SAMA (Saudi Arabian Monetary Agency) regulated activities. Al Ashaikh has more than 17 years of experience in Treasury, Capital markets, Investment Banking and managing client relationships. He started

his career in the treasury department of National Commercial Bank (NCB) and rose through the ranks to assume the role of Country Head of Investment & Derivatives Sales. He later moved to JADWA Investments as the Head of Wealth Management. Al Ashaikh joined Deutsche Securities Saudi Arabia in 2010 as Head of Private Institutional Clients (PIC). In addition to PIC, he was responsible for managing public sector & institutional relationships. Al Ashaikh has a Bachelor of Science Degree in Finance with Honors, from King Fahd University of Petroleum & Minerals and has completed an Executive Management programme from INSEAD, France.

Bain & Company has announced the appointment of Luc Luyten as its managing director in the Middle East. Bain advises clients on private

equity, mergers and acquisition, strategy, operations, technology, developing practical insights that clients act on and transferring skills that make change stick. In his new role, Luyten will oversee all office activities including growth planning, recruiting, training and development of professional staff and the day to day management of the office operations. Prior to his appointment, Luyten served as head of Bain’s EMEA Industrial Goods & Services Practice. He was a founding partner of the firm’s Benelux operations, where he served as its managing director. Before that, he was a partner in the firm’s London office. Luyten earned an MBA from the University of Chicago, a master’s degree in civil engineering from the State University of Ghent, Belgium, and a degree in business economics from the University of Leuven, Belgium.

Deutsche Bank has appointed Harold Leenen, to serve as the regional head of Global Transaction Banking (GTB) for the Middle East and Africa (MEA). In

his new role, Leenen will oversee the GTB business activities in the wider region of the Middle East and the whole of Africa, in an effort to further deepen Deutsche Bank's business links with the African continent. He will be tasked with building on GTB's existing success and actively pursuing further growth opportunities in the region. Leenen will be based in Dubai and report into Ashok Aram, CEO of Deutsche Bank MENA. He will be a member of Deutsche Bank's MENA Executive Committee. Over the past few years, Leenen has made a major impact on the integration of the Dutch business acquired from ABN AMRO in 2010 in his roles as Chief Operating Officer of GTB, and most recently Chief Executive Officer of Deutsche Bank Nederland N.V.

Independent asset manager PineBridge Investments has appointed Wael Aburida as its Chief Investment Officer for the Middle East, North Africa and

Turkey. Aburida, who has about 20 years of experience, was previously director of mergers and acquisitions at UAE-based Waha Capital, and prior to that was director of chip maker Intel’s global M&A group. At PineBridge Aburida will lead the firm’s MENA private equity and real estate team, and will be responsible for deal origination, negotiations, execution, portfolio management and exits. He will be based in Bahrain and report to Middle East CEO Talal Al Zain.

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Our services include Corporate Governance, Business Establishments (Franchises, Small and Medium Enterprises), Market Due Diligence, Joint Ventures, Corporate Policies, Corporate Restructuring, Product Restructuring and Intellectual Property.

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amic Growth Starts at Core Foundation

Office Wing D-709, Dubai Silicon Oasis (DSO) Authority BuildingPO Box 444854, Dubai, United Arab EmiratesTel: +971 4 372 4422, Fax: +971 4 372 4423Email: [email protected]: www.principle-consultants.com

Our services include Corporate Governance, Business Establishments (Franchises, Small and Medium Enterprises), Market Due Diligence, Joint Ventures, Corporate Policies, Corporate Restructuring, Product Restructuring and Intellectual Property.

[email protected]

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