business insight march

Issue 3 - March 2013www.businessinsight.ae

Handling Employee Misconduct Cases Lawfully and Effectively

Dont Retreat Compete

Supply Chain Management

Mitigating Currency Exchange Rates

Secrets to Success Series

Gain Competitive Advantage Through Staff Happiness

Going Green Rising Cost of

Medical Care

Manage your Finances Today to be Rich Tomorrow

The Audi A8 L. Always first class.

Available with a powerful 4.0 TFSI quattro V8 engine or an equally dynamic 3.0 TFSI engine, the Audi A8 L is a pure expression of distinction. Plush cabin finishes are woven with intuitive technology; commanding exterior lines evoke a dual impression of cutting-edge design and flagship elegance. With Audis ultimate luxury saloon, unrivalled performance and opulence is yours.

Audi Connect Online Service | MMI navigation system plus with MMI touch | rearview camera | Pre sense system standard Audi Complete package: 3 year warranty | 5 year / 105,000 km service | 24 hour roadside assist

Optional equipment includes: rear seat entertainment | reclining rear seat | Bang & Olufsen sound system

For more information visit www.audi-me.com/a8

AUD065_A8L-DPS-Gulf Business_27x41.2cm_ENG.indd 1 2/27/13 2:44 PM

March 20134

Published by: DMCC Authority

Contact:James Bernard

Associate Publisher: Nuria Gonzalez Martin

Editor: Tanya Selly

Associate EditorRitwika Chaudhuri

Business Development Manager: Brendan Bosley

Administration: Janice Porte

Art Director: Mohsin Rawal

Printing: UPP Printers

Distribution: Blue Truck

For information on advertising rates & positioning:

Please contact Brendan Bosley Tel. +971 4 375 4619

Email: [email protected]

For editorial schedule & article submission:

Please contact Tanya Selly Tel. +971 4 375 4121

Email: [email protected]

Copyright 2013 Redcorp.

I cant believe it is March already Can you? Time has flown by! It doesnt seem so long ago that we were herald-ing in the New Year, feeling positive about what it will entail. Do you still feel that way now?

If you are like me you will be looking back at what you have achieved so far, and what is left to do for Q1. You may be happy with the ways things are going. If so, great, long may it continue! Not all of us are there yet though. Some of us may even feel as though we are stagnating a little, and wondering what we can do as we are often being unstuck by the corporate giants out there. If so, turn to page 11 for our article on how to take on these giants and beat them at their own game.

Continuing on the theme of beating the big boys, turn to page 48 for a step by step guide on how to create your companys own renowned persona. I know this seems like a mammoth task right?! Wrong. Our guide breaks down the whole process for you into manageable chunks, showing you just how easily you can make your company standout, just like the golden arches So why arent you doing this?!

Finances can also be a key issue in March as many busi-nesses that are branches of larger organisations scramble around in order to log their year-end results in time for April. Even if you are a small company you may be looking at your finances, finalising 2012 accounts or looking at your cashflow for Q1; what you have yet to achieve to reach your goals, and comparing them to the same period last year. Either ways page 6 is for you as we discuss how some business owners can take their eyes off the ball and/or be-lieve this to be far more difficult than it needs be.

If business is going well for you, or if you have just, or are about to move offices, I would recommend reading pages 51 and 52. This will give you some great tips to take into ac-count when planning your planning your new offices as a whole.

In answer to my question above as to whether or not you still feel the New Year positivity I hope that after reading our magazine the resounding answer is yes, and that you are able to see, plan and have the right tools to make 2013 a success.

All the best

Tanya

Talk to me at [email protected] and let me know what information you need to take your business forward and I will try to help you in the next issue!

Editors Foreword

March 2013 5

CONTENTSOPERATIONS

WELLBEING

WELLBEING

SUCCESS

MONEY

PEOPLE

TECH

THE HUB

Page 9 10

Page 31 32

Page 16 17

Page 21 22

Page 34 35

Page 43 44

Page 48

Going Green

Gain Competitive Advantage Through Staff

Happiness

Interview Linda Mahoney Chairman, Better Homes

Islamic Finance: Compliments not Competes

Keeping your Data Safe

Can Meditation Improve your Business

Tips to Building a Strong Brand

6

11

14

15

1923

24

27

Operations Manage Your Finances Today and be Rich Tomorrow

Dont Retreat, Compete

SuccessInterview Nathalie Haddad, M.D. Right Bite

Interview Lesley Fair and Nicola Holmes Directors,

Custard Communications

Money How To Chose The Right Bank For Your Small Business

Alternative Project Finance Gaining Popularity

Mitigating Currency Exchange Rates

Introduction To Commodities

29

36

38

40

46

51

53

54

55

PeopleHandling Employee Misconduct Cases Lawfully

and Effectively

TechHello To The New BlackBerry Z10 Line

Techworking - Linking Into Business Success

WellbeingRising Cost of medical Insurance

The HubSupply Chain Management

The Truth Behind Fitting Out an Office Space

Business Directory

Entrepreneurship: The New Culture

News Desk

March 20136

Meyer and De Wits wrote in 1998 plans require forecasts. Danish physicist Niels Bohr also once joked Prediction is very difficult, especially about the future. Even enthusiastic planners acknowledge that forecasts will be inaccurate.

Does this mean that we do not have to plan, or that forecasting is useless? Of course not! The best way to prepare for an unpredictable tomorrow is to plan meticulously today, to try and shape the future and meet changes in the marketplace. The success of a business is hidden in its effective planning and management; and one of the most important driving forces behind healthy business growth is to manage effectively the finances.

Poor financial management of owner-managers, or lack of financial management altogether, is the main cause underlying the problems faced within SME financial management. Hall and Young 1991 study looked at 3 samples of 100 small enterprises in the UK that were subject to involuntary liquidation in 1973, 1978 and 1983. It showed that 49.8% of the respondents claimed that their business failure was directly linked to poor financial management. The positive correlation between poor or nil financial management (including basic accounting) and business failure has well been documented in western countries according to Peacock (1985a).

This clearly shows that to be successful in business we must devote more time and resources to effective financial planning. So what does financial planning actually mean?

The Role of Financial PlanningFinancial management can be defined as the organisation of finances within a company in order to achieve the financial objectives of the organisation. This has two aspects; financial planning and

forecasting, and financial control.

Financial planning will ensure that enough funding is available at the right time to meet the needs of the organisation for short, medium or long-term capital investment. Financial forecasting is the estimate of a financial trend for an organisation. The goal is to minimise the error between planned and actual requirement. Financial control comes later as it seeks to assess whether the plan put forward meets the objective of the organisation in question.

Obviously financial plans can be a critical tool for any company. They will help to link a companys daily operations and available funds to its mission, and both its short and long term goals. These plans help management to identify steps needed to be undertaken to reach key milestones, and can also help to motivate staff to achieve targets. Vice versa it also addresses the problem of gap between goals set and not achieved.

Big or small, private or public, financial planning is crucial for any organisation as without that no business would be able to measure accurately whether they have failed or succeeded, whether a new venture was productive or destructive. Financial planning helps highlighting whether to reduce debt or raise equity, or whether current cash is enough to run the day-to-day operations and/or fund external ventures.

Keeping in mind the universal accounting norm for any business organisation, the need for an SME from that of the bigger organisations differ substantially. In a large corporate, the objective of the firm is to maximise shareholders wealth either by maintaining income and reducing risk, or by increasing net income by keeping risks constant. However for a SME over and above the P&L (profit and loss account), the most important challenge is to remain

Watch the costs

and the profits

will take care of

themselves

Andrew Carnegie

Be Rich Tomorrow

Manage Your Finances Today,

March 2013 7

OPERATIONS

afloat by maintaining a healthy cashflow. Cashflow management entails measuring cash coming in (receivables) and cash going out (payables). Despite an initial infusion of healthy capital whether from banks or other sources, the business might stumble if it lacks operating capital to run the show on a regular basis.

Expert commentPritam Mirchandani, Head of Business, Finance RakBank, comments Financial planning and financial management, including cash flow management, is of the utmost importance to the success of SMEs. Cash must be readily available to operate the business and fulfill short term obligations. Absence of proper cash flow management tends to lead to issues like cheque returns, delays in payments, and, consequently, the risk of losing credibility in the market. To ensure that they are treading the path of successful financial planning, SMEs must take advantage of their banking relationship and consult with their banks on how to avoid financial pitfalls. They can also consult with their accountants and other financial professionals.

Douglas Stoneham, General Manager, SME Banking, Middle East, There is a saying cash is king. For SMEs, this is a very important message. Also understanding the tricks of trade with supplies, credit to buyers stock holding period etc helps planning effectively for the business.

Thus maintaining a continuous flow of working capital in turn helps in addressing two other dual objectives:1. To ensure income to the owner-manager2. To grow the business in terms of earning through sales

Establishing a planFinancial plans are built from the ground up. Management begins the planning process by setting goals, followed by gathering insights and information from all areas of the business to understand its competitive position in its market. Management then can focus on internal and external factors, enabling it to create a base from which to forecast revenue and profits.

Step 1: Set goals Set specific numeric goals for each business or division based in part on past performance. Scan the external landscape for specific factors that could impact performance targets for a particular business unit or division.

Step 2: Create Metrics Devise relevant internal performance metrics to track and measure performance. Some examples are: Changes in volume Changes in operating profit margin Uptick in selling, general and administrative

expense (SG&A) Headcount analyses cost per function

Step 3: Scan environment Scan the external landscape for specific factors that could impact performance targets for a particular business unit or division.

Financial planning and budgetingAn effective financial plan is based on a 3 step process for determining and detailing an organisations financial goals: budgeting, forecasting, and flexibility. When budgeting, an SME should be well aware of their numbers and must adopt emergency strategies to ensure their ability to weather unfavorable conditions. It must also ensure that expenses are minimised, company income is maximised, and credit is managed. Financial forecasting on the other hand is necessary to minimise the error between planned requirements and actual requirements. Flexibility is a running theme throughout the plan to ensure that the SME is agile enough to adjust to market changes and make the best of it. suggests Mirchandani.

The external and internal factors provide managers with the foundation to create a budget, which works in tandem with financial planning. Small business owners can use financial planning and budgeting to obtain external financing from investors or banks. Many small businesses need external financing for growing operations. Because small businesses may not have a strong financial history, financial planning and budgeting helps investors or banks thoroughly review the business. Not only preparing budget, but monitoring its progress regularly is equally important.

Budgets should not be set in stone and need to be flexible to react to special items, ranging from a spike in borrowing costs, to nonrecurring expenses that might cut off a revenue stream. Hence, dont forget to update budgets and financial plans regularly to account for unanticipated events. A financial plan that includes detailed financial statements and projections forms the core of the overall business plan. It enables the company to make sound business decisions about what financial resources it needs to acquire and to plan for and obtain necessary financing to establish, sustain and to grow business, says Mirchandani.

Stoneham points out two more important points which SMEs need to keep in mind while making financial plans, They need to know clearly what kind of margins they are working as that is a determinant of cash they generate. Also it is better to spend on a finance manager from the very inception considering this as an investment or probably to get help from an independent financial consultant who can help in effective financial planning.

The above sounds complicated, confusing? Do not worry, see our simple recipe to a solvent and successful organisation.

Eleven tips to drafting an effective financial plan1. Plan ahead, prepare a budgetHow can you get going if you do not know where to go or how to get there? So,a. Draw a clear business plan, set a financial target, create systems for budgeting, receivables, and payables to establish how healthy the business are in a financial sense. b. Create a cash flow statement taking note of

While financial

management

is critical, within

this function the

management of its

assets is perhaps

the most important.

In the long term, the

purchase of assets

directs the course

that the business

will take during the

life of these assets,

but the business will

never see the long

term if it cannot

plan an appropriate

policy to effectively

manage its working

capital

Osteryoung et al

March 20138

current receivables what and when it is due. c. Keep a close eye on both payments the business will be required to make and payments that could be delayed or deferred. Do not let unpaid debts lay idle.d. Manage stock effectively to improve your cash flow. By only purchasing the stock you need, it ensures that your working capital is not tied up unnecessarily in products.

2. Forecasting Forecasts can never be 100% accurate, hence the need for planning. Within your plan try to include as many external variables as possible, not only from the business internally but also take into consideration the wider market.

3. Plan your tomorrow based on yesterday The best budgets are based on the historical budget system. This system shows where money has historically been earned and spent, identifies whether milestones have been reached or not, and then plans business operations in line with this reality and the new milestones set.

4. Effective use of capitalIt is essential that long term and short-term capital be fully utilised. While long-term capital should be used for acquiring fixed asset and partly to finance current asset, the latter should be used for acquiring current assets like raw materials, stock in process, finished goods, trade debts and investment.

5. Meet tax deadlines Failing to meet tax deadlines for filing returns and payments can be a costly business as youll incur fines and interest on those fines. Whats more, these are unnecessary costs that can be avoided with a bit of forward-planning. There are many ways you can help reduce your tax liabilities and it is important that

you take advice to ensure that you take advantage of them.

5. Keep your books up to date weeklyDont be tempted to put off doing your paperwork, otherwise you not only risk falling behind and ending up in a mess at tax return time, but you could risk failing to invoice a customer and losing out on money.

7. Be aware of competitionIt is not only important to focus on individual line of business but also be aware of the competitors. The long term economies of business involves emphasizing on competitive advantages like achieving lower cost than that of your competitors, offering superior value to the customer with a combination of product and price attributes and also offering added services.

8. Be flexible Be ready to adapt to changing situations that might affect the financial forecast. Setting a benchmark or monitoring events as it happens could do this.

9. Know your customer, spread your risk Do not perform work for customers that cannot be relied on to pay promptly. Share with all customers the terms of payment, including any incentives and penalties. Dont rely on a small number of customers too heavily. If they become insolvent or suddenly switch to doing business with your competitor, the impact on your business could be catastrophic.

10. Line of credit When the business is cash negative, do not panic. As long as the business has predictable, reliable income from customers in the near future, a manager can access lines of credit. Keep a pre-arranged source for a line of credit in case you are short of capital but use it judiciously only in case you really need it.

11. Plough back profit Do not forget to plough back a good part of your earned income to ensure growth and stability. Such a policy will not only pay rich dividends in future, but also help getting loans from external sources in times of distress or when to go for expansion.

Adaptive organizations believe that discontinuous change is now the norm. They see financial planning as a continuous, inclusive process, driven by events (such as the launch of a new product or a competitive threat) and emerging knowledge, and not constrained by the financial year-end. Nor does it need sophisticated tools. Instead it relies on fast, relevant (actionable) information and responsible people who know what is expected of them, and what to do in any given situation.

In short, if you follow the above basic guidelines of cash management and planning, you are more likely to succeed. As you grow in size you need to adopt a management model that supports the companys success factors, and based on that establish an effective financial plan.

Beware of

the danger

signals that flag

problems: silence,

secretiveness, or

sudden outburst

Sylvia Porter

(19131991)

March 2013 9

OPERATIONS

In January Abu Dhabi held the Sustainability Week Conference 2013. Over 150 countries represented by government figures from all over the world gathered to discuss a common goal; to ensure the prosperity and welfare of mankind for a common and sustainable future. So this got us thinking, how can this relate to companies? Clearly, business and governments globally have a duty to educate the consumer on sustainability, but first, shouldnt we put into practice what we preach?

It was enlightening. We found, not only can you become greener but you can also save money.

Switch off all electrical appliancesThis may seem obvious but how many of us leave lights on in unmanned rooms? All over the world, countries are turning off street lights in whole cities in order to meet their goals in reducing emissions, and save money. Why dont we?

Also, consider future purchases. A PC typically uses around 150w during moderate activity, whereas a laptop computer consumes 30 to 40w of power. Laptops are also capable of performing in a low-energy mode, reducing the amount of power

used. The same goes for monitors. A laptops power consumption is used to power the laptop and its screen. Desktop computers tend to have an LCD or CRT monitor that uses an additional power supply.

Collaborative DistributionThis is a huge trend across Europe which is basically shared supply chains. Shared systems make you greener and increase your customer service by allowing flexibility in your delivery schedules.

The potential savings are huge, and as such, we plan to break this down for you in issue 4.

Recycling paperThe average office worker uses 10,000 sheets of paper per year and 1.5 pounds of paper waste per employee per day. For every ton of paper you save, you can save up to 17 trees and 682.5 gallons of oil. Guess where we are going with this

A no cost option is to reuse paper wherever appropriate and make savings. Also recycling produces no additional costs. Companies now specialize in recycling paper, who will collect your paper and turn it into products, which are then sold on. All confidential information will be dealt with appropriately and shredded in a secure manner

Another is to give thought to marketing. Is that flyer really junk mail? On average, each household currently receives 41 pounds of junk mail a year. Is this necessary?

Double sided printingMany printers and copiers today come with the option of double sided printing. The advantages of this are obvious, double sided printing means less paper and therefore less money. The maths is simple. By setting your printers and copies to double sided you will save approximately half of your paper

Going Green

Printing double

sided saved us 50%

of paper costs

March 201310

costs. Use brothers double sided printing calculator to find out how much money you can save http://www.brother.co.uk/g3.cfm/s_page/106450/s_mode/display/s_page/106450. Not only will you be saving significant monies but you will also be saving the environment too.

TechnologyWith a little outlay, companies are now willing to invest in paperless office technologies, including electronic backup and storage solutions; making paper a thing of the past and significantly reduce clutter. Did you know that one 100 Megabyte zip drive can store the contents of a four-drawer filing cabinet and one CD-ROM can hold nearly a roomful of paper! Research shows that you can save 40% of overall document-related costs by implementing a digital document management solution.

Remanufactured ink and toner cartridges cost an average of 15% less than national brands and come with a 100% money back quality guarantee. One returned cartridge keeps approximately 2.5 pounds of metal and plastic out of landfills. Remanufacturing one toner cartridge also conserves about a half gallon of oil.

Ensure that your office is set up for network enabled printing. A network printer is connected to the internet and allows multiple computers to print from it. Having a network printer in the office will reduce the need for desktop printers, thus saving energy, maintenance cost, and space. If your business sends and receives a lot of faxes, enabling your computers to send and receive faxes directly you will be able to save 89% of these costs.

Change your font size to Arial narrow or similar and save 15% of your black ink use. Now that really is a good tip!

PackagingThe first way to decrease your carbon footprint and save money is to ask yourself Do we really need all that packaging? Millions of tons of polyethylene films go into billions of flexible packages each year. Eliminating even a fraction of a gram adds up to sizable benefits for the environment, lower packaging costs and higher profit margins. Also, Polyethylene has a half-life of arguably several hundred years; your packaging will out live you, several generations of your family and probably your company. Do you really want this?

Invest in modular furnitureModular components form the core of an environmentally efficient office design. Buying modular furniture helps you mix, match and grow without the need to reinvest in an entirely new look, simplifying future purchasing decisions and potential waste.

Office SundriesUsing paper cups and vending machines are a very quick way of providing drinks but very costly, not only in terms of products but also when considering

your environmental footprint. By switching back to mugs and glasses not only will you save money in terms of purchasing, but also the environment. The same applies to paper towels in your kitchen and bathroom.

Air ConditioningIn the UAE, air-conditioning is a must have which is often one of the most costly utility bills a company has to make. On average 1C in indoor temperature represents 5% of your energy bill, which means that you actually save 10% by increasing the indoor temperature from 20C to just 22C.

New ClientsBecoming a green company can also boost your sales and its a lot easier to accomplish than you think. As the world becomes more aware of the environment and sustainability our choices are naturally affected. So why pass up an opportunity to appeal to this market? If you have made a commitment to green practices let your client audience know, and youll be surprised about the positive impact this will have.

Remember, it all starts with you, spread the wordIf more people Go for the Green Option in their daily work-life, the positive benefits will multiply. Start by making more personal decisions with the environment in mind. Then help increase awareness by spreading the word to your colleagues, teams, bosses, suppliers and customers. It all adds up!

Ultimately, small changes will have a big impact. Changing one aspect of the each of the areas above, helps safeguard the environment for our children and grandchildren.

If the US could

cut paper use

by just 10%, it

would prevent

the emissions of

1.6 million tons

of greenhouse

gasses which is the

equivalent of taking

280,000 cars off of

the road

March 2013 11

Business is a constant battle of David vs. Goliath, with small businesses desperately fighting it out with the large corporates that dominate the market. Standing out in an industry full of giants takes courage, individuality, and a bit of savvy. So what else can you do to remain competitive and outmanoeuvre the big boys?

Dont be intimidatedAll companies and brands that we can think of today started off small. They had a business idea and grew it; just as you are today. If you believe in your product or services, dont be intimidated by the big players; play them at their own game.

You initially had confidence in your idea to get you this far. Keep that confidence. Tell people what makes you great and different to your competitors, and then tell your story over and over. Persistence will see you through. It is a tough battle, but we all know why we fight it

Be an individual and find your nicheDo you really want to follow the herd and not get noticed? You know you will be hidden if you do this. Yes, companies do this and some make money, but this takes a lot of money at the outset, and normally amounts to ruin for entrepreneurs.

You need to determine excatly what it is that makes you stand out from big brands and businesses. Question each aspect of your business. Do you offer around the clock customer service? A free extended guarantee? The fastest delivery? Free setup? How are you viewed by your clients?

Knowing these answers and more will set you apart from your bigger competitors and identify youre your key selling points. You almost certainly will struggle to compete on price, but you can compete on value.

Focus on your customersWho likes poor customer service? Think of what you have learnt from your previous treatment as a consumer and incorporate these, establishing your unique sales points when going against the corporates.

Small businesses tend to offer superior customer service when compared to large corporates, so focus on this point. Cara the Jewellers have managed to take on global brands by using this focus.

Expert comment:Kiran Pethani, Cara the Jewellers comments: We closed a shop as we werent getting the same level of service throughout the business. Service is what is important to us.

Ultimately, get customer service right and you will get repeat clients and brand loyalty. You will also have free marketing, as positive feedback from clients to their friends and family is invaluable and the easiest way of increasing sales as it involves the trust element. When youre building a business you need every bit of free publicity you can get.

Speed and flexibilityOne thing that large corporates cannot match SMEs on is speed and flexibility. Being close to all the action, you can spot changes in the market a lot quicker than larger companies, and are able to action these changes in the shortest timeframes as you do not have the wheels of corporate infrastructure to go through to get the go ahead.

Being in this position should not be taken lightly. Having and capitalising on your flexibility means that you can profit from these changes and be the industry leader in the new area, far quicker than your large competitors can, whilst setting standards that they may not be able to compete with.

First they ignore

you, then they

ridicule you, then

they fight you, and

then you win

Mohandas

Karamchand

Gandhi

Dont Retreat, Compete

OPERATIONS

March 201312

Play to your strengthsBy this we mean think about your USPs against a corporate and sell these. The prime example of this is when you compete for talent; often small companies think a corporate will just pay more therefore winning the prospective employee, however rarely is compensation an issue. If this is not your experience, then the candidate was not right for you as there will always be someone who can pay more.

At the start acknowledge that you are an SME. You have a different culture, resources, etc. making you different to a corporate. This should be taken into account as employee candidates often do have a preference as to whom they wish to work for. Furthermore, money isnt everything. Today a work life balance is equally important. People want stability, a feeling of belonging, and also working where they feel they can make an impact. As an SME you will have probably have much less bureaucracy and therefore be able to provide these far easier than a corporate. Im not saying you do not expect your employees to work as hard, if not harder, but you are able to make the work place more fun, where everyone feels equally important as you are all part of the same team, working on an exciting vision for the future and so much more.

Expert comment:Phil Starr, Recruitment Director at RealHR Consultancy and Recruitment comments: SMEs can offer a lot more to a candidate. When competing with a large corporate, remind the candidate that due to your size, they may be able to contribute more to the company as a whole. Generally, SMEs will not put people in a box as they work in more than one area of the business. Also, SMEs are known to offer more autonomy in a role as well as flexible working, job satisfaction and an increased sense of personal worth. These are factors that should not be taken lightly as they are increasingly sought by talent. Finally, do not discriminate against age. A seasoned workforce can bring a level of expertise that can be difficult to find in a younger and more inexperienced workforce, and do not necessarily cost more as practised professionals are underutilised.

Dont rule out competing on priceOr at least until you have conducted your research. The first thing that you have to do is understand what products you have that are over or under priced, its important to know how you compare to the competition. By running a competitive analysis on your products (adjusting prices so youre closer to the competitive price), youll increase your competitive stance.

Also look at conversion rates. What is selling and what is not? Is there a reason for this? Is it that your staff do not understand the product? A mystery shopper will provide feedback to help you move forward with this. There are many reasons why you may not be competing and price may or may not, be one of them. You have to understand this first.

Look at your competitors and understand your price relationship to them to see if thats causing the low and high conversion rate products/services. Conversely, if doing well, ask yourself what is leading to that high rate. Can you replicate this?

Find the right staffBusiness recessions inevitably create a large and available pool of human capital that, as small business, you can take advantage of. Just as you shouldnt use price as your benchmark for competitiveness, you also shouldnt select the cheapest staff. Select genuine talent, the sort of people who share your vision, who are willing to help you make the most of every opportunity, and want to make your dream a reality. Dont hesitate to offer your team performance-related bonuses or even a small option on shares in the company if appropriate- it will be more than reflected in motivation, and help to retain your key staff as they will become invested in the Company.

Dont be afraid of technologyFinally, understand the value of technology. Cutting costs can be difference between surviving and ensuring a future. Technology is a constant source of cost-cutting innovation across every possible business process; and is as easily available to small businesses as it is to larger competitors. Our previous article in Issue 1 on cloud services shows Microsoft Office 365, for example, can put email, security, collaboration, communications and websites into the palm of your hand for as little as 25aed per month. SharePoint, for example, is the platform which many large companies use to create complex websites and collaboration portals. Only five years ago, implementing SharePoint was a four-to-six-figure commitment; today enterprise collaboration costs as little as a couple of lattes for the office each morning.

Business survival truthsWho says SMEs cant succeed? The long-held belief that 50% of businesses fail in the first year and 95% fail within the first five years has changed according to more recent statistics published by the Small Business Administration (SBA).

According to their report, 7 out of 10 new employer establishments survive at least 2 years and half at least 5 years. The Small Business survival rate has improved from 50% of businesses failing in their first year to 7 out of 10 (58%) of new businesses surviving at least two years, and 50% at least 5 years. Looking at this, especially since 2008, makes it all the more positive and hopeful for people starting businesses and succeeding, regardless of external conditions.

Finally, its not just about responding to customer inquiries. Doing more for your customers than they expect is the best way to generate word of mouth. Send your best customers gifts. Also, take an interest in their lives and businesses. Knowing your clients forms an emotional bond, and at the end of the day, this is why they return; we all know that loyalty is a difficult trait to break and this is what we should be striving for in all areas of our business.

As we advance

in life it becomes

more and more

difficult, but

in fighting the

difficulties, the

inmost strength is

developed

Vincent Van Gogh

March 2013 13

SUCCESS

Business Insight Exe plan-285x225-E.indd 1 11/6/12 5:14 PM

March 201314

People know the importance of eating healthily to boost productivity and performance, but who has the time to cook healthy balanced meals day in day out? Also with the restaurants that we are blessed with in Dubai it is easy to see why we would not necessarily lose that Dubai stone.

Nathalie Haddad, founder of Right Bite, is a clinical dietician and therefore understands this problem better than most. As the Managing Director of Right Bite, a nutrition and catering service, Nathalie is creating a healthy alternative to the standard ready made meals concept; offering a tailor made menu with your taste buds and lifestyle taken into account. Her aim for the company is to enhance your nutritional intake, by offering delicious food, created for you and delivered right to your door.

What were the defining factors in you starting your own business?When I was counseling individuals prior to Right Bite, my customers would comment that they know they should be eating healthy food but there is the lack of available healthy options in the market. Convenience and variety were also obstacles. It was at this time that I saw a need for this type of service, a healthy food plan delivered directly to the customer, it was this idea that I developed into a business, and Rite Bite was born.

Seeing my clients happily benefiting from the service, and how it changes or impacts someones life is my motivation. I am very lucky as I have a great team. We want to be innovative and strive to stay up-to-date with trends, whilst evolving the business and the services we offer.

What were the first steps you took to launch your business? I have a passion for nutrition, which was lacking in the market so I started off just doing it, creating meal plans for my customers. Client relationships are important as they give me their feedback on the foods we created and the service we offer. Slowly we grew as a business and the offerings we provided.

Being in business you must have made mistakes. How you recovered from them?Starting and running a business is a learning curve for business owners. The learning never stops however, you must be open and admit when you are wrong or make mistakes. Learn from them, and correct them. Do not get disheartened by them. For us the mistakes were not major, just occasional little issues here and there, which is part of learning and growing any business. Remember, they allow you to offer a better service to your customers, and a better work environment for your staff and colleagues.

What are your plans for the future? We have recently ventured into the caf business and opened our first healthy caf called Nathalies Caf in Abu Dhabi. I hope to continue growing in the healthy catering business across all areas of catering.

If you could impart any advice on other Entrepreneurs, what would it be? If its something that you love then take the risk and work hard to achieve your goals and dreams.

[Problems in

business] allow

you to work harder

to solve these

problems and in

turn offer a better

service to your

customers and

a better work

environment for

your staff and

colleagues

Success Series

Continuing with our Success Series, we speak to some of the leading brands that have come from the UAE. Read on to find out on how they have become so successful and what advice they have for you.

Nathalie Haddad, Managing Director/Dietician of Right Bite

Interview

March 2013 15

SUCCESS

Everyone knows just how critical marketing and public relations is to a business, they are the people that turn a negative experience into a positive one leaving the public happy. They are also the people who assist you with understanding your business so that you are able to determine where best to spend your money so that you get the maximum exposure, but with so many specialist companies in this this area, but they too have had to start from somewhere, often competing with the big boys.

The question is; why would you go into a business whereby you know you are going against the huge multinationals and how can you even begin to start to realise your dreams?!

We speak with Lesley Fair and Nicola Holmes, Directors of Custard Communications who have done just that and made a success of it. So why did you decide to start your own business, and what continues to keep you motivated? Nicola and I were freelancing. Nicola had come from the UK to freelance with event management companies in Dubai and I had been in the UAE for several years in hospitality, PR, marketing and then freelance event management.

We had both reached a point where we were asking ourselves Whats next? There is a glass ceiling as a freelancer. Id been client side and was frustrated by there being little transparency in the process of recruiting an agency, and Nicola was frustrated that clients were often not treated with the respect they deserved. It seemed like a logical next step to join forces because our values are so aligned, and neither of us felt we had given the UAE our fullest.

Because we were both in the industry we had an in depth knowledge of the market and the potential for the sort of business we wanted to set up, for example

a business that is client focused and transparent. Research into our market prior to start up wasnt research as such, but innate and intimate knowledge of the industry. We wrote a basic business plan and knew what we wanted to see in an agency that was to be a part of us and us a part of it.

So, have you made mistakes along the way? Oh yes! Wed be liars if we claimed we havent made mistakes, but mistakes are lessons to learn.

We always take the time to reflect on lessons and vocalise with each other and our team where things can be improved. On a personal level weve both learned that rest and relaxation time is important, and looking after ourselves is crucial.

How do you retain talent? Thats a good question that weve never asked before, so we have had to ask our team. This is straight from the horses mouth: The team like the way we conduct business, the way we deal with clients and that the honesty and comfort levels we achieve with clients makes their work more enjoyable because they can be themselves. Whilst professional, were also quite laid back. We take our work seriously, but we dont take ourselves too seriously, theres a lot of laughter in the office and amongst the team. They also like prestige of the clients we have and the events we manage.

The creativity of the team and how we draw it out is very important because our repeat clients, even year on year, get a different product each time and the team like that they never get bored. Our advice, with staff, suppliers and clients is to treat them as you would expect to be treated.

What advice do you have for other start-ups?For start ups?! Easy, share your concerns with someone you trust, be thankful and keep smiling.

[Problems in

business] allow

you to work harder

to solve these

problems and in

turn offer a better

service to your

customers and

a better work

environment for

your staff and

colleagues

Lesley Fair and Nicola HolmesDirector, Custard Communications

Interview

March 201316

Linda Mahoney

Dubai has been through incredible change since its inception, and few companies have been around to see it evolve since its earliest days. Better Homes, Dubais largest property realtor, began in 1986 as a one-woman operation from a villa in Jumeirah. Today it is one of Dubais leading property agencies, with over 250 agents in UAE and offices in India, Qatar, Oman, Jordan and Saudi Arabia. We speak to Linda Mahoney, Chairman of Better Homes, about seeing the company through the good, bad and ugly economic cycles, and how her company grew through it all.

How did you start out in the property market?I started working for an American lady in 1985. She obtained head leases from landlords; paying the landlords their rental, and leasing them onto tenants with a margin. Shortly afterward, the repercussions from the earlier Kuwaiti stock market crash were being felt, in addition to the drop in oil prices. This then led to a depressed market. When this occurred, rents went down and she decided to leave the business. So I thought, What do I do now? I still thought that real estate was a good opportunity, so I decided to start on my own. It was hard work, but it turned into a great opportunity.

You started in 1986, so you have must have seen Dubai evolve.The Emirates has seen some of the most dynamic growth and change that a country can go through, and likewise the real estate industry here. Back then, the real estate industry was in a fledgling stage, so we were all learning as we went. The infrastructure was poor, and there was a lot of driving out to dusty parts of town, taking documents here and there. This was before emails and before mobiles, so you can imagine! We put ads in the paper via phone conversations. The property went before it was printed, as demand was increasing without the property availability.

As Dubai developed so did we. It was an amazing transformation. I am proud of Dubais achievements and transformation, and likewise of Better Homes for being part of that growth. Its incredible to think of all the people we have assisted, and the services we have provided throughout the ups and downs of this citys evolution. 30 years has gone by so quickly.

What about mistakes and what did you learn?Everything is a learning curve. Its important to always learn and improve yourself as a leader and as a business. The only way to deal with mistakes is for you to acknowledge them and put them right. I would say that the only mistake you can make in business is to not learn every day.

How did you survive the downturn?Property is a cyclical industry so as a business we were already aware of this. We reviewed our business model and invested in property management to broaden our business interests for the downturn. We had to future-proof our company before the crisis and streamline during the crisis. This is inevitable.

I suggest looking at your business model; how this works in worst and best case scenarios. Then look at which areas you could change to ensure you survive. Keep your options open and consider all possibilities.

How has your company grown in recent years?Ryan Mahoney (M.D.) brought us into the digital age. Better Homes is now a leader in online property services. We can connect to buyers and renters globally through the extensive online database of property listings. Our listings database is powered by industry-leading software, Masterkey.

In a world-first, or so we believe, we have created an online customer ratings tool for our agents. Reviews are user-generated by previous clients and

Everything is a

learning curve. Its

important to always

learn and improve

yourself as a leader

and as a business

Interview

Chairman,Better Homes

March 2013 17

SUCCESS

are accessible on the Better Homes website. Its all about being transparent for the customer, this is the direction companies are going if they want to gain customer trust in the digital age. We all want to know that we are dealing with a good agent. Not only is customer user feedback vital to obtain trust, but it is also a useful HR tool, allowing us to review practices and see where training is required. Another key area of focus is ensuring that we have a large presence on the ground with 250 agents, and growing. It is critical for us to know the market well, from the ground up.

We have also broadened our services to become more of a one-stop shop. That is, yes we offer residential and commercial sales and leasing, and we did expand to include property management and short term rentals. More so, we feel the customer should be able to come to us for all aspects of moving into a new home. That is why we have partnerships, lots of them, with great companies like Zen Interiors and Zurich insurance and so on; this gives the client benefits for buying or renting through Better Homes. We have to always think of the client and what serves him or her, in terms of products and in terms of customer service from our agents.

So your employees are important to youVery! We have a variety of people we have from many nations. It is rewarding and opens the company to different possibilities that you ordinarily would not recognize. Our employees are often multilingual and that is an asset for any company.

What tips do you have for other small business managers?

Surround yourselves with others of a different mindset. I would never think of things Ryan does. It gives us a larger view; considering all angles, which is vital for business. We are very lucky as we dont argue and I have no insecurity about any decisions that he makes. We possess talent in different areas which are complimentary to each other. There are no egos to worry about. Having the right team around you to support each other is vital.

In your career, you have had ups and downs, how have you not fallen at the first hurdle?I am an intense person with high energy. Would I have done this had I not needed to, I dont know. For me it was need, they say necessity is the mother of invention, and I would add determination. It is amazing what people are able to do when they need to. You can take on so many different personas and find the ability to deal with the various areas of your new life. You adapt. You just adapt. Ultimately any budding entrepreneur out there needs to remember that even though we may be inundated, we can still be capable of doing anything that we set our minds to.

Entrepreneurs have a can-do mentality. Some are risk takers, and others arent, but they are all driven. Likewise, some people by nature prefer to work for others. This is a good thing as this is the mix that makes a business.

If you could impart any other advice to companies, what would it be?There is room for everyone. Just find your niche and strengths and start there. Keep your eyes open to possibilities, keep learning and turn every challenge into a new experience. Above all, dont fear competition, use it as a motivator.

I suggest looking

at your business

model; how this

works in worse

and best case

scenarios. Then

look at which

areas you would

change to ensure

you survive. Keep

your options open

and consider all

possibilities

March 201318

March 2013 19

MONEY

When youre just starting out in business the same question is asked by every SME owner. Who should I bank with that can support me now and in the future? From the start you should be looking for a supportive and reliable bank. Whether your needs are simple (a separate business checking account) or complex (a line of credit, mobile access etc.), finding the bank that fits your business needs is crucial. Choosing the wrong bank account could not only limit your potential growth and services, but could cost you more than necessary in terms of fees, time and effort.

Before you make any decisions, remember that all banks are different. We talked to RAKBANK, ranked in the top three for SME Finance providers in Dubai, to gain their expert advice on banking and what you should be doing to make your business a success.

SMEs: Follow RAKBANKs vision to growSMEs, which are defined as businesses with less than 250 employees and a turnover of less than AED 250 million, are a thriving source of growth for Dubais economy, and the UAE as a whole, accounting for 95% of enterprises, 40% of the workforce, and contributing 42% of the annual value-add created by Dubai. More precisely, around 230,000 SMEs in the UAE contribute above 75% of the countrys total business sector, one-third of the UAEs gross domestic product (GDP), and are one of the fastest growing sectors in the country. According to the Ministry of Economy the contribution of SMEs to the UAE GDP doubled in 2011 to reach 60%.

Graham Honeybill, General Manager of RAKBANK once mentioned in an interview that SMEs form the backbone of the UAE economy and are the largest employing sector in the country. Their health is crucial to the local economys ability to overcome market challenges effectively and quickly. Hence within RAKBANK, they represent the fastest-growing area of business, and a key priority.

RAKBANK attributes the upsurge in the SME sector to both market opportunity and the entrepreneurial spirit of the community. Over the years RAKBANK has established its reputation as financial partner of choice throughout the growth cycle of SMEs. And, despite being considered high risk area by many banks, RAKBANK has always been proactive in the SME field, extending finance services to businesses that demonstrate viable business models and healthy cash-flows. RAKBANKs prominent role in providing financial solutions to the local SME sector is acknowledged by Dubai SME, an initiative of Dubais Department for Economic Development to promote SMEs. In fact in a recent study undertaken by Dubai SME, RAKBANK is classed as one of the top three banks in terms of market share in the UAE SME banking market, where the top five market players account for nearly 60% of primary banking relationships.

Pritam Mirchandani, Head of Business Finance, RAKBANK says, The UAEs strategic location as a trading hub for a wide geographic region provides excellent business opportunities for SMEs. Given that SMEs have become one of the key contributors to the local GDP, RAKBANK has aligned itself with the growing SME sector since the launch of its dedicated Business Finance Unit as early in 2005.

One of the early starters in SME financing, RAKBANK has a plethora of products to offer to its business customers including loans and deposit products along with excellent services targeting to different needs of the budding entrepreneurs. The bank lends to eligible businesses operating for at least six months, and assesses their credit-worthiness through an analysis of their business models, growth plans and available financial information. SME finance services are available at the banks 33 branches in the country, including its dedicated SME centers.

Our business finance unit extends financial solutions

Our business

finance unit

extends financial

solutions to

businesses across

a wide range

of sectors and

industries as long

as the business is in

line with the Banks

lending criteria

which is based on

a viable business

model, strong

business plan, and

robust operating

environment

Pritam Mirchandani

The Right Bank for Your Small Business

How To Choose

March 201320

to businesses across a wide range of sectors and industries as long as the business is in line with the Banks lending criteria which is based on a viable business model, strong business plan, and robust operating environment, says Mirchandani.

Products from RAKBANK All businesses in UAE can take advantage of RAKBANKs interest-bearing transaction account, which gives access to more funds while paying interest. In addition, RAKBANK offers collateral free business loans known as Finance Loan to small SMEs with minimal documentation to support their expansion, or to meet their short or long term financial goals. These loans range from AED 100,000 to 2 million. The requirement of collateral is a significant obstacle for SMEs in accessing finance, as these assets can otherwise be used as an additional source of capital or offers other benefits to the business when not locked down as a financial security. By eliminating the need for collateral, RAKBANK aims to facilitate finance to SMEs in an effective way and without setting unrealistic demands for security, whilst undertaking a thorough business and creditworthiness review of individual borrowers.

As company requirements become more complex, RAKBANK helps SMEs meet financial obligations such as finance for shipping and stocking period, advance payment to suppliers, local debtors, export, and non-funded products. Not only does the bank supply the relevant paperwork, but bank agents are available to offer customers additional tailor-made solutions to meet specific needs.

Recently, RAKBANK has launched a Renminbi payment option to allow clients in Dubai to pay in the local Chinese currency (RMB) to avoid exchange costs and become more competitive. The bank also offers its business banking customers competitive auto finance solutions with minimum documentation and many insurance benefits.

According to Mirchandani, there is little reason for busy clients to visit the bank. We support

companies by offering them customized finance solutions with minimum documentation and ensures that dedicated staff or relationship managers are available to customers every step of the way throughout the banks business banking centers. As a market leader in customer service, RAKBANK brings customers additional convenience with its internet banking channels, including Online and Mobile Banking solutions.

So what does RAKBANK advise to their clients to facilitate business growth?

RAKBANKs guidelines for SME successMore than half of SMEs fail within five years of startup due to lack of adequate working capital, poor market selection, and rapidly changing external market conditions. Many firms do not develop an initial plan and even those that do establish a plan, do not monitor and continually adjust it to changing market conditions.

Financial planning and management, including cashflow management, is of the utmost importance to the success of SMEs. Generally, SMEs must bear in mind that an effective financial plan is based on a 3-step process for determining and detailing an organizations financial goals: budgeting, forecasting, and flexibility. When budgeting an SME should be well aware of their numbers, and must adopt emergency strategies to ensure their ability to weather unfavourable conditions. SMEs must also ensure that expenses are minimised, company income is maximised, and credit is managed. Financial forecasting on the other hand is necessary to minimise the error between planned requirements and actual requirements. Flexibility is a running theme throughout the plan to ensure that the SME is agile enough to adjust to market changes and make the best of it.

As far as banking is concerned to ensure that you are treading the path of successful financial planning, SMEs must take advantage of their banking relationship and consult with their banks, accountant and other financial professionals on how to avoid financial pitfalls.

RAKBANK suggests that any investor thinking of starting a small business must choose a bank that not only extends innovative financial products, but also provides high level of customer service and convenience. They must also form a business banking relationship as early as they can by simply opening a business account.

Choosing the Right Bank: Final ThoughtsA good bank can prove to be an invaluable partner to a small business, not only helping you to borrow capital, but also working with you to plan for the future and assure potential customers of the businesss stability and credibility. Put as much effort into finding the right bank, and nurturing your relationship with your banker, as you would put into landing a big customer or hiring a new member of your management team.

Any investor

thinking of starting a

small business must

choose a bank that

not only extends

innovative financial

products, but also

provides high level

of customer service

and convenience

March 2013 21

Compliments, not Competes

Islamic Finance:

Islamic Finance today is the fastest growing financial sector, growing at an annual rate of 20% and is estimated to become a US $1.8 trillion industry by 2015. Sharia Compliant financial assets around the world have already hit US$1.3 trillion in 2011, a 150% increase over the last five years, and from a mere US$5 billion back in 1980s, according to a report by a lobby group, UK Islamic Finance Secretariat (UKIFS).

Globally, banks hold over 90% of Islamic assets, and together with funds are big investors in sukuk bond, the most popular instrument in this sector and is growing at a phenomenal rate. 2012 reports from Zawya showed that global sukuk issuance nearly doubled in 2012 when compared to 2011. More than 500 institutions globally offer Islamic banking and investment products and services to both retail and corporate customers. On an average 12% of Muslims around the world use Islamic financial products, but with other countries expressing interest in increasing services, the market is likely to grow bigger over the next few years

Interestingly, apart from growing faster, Islamic banks have emerged from the crisis with their balance sheet unscathed mainly because of their business model and exclusion of certain things; which has given them natural shield from the general meltdown and edge over conventional banking for offering safety and stability.

Advantages to Islamic FinanceThe above has been possible because of the basic tenants of Islamic finance, see our previous article on Islamic Finance Issue 2 for more information. Within Islamic finance key precepts is a commitment to back all financial contracts by assets and activities in the real economy, as well as an emphasis on the principles of morality and ethics in conducting business. The moral and ethical consideration of Islamic banks cannot be detached from the banking

practices and has to be consistent with the standards laid down by the Sharia board.

Tirad M. Mahmoud, CEO, Abu Dhabi Islamic Bank summarises the benefits of Islamic finance and the resilience of this sector, Islamic banks comply with a number of laws as well as regulations and values based in religion. Generally speaking, sharia-compliant banks have targeted businesses that are connected to the real economy. These include trade, development, housing programmes, infrastructure and other assets that are part of the long-term economic development cycle. Since Islamic banks do not indulge in speculation and are attached to normal economic activities, risks taken by them are less.

Furthermore Islamic banks bring saver and investor closer to real market by eliminating the barriers between them. The nature of the financial intermediation of Islamic banks significantly defers from conventional banks and it is in harmony with real market and developmental changes in it.

In Islamic Finance the use of interest is prohibited for borrowing as in that case the borrower only bears the risk of loosing or making money, instead Islamic finance propagates sharing of profits and losses equally between borrowers and lenders. So, instead of lending money in return for interest payments, Islamic banks would lend money in return for an eventual share of the profits or loss generated from the business.

Another important characteristic, which forms the basis for the development of Islamic banks, is the relationship with depositors. They deal with their customers on investment grounds rather than a pre-determined fixed interest rate. They invest the money of their depositors on highly profitable projects after going through a strategic analysis in order to give a substantial return to their depositors. Thus in Islamic banking industry, each bank will attempt to out-perform other banks if it wants to attract funds from investors.

Are the advantages strong enough to outpace conventional banking? Mahmoud says, In light of what has happened with the global financial crisis, businesses are taking stock and listening to clients demand for morally-sound practices. Islamic banks are well suited to cater to this gap in the market. If this business model is more successfully publicised, then demand for sharia-compliant banks and their services will increase dramatically and outpace conventional banks.

MONEY

March 201322

ExpansionThe nature of Islamic finance and the face of Islamic banking have changed drastically over the years. It is no longer considered archaic and only religion bound with primitive rules and regulations, but more as an alternate mode of finance curving its own niche, inching space in the world of conventional finance and spreading beyond the ready made customer base of 1.2 billion Muslims to non-Muslims as well.

The introduction of new instruments and financial products upgrades earlier practices; and with the evolution of regulatory and legal framework has made it more user and market friendly. The potential for growth of course depends on Islamic banks offering products with broader appeal. While Sukuk (Islamic Bonds) appears to be the most popular Islamic financial products, there is significant demand for other Islamic financial services such as insurance, wealth management, project finance, private equity, mortgage and capital market insurance and of course last but not the least is Takaful or Islamic insurance.

Seeing immense potential of Islamic Finance, France and Korea have introduced new laws for issuing sukuk; furthermore new Islamic banks have recently opened in China. Citigroup, Standard Chartered, HSBC and BNP Paribas have all taken steps to seize growth opportunities in Islamic finance. Germany will soon have its first Islamic bank. Ireland, a country of arguably staunch Catholics, is also making a bid to be a global hub for Islamic finance.

There are more joining the fray. Bloomberg have built deep product suites and a raft of indices to offer their customers Islamic finance instruments. Londons Islamic property funds encompass buildings from the Shard to regular family homes. The UK capital has more sharia-compliant financial institutions than any other western city. Following that, Paris, Frankfurt and Luxembourg are determined to become competitive hubs in the Islamic finance sector

And in the center for all these popularity is once again the core principles of Islamic finance like prohibition of usury, disdain for investing in industries like alcohol or gambling thus extending its reach beyond Muslim community into those individuals and institutions traditionally termed as responsible investors.

However, despite its ethical nature and safer approach to financial dealings, it has its own challenges.

Challenges to Islamic financeOne of the major issues with Islamic finance expanding around the globe is varying interpretation of Islamic laws in different countries. For example a contract drawn in Dubai may not be recognized in Malaysia. Even the local markets suffer from lack of clarity in rules and regulations when entering international arena.

In Malaysia we have best practices. We have existing rules and regulation but what we have additionally for Islamic banking is clear regulations that allow us to have a better turnaround time for products and services. This is what we hope to have in other countries as well, says Muzaffar Hisham, Head of Maybank Islamic, the Islamic finance arm of Malaysian bank Maybank, whose Islamic wing focuses on South East Asia, operating in Malaysia, Singapore and Indonesia.

Mahmoud goes on to explain the problem behind uniformity of laws slightly differently, Many people would like to have sharia regulations simplified but this is not easy. Interpretation of Islamic religious laws can be more flexible in one school of thought than another, but there is no one law that can overwrite another. Sharia rules around the world have similar fundamentals, which are interpreted differently as a result of these different schools of thought. There is sufficient diversity, which in turn brings more flexibility into Islamic financial products and services.

A lack of standardisation is not the only hurdle the sector is facing. As a financial practice which is supposed to be based on ethics only, there are questions of integrity in certain products. According to Mohamed Akram Laldin, Executive Director of International Shariah Research Academy for Islamic finance, 80% of Islamic financial products are merely Islamised versions of conventional ones. Also there is shortage of expertise in this field resulting in many Sharia scholars sitting on multiple boards.

To prevent these types of conflicts Mr. Laldin is leading the negotiations with his counterpart in Saudi Arabia to create common regulations for Sharia scholars, and to set up a global certification board. This is important because we want to boost the confidence of the investors and we want to be transparent, he says. At the end of the day, this is what Islam is propagating.

Because of inherent challenges and lack of proper and effective marketing Islamic assets represent approximately 1% of the global financial market.

To what extent will Islamic finance, for institutional and individual investors, continue to grow outside of the Muslim world? This depends on few key parameters. It certainly depends on the issue as to what extent it can offer more tangible solutions beyond the Muslim community over and above being just an ethical spin on conventional finance!.

While the prognosis will be clearer few years down, it is true that suddenly its become more about the numbers and interests, and less about a leap of faith.

In next months issue we will be looking in more detail at Islamic finance products, in particular Sukuk, and current products available today for UAE businesses.

It is time we

have a move

from individuals to

institutions. It could

be a global sharia

board... The reason

is people deal with

you on

international

standards. You

have to have the

right standards

Nasser Al-Shaikh

The primary goal

of Islamic financial

institutions is socio-

economic

development and

the alleviation of

poverty

Al-Zuhayli

March 2013 23

MONEY

As economies across Europe and the U.S. continue to struggle to regain momentum, the Middle East is becoming a key driver for world economic growth, planning significant developments and upgrades of its infrastructure, and hence the need for significant investment from various sources.

This need has opened a flood gate of opportunity for alternative project finance which is gaining accepted over and above traditional source of infrastructural financing from banks and government sources.

Globally, KPMG estimates US$40 trillion investment is needed in the coming decades to provide basic levels of infrastructure. Out of which by 2020 GCC countries plan to invest up to US$3 trillion on infrastructure projects alone including power, water, alternate energy and transportation.

As per reports, Saudi Arabia, UAE and Qatar account for almost 80% of the on-going US$452 billion worth of infrastructure projects that are expected to give a much needed support to the GCC construction industry. Bahrain is planning a US$291.7 million spend, and Qatar is allocating 37% of its budget towards major capital projects; the bulk of which is for infrastructure projects.

Providing finance for infrastructure and energy projects in the GCC is essential for the regions continued growth. Project finance has, and will continue to provide, an essential means of ensuring the continued development of such projects. Bank finance has traditionally been the main source of project finance, but with banks balance sheets now being constrained, alternate sources of finance need to be tapped, said Jeffery Barratt, partner at Norton Rose, international legal practice, Board Member of International Project Finance Association

(IPFA) & Middle East London Committee Chairman in an event titled alternative sources of financing for projects in the Middle East.

Jeffrey Singer, CEO of DIFC Authority commented, Despite challenging economic conditions, investment in major projects both locally and globally remains positive and in fact continues to grow. Undoubtedly, we have seen a shift from traditional project finance sources to alternative funding sources, leading to greater reliance on local banks, development banks and Islamic finance to name a few.

The event looked into the need, opportunities and recent trends in alternative project finance mainly in the Middle East region, the initiation of Islamic finance and Sukuk side by side to finance major infrastructural projects, and also shared a case study on the recent groundbreaking US$1.2 billion Madinah Airport expansion in Saudi Arabia where a unique financing structure was made based on a modified Islamic financing model. It also discussed how local banks flushed with capital are coming out more prominently to fund mega projects but still how the local export credit agencies (ECA) are the major support for EPC (Engineering, Procurement and Construction) contractors or equipment companies.

However, due to newly developed nature of the regional financial market, alternative sourcse of finance is still being practiced on a more experimental basis rather than becoming a regular funding practice. The limitations are noticeable, for example, projects bonds are yet to become popular and funds from insurance are less visible for infrastructural financing. Governments are also very particular on the credentials of private funding institutions but the potential in this field remains huge, and very soon it is likely to become the order of the day in the field of project finance.

It is getting harder

for small businesses

to obtain funding.

We know that

various alternative

forms of funding

have sprung up

in response to

this problem, and

businesses would

be wise to do

some research

into bypassing

banks and source

additional finance

elsewhere.

Rob Donaldson,

head of M&A Baker

Tilly

Finance Gaining Popularity

Alternative Project

March 201324

Just a few days after global finance ministers and central bank chiefs meeting in Moscow dismissed talk of a currency war, it appears that a battle is brewing in Asia to keep the value of currencies competitive. For many of us, we are not sure exactly what this term means, how this may affect our business or what steps to take to ease any potential risk. Read on if you want to de-mystify this subject.

Currency warCurrency war, also known as competitive devaluation, is a condition in international affairs where countries compete against each other to achieve a relatively low exchange rate for their own currency. The effects are quite simple. Imports become more expensive. So, domestic industry, and consequently employment, receives a boost in demand from both domestic and foreign markets. However, the price increase for imports can harm citizens purchasing power. The policy can also trigger retaliatory action by other countries which in turn can lead to a general decline in international trade, harming all countries. Hence the term currency war

So what does this actually mean to you as a business? A currency war naturally leads to a foreign exchange risk (also known as exchange rate risk or currency risk). Foreign exchange risk is a financial risk created by an exposure to unanticipated changes in the exchange rate between two currencies. This means that investors and multinational businesses exporting or importing goods and services, or making foreign investments throughout the global economy, are faced with an exchange rate risk which can have severe financial consequences if not managed appropriately for example, increased costs whether as part of the actual transactions, and/or the actual price of goods and services. Sadly, no one can predict whether the rates will

increase or decrease, and this causes significant issues for business planning as it makes it difficult to predict how much of your cashflow will be affected by exchange rate fluctuations. This can have a fundamental impact on your business for example, corporations that look to spend domestic currency to purchase imported goods lose purchasing power as domestic exchange rates fall. Conversely, multinational corporations that make international sales lose business and profits when domestic exchange rates appreciate. In light of this, and the fact that there is a currency war being fought by countries at present, we have looked in more detail at the various ways in which you can mitigate these risks, but first you need to understand the whole risk.

PoliticsThere are other forces to keep an eye on, not just the rates themselves. You have to recognize that political implications associated with foreign exchange rates can affect your bottom line. For example, strong exchange rates may result in national trade deficits, because exported goods are now more expensive. In response, government leaders could legislate high tariffs and strict quotas on foreign business. These measures are designed to protect the domestic economy, at the expense of foreign business.

Transaction RiskTransaction risk comes from having to conduct commercial transactions in foreign currencies. Generally, businesses convert the foreign currencies into your own currency for the purposes of reporting and consolidation eventually, with them profiting if your currency becomes stronger and suffer losses if your currency becomes weaker. For example, if you have AED50,000 profit from an operation in England, and the pound strengthens, your currency would dip in value so you would end up with less than AED50,000.

Venezuela

purposefully

devalued its

currency and

wiped millions from

Procter & Gamble

share price in

February 2013

Currency Exchange Rates

Mitigating

March 2013 25

MONEY

Translation/Accounting RiskTranslation/accounting risk effects your companys financial statements as opposed to a financial risk. It is the risk of transactions in another currency when you have already entered into that given contract. For example, any subsidiaries and assets (including your products) in another country, would have their values expressed in that currency. In your financial statements, you need to express the values of your foreign assets in your currency so you can combine it with your local assets.

Economic/Operating Risk and TaxAlso known as operating risk, economic risk is associated with the revenue, demand and costs for your products in a foreign country. When the exchange rates fluctuate, so if the foreign currency drops in value, your products would become more expensive and less attractive in that country. This could result in lower sales revenue and lower profits.Depending on the particular country where you do business, tax may be payable.

Once you fully understand all the possibilities surrounding your risk, you then have to measure the risk itself, taking into account these factors, and more, to determine exactly what your actual exposure to currency risk is;

1. Identify the cashflows of your business that are to be converted into another currency, coming up with estimated figures if you are unable to confirm a guaranteed amount. Include three types of scenarios Anticipated exchange rates, higher and lower rates.

2. Link incoming and outgoing cashflows that are in the same denomination to determine your net cashflow. For example, if you export to Europe, link all business that is undertaken within that region. Repeat as necessary for Japan and any other currency in which you conduct your business. For the purposes of measuring foreign exchange risk, you should net them out and only be interested in profits, to Identify your transaction area that is exposed to currency risk, and the potential impact on profits as result of the decline in that given currency.

3. Analyze your exposure to the rates. Businesses should understand the economic drivers behind exchange rates. Strong national economies generally translate into higher currency valuations. When a countrys economy is strong, people want to store that currency as a means of taking advantage of lucrative stock market, real estate and business investments. Conversely, investors will liquidate these asset holdings amidst recession. As capital flows outside of a nations borders, its exchange rates fall.

4. Determine how much money you can potentially lose if exchange rates are expected to fluctuate as anticipated. Again, ensure you account for at least three scenarios Best, worst and expected cases.

Remember that foreign exchange risks relate to adverse currency rate fluctuations where the end result is a loss purchasing power and therefore

reduced profits. All participants within the global economy may use currency swaps, derivatives and diversification strategies as tools to manage foreign exchange risks.

Once you have determined your overall risk exposure, you can start to plan as to how you will mitigate that risk. Globally, there are insurance products available to mitigate these risks; however these do not exist to cover transactions made in, or from, the UAE. Do not be disheartened though as there are still various methods that you can use to limit your exposure to foreign exchange risks.

Strategy1. Corporations can hedge foreign exchange risks with diversification and derivatives. Diversification limits the ability of one failed profit source or currency to manifest itself into severe losses for the overall firm that may even lead to bankruptcy. Corporations can diversify themselves effectively by maintaining presences within different countries and acquiring foreign exchange reserves in multiple currencies. Businesses that lack the capital for international expansion may purchase shares in global mutual funds for diversification.

Beyond diversification, currency derivatives manage foreign exchange risks. Currency derivatives, such as futures, options and forwards, lock in predetermined exchange rates over set periods of time.

2. The easiest way to mitigate risk is to open a foreign bank account in the currency required. This would require you to offset bank fees, charges and any tax that may incur in doing so. Whilst it will not cut the risk completely, it will also gain a modest interest whilst you wait for the exchange rate to move in your favour, before moving the money back to your account.

3. Normally reserved for companies who deal in large sums of money internationally, and we recommend seeking full financial advice from a financial advisor on this as it means you would hedge your funds in the derivatives market by futures or forwards contracts. This is worthy of an article in its own right, but to summarise, the result is that you negate the affect of exchange rate fluctuations as they are canceled out by an opposite position in derivatives.

4. Again, worthy of full financial advice, but trade options are a lower cost alternative to derivatives. The strategy for hedging a foreign currency position with options is similar to using futures or forwards, but is usually less expensive.

5. A currency swap can be complex, but it is an effective method at mitigating foreign exchange rate risks, when used sparingly on portions of their foreign risk. Basically, it is an exchange of future income streams through in different currencies. On maturity, the company receives the currency that has appreciated relative to the other.

First you have to

fully understand

your risk, then you

have to measure

the risk itself before

you are able

to implement a

strategy

March 201326

people + culture + structure = added value

For all inquiries call +971 (0) 4 3754273 or email [email protected] adding real value

Outsourced Services:

Payroll & EOSB Calculations

Attendance Management

Grievance and Discipline Management

Onboarding & Visa Administration

Operational HR

Professional Human Resource service provider for all SMEs, at unimaginably reasonable rates

March 2013 27

MONEY

From the orange juice we drink to the gas we use to power our cars, commodities play important roles in our daily lives. They can be found literally all over the world, and can be traded on the global marketplace. In fact, billions of dollars are invested in commodities every day.

Whether they are traded on the spot or on futures market the goal in commodities trading is to buy low and sell high. But what does this mean to the Dubai and our business?

Over the last three decades Dubai has become one of the most important centers for imports, exports, and re-exports in the region, and has worked to strengthen its industrial base with the aim of expanding sources of income.

The result of which is that Dubai is now recognised as one of the trade centers in the Arabian Gulf region, and growth is expected to continue especially in manufactured goods.

This development means that commodities are central to UAEs commerce and growth, and as such our business. If commodities is one of the biggest income sectors in Dubai and is set to grow even more, then surely we should be looking at this market to either invest in as a business and/or privately, and most definitely as a revenue stream for our services/products.

To help you understand the potential of this market and impact on your business, we have chosen to run a series of articles on commodities; what they are, how they work, why this market has continued to grow during the recession, what to be aware of, and how to trade if you are interested.

So lets start from the beginning and spell out the basics!

Definition of a commodityA physical substance, for example

business insight march

Documents

pmthe audi a8

tfsi engine

rich tomorrowthe audi

year warranty

new year

tfsi quattro v8 engine

information visit

unrivalled performance