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Risk Management A Need in Modern Management Science
HorwarthMak Risk Consulting
UAE Economic Forecast
UAE Central Bank : Economic growth rate in the United Arab Emirates will slip to four percent from last year's 7.4 as a result of the global financial crunch. Governor of central bank Sultan Nasser al Suwaidi said he expected growth to fall because of the global credit crisis and its impact on the domestic banking system. He said the situation “is putting pressure on everything in the external world. Therefore, that’s going to cause a slowdown in the economy (of the UAE)”
Standard Chartered report: Prediction of 2.7% economic growth rate for 2009
Oil contributed 36% to UAE economy in 2007July 2008 : $147.27 a barrel This week : below $ 50 a barrel
Other sectors approx 64% contribution : predominantly from real estate and construction industry
Today's News
Nov. 23 (Bloomberg) – Amlak Finance and Tamweel, Dubai’s two-largest mortgage lenders, will be taken over by a United Arab Emirates-owned bank after concern the Gulf’s five- year real-estate boom is ending caused their shares to plummet. Amlak and Tamweel, whose stocks each have fallen more than 80 percent this year, will “merge under” Abu Dhabi’s state- owned Real Estate Bank, the U.A.E. Ministry of Finance said late yesterday in an e-mailed statement. The transaction has the “blessing” of Dubai ruler Sheikh Mohammed bin Rashid al- Maktoum.
Dubai, home to the world’s tallest building and man-made palm-tree shaped islands, is bracing for a slowdown in the property market as economic growth slumps and oil prices fall. Dubai is considered the most vulnerable place in the Persian Gulf to lower crude prices as real-estate and debt financing pose risks, Citigroup Inc said Nov. 18.
Dubai may need help from Abu Dhabi and the United Arab Emirates to fund a surge in borrowing, according to Moody’s Investors Service.
Nakheel PJSC, the state-owned developer planning a kilometer-high tower in Dubai, said last week it will scale back some of its projects because of the global economic slowdown. Emaar Properties PJSC, the Middle East’s largest real-estate developer, said Nov. 13 it is reviewing its recruitment policies. (Bloomberg)
Enterprise Risk Management Framework
Risk Management = Business Value Management
Enterprise Risk Management is effectively about identifying and actioning mitigation plans to limit or eliminate the potential “loss events” that could occur throughout your business in order for you to achieve the
financial targets you have set for your business.
Risk Management is about protecting your cash flow and the value of your business.
Modern Management Science
UAE Market :from economic boom to
economic stress Characteristics :
• Not if you will get paid, but when you will get paid
• Lack of Funding from Banks
• Higher lending costs• Retrenchments• Lack of Consumer
confidence• Decreased Sales• Cost Heavy Manual
Processes and document sharing
• Redundant staff, systems and processes
• Need to improve Credit Assessment processes
Path to Recovery :
Back to Basics!
What can you do today?
Protect and manage your cash flow!
• Regulatory Compliance – avoid unnecessary legal hassles or fines – Compliance Health Assessment
• Financial Assessment – Assess the current financial health of your organisation– Reassess your projected or forecasted growth figures (perform
stress tests on historic growth patterns)– Financial Institutions: Basel 2 – capital adequacy assessment – Alternative financing: Factoring and Invoice
Discounting
What can you do today?
• Data / information Management
1. Do you have all the relevant information on your customers, sales, invoices and their payment behavior ?
2. Do you have all the relevant information pertaining to your suppliers ?
– How confident are you that the information you are basing your business decisions on is from accurate sources ?
– Do you have single views of your customers ? – KYC ( Know your customers)
The costliest lesson to be learnt: Inaccurate and poor data quality will lead to ineffective technology systems and poor management decisions being made.
What can you do today?
• Customer Assessment
– Identify or assess the cost of acquisition of customers– Identify or assess the cost of managing your customers : Reclassify
your customers by value (good vs. bad) – Identify the cost of losing a customer, i.e. default– Re-examine your pricing models– Develop and Implement strategies
to gain your competitors customers
What can you do today? • Operations Assessment
Most lost events occur due to inadequate or ineffective processes, policies and operational controls in an organisation
– Review infrastructure ( people, processes and systems) – Identify measurements of productivity– Re-assess your suppliers– Streamline your processes– Identify potential technology solutions that could replicate manual
processes within your organisation in order to reduce costs, improve turnaround times and productivity
– If you are producing or distributing tangible goods and services, what is the cost of returns ? Defects ? Time taken to fix these problems ?
– Identify Redundancies and implement remedial action plans / policies – Assessment and Training of Staff– Talk to your staff : Uncertainty and insecurity can affect productivity
What can you do today?
• Technology and data Assessment : New or Existing Technologies
– Manual vs. Automated processes– Improving your Communication with customers, suppliers and internally
throughout your organisation – Implementation of technology solutions can save you resource time, cost
and empower you to be more competitive.– Accurate data for decision making purposes
Examples :
CRM Systems –Compliance Single view database of customer information – data rationalisation ERP Software solutionsInvoicing SoftwareWorkflow Tools Web-Based data sharing platformsCredit Risk Rating or Scoring Models/ Decision Engines
Improve the Controls of your Business
• Reassess and Streamline Processes
• Identify Redundancies (people, systems and processes)
• Automate through Technology
• Future Planning: Identify your potential loss events
