2. Multiple faces of a CFO
• Balance capabilities
Operator • Optimize cost
• Improve service levels
• Protect and preserve the assets of the organization
Steward • Internal controls, risk and accountability
• Provides financial leadership in determining
Strategic strategic business decision
• Align financial strategies with shareholders’ value
and objectives
Catalyze • Ensure high performance culture
• Investment management and strategic execution
PWC study
3. Continuous evolution of CFO’s role
Crisis • Expertise in credit and banking
• Capital market and investment banking
Management • Restructuring
• CFOs are sought with digital knowledge to
Digital help the company integrate new business
models, marketing strategies and sales
Champion channels
• CFO needs to understand what drives the
PE landscape business and how to get the numbers that go
to the heart of those key drivers.
4. Landscape in the Middle East –
Historical challenges
Diversified companies - Growth through unrelated opportunistic
investments
Energy riches have led to strong growth over the years - Element of
organizational arrogance ?
Strong preference for ownership of real estate assets
Restrictive competition and privileged access to power centres through
family connections
Easy access to bank funding by large family group often through
ownership linkages
5. Landscape in the Middle East –
Organizational challenges
Lack of boundary between promoter interest and corporate interest
Organizational structure – Loose organizational structures, complex relationship
between holding companies and operating entities
Lack of succession planning
Prime managerial positions with family members
Blurring lines of control, complex relationship between family members and
stated and behind the scene power structures
6. Landscape in the Middle East –
Governance challenges
Lack of a governance framework - Adequate policies,
systems and procedures,
Absence of robust financial reporting framework
Lack of independent directors
Absence of shareholders’ activism
7. Landscape in the Middle East –
Banking scenario
Banks were largely lending on names and security rather than focusing
on cash flow
Large inflow of funds in 2007-08 led to indiscriminate lending
Large portfolio of real estate
Diversion of short term funds for investments
Encouraged corporates high leverage and unrelated and risky
investments in diverse geographies
8. Landscape in the Middle East –
Unique opportunity
Family controlled take a longer term approach to
running their businesses
Readiness to invest capital with patience that brings
competitive advantage.
Quick and centralised decision making paves way for
seizing market opportunity quickly
Long term commitment to the region rather than
on/off approaches of multinationals
9. Changes in the Business Scenario –
Post Crisis
Businesses are now facing tough economic environment
Major default of a number of corporate across the region
Intensified competition and pressures of globalization
Stronger regulation
Rapidly changing political landscape in the MENA
10. Changes in Banking scenario
Banking system initially suffered liquidity problems
Sectoral prudential caps by Central Banks
Bankers moved from exuberance to extreme caution- Decision Paralysis
High CDS rates restricted funding in 2009-10 in Dubai
Alternative financial players have got effected due financial turmoil and
deleveraging.
11. Cash Strapped Companies –
Survival and way forward
Post 2008 after banks have tightened credit, number of
companies remain in a precarious cash position
Accessing cash is a permanent preoccupation many
such CFOs
Improve working capital management
Evaluate supply chain and business model
12. Cash Strapped Companies –
Survival and way forward
Build trust with banks and improve communication
Explore non bank funding - Basel 3 rules with stringent capital
provisioning will have adverse effect on funding of SMEs
Follow an asset light policy to reduce debt and improve cash
flow
Can a private placement market be developed in an organized
manner in the middle east ?
13. Cash Rich companies – Way
forward and opportunities
Explore the best approach to long term funding and use the opportunity of lender’s focus on
low risk funding to reduce cost of funding
Improve controllable business parameters and work towards improving the credit rating –
external/internal audit, management structure, freeing up of capital, better cost control
Evaluate current business to move away from unrelated businesses – Overcome
reluctance to put on sale due to perception issues
Explore sale and lease back for real estate assets used by the organization – freeing of capital
and improving ROE
Look for unattractive assets of other investors
Improve market share in current areas of operations
14. Cash Rich companies – Way
forward and opportunities
Explore new market opportunities – Africa the continent
of future growth ?
Resource rich and the potential to build compelling
business models of integrated projects mitigating raw
material price risks
Large market, favorable demography, growing economies,
growing middle class , need for large infrastructure
investment and also manufacturing opportunities
