- Ernst & Young recommends renewed focus on building stakeholder confidence, corporate governance and human capital reward, retention and leadership development
Kuwait -
The majority of companies across all sectors of the Kuwaiti economy have shown resilience to the effects of the global financial crisis and are beginning to revisit their performance goals. The economic downturn has posed key challenges and created a hugely changed business landscape, but companies are responding. Their action plans aim to ensure that management’s time is focused on key areas of priority. This was the combined view of senior partners at Ernst & Young, Kuwait. Their assessment was based on interactions with and regular feedback from leading local businesses.
The Kuwaiti economy was able to absorb the impact of the downturn and therefore withstand the severe shocks experienced elsewhere across the globe. While the trough of the business cycle may have passed, the market remains uncertain.
Launching Ernst & Young’s Global study
Lessons from change, and sharing insights of Ernst & Young Kuwait Partners, Waleed Al Osaimi, Office Managing Partner of Ernst & Young Kuwait, highlights the areas which leading organizations are focussing on. He says: “The global economic downturn has had strategic implications for the regional economies and for businesses based in Kuwait. One of the key lessons learnt is the need for renewed focus on core competencies, stakeholder confidence and corporate governance. From an operations point of view, companies recognize the continued importance of cash during this period of low liquidity. Tighter working capital management, alternative or new sources of capital and bringing in new strategic investors are being pursued.”
Companies adapt to new economic conditions
It was found that companies based in Kuwait are working towards improving responsiveness, flexibility of operations and staff productivity, as well as optimizing business support functions to drive down cost, enhance efficiency and adapt quickly to changes. They are also adopting enhanced forecasting processes and business analytics to respond to market volatility. Expectedly, it is the financial services companies in Kuwait, and large conglomerates, who are leading the market in terms of adoption of cost optimization practices.
Waleed adds:” Companies are restructuring their finances to reduce cost of capital and renegotiate debt. In addition, active communications with creditors to improve long-term funding and realigning the balance between debt and equity are other key areas of focus in Kuwait. Companies still need to take concrete steps to improve corporate governance to a higher level and improve frequency of corporate communication.”
Waleed suggests that businesses look at how well their key stakeholders understand their performance reporting and provide additional non-financial information. He also calls upon enhancing the role of the regulators (Stock Exchange and Central Bank of Kuwait) in this regard.
It is also noteworthy that local Kuwaiti companies continue to pursue opportunities to diversify and should, therefore, develop effective market entry strategies.
Talent remains scarce
Developing and building management talent and seeking strategic hires to fill skill gaps are areas that businesses will need to address, in addition to retaining existing talent. Waleed lauded the efforts of the oil sector, which has created a leadership development center to assess and address leadership requirements for the future.
It was also noted that family-owned groups and other large companies, especially those with a regional footprint, are actively pursuing the agenda of leadership competency development and talent management to ensure their people can drive long term strategic objectives.
In order to ensure alignment of performance and rewards, there is a need for incentive and remuneration schemes to be rethought and how companies must take a broader approach to incentives. Waleed says: “Compensation programs, especially for senior executives, need to be transparent. Therefore, active board level remuneration committees need to be formed to ensure independence and governance. However, knee-jerk pay freezes can de-motivate and disengage employees.”
