HAWKAMAH ADVISORY
The business world has witnessed many examples of global corporations facing financial & management issues. Lack of transparency or weakness in disclosure policies caused such results in many instances.
Structural or functional failure at board level, absence of internal or external auditing policies and controls are consistently contributing factors to increasing the risk of failure.
As the region's corporations are going multinational, corporate governance is becoming more and more important in protecting investments, building a globally competitive corporation, and enabling companies to take advantage of the latest in innovation.
Whether companies are experiencing rapid growth or are willing to address board and top management core concerns when it comes to good practice and governance, Hawkamah can provide experience-based assistance to them.
We have developed a structured and tested process of assessment, review, and improvement plans. Implementation and re-assessment are provided in close relationship with clients.
Good corporate governance is important for all types of companies. However, it is essential for listed companies not just from the regulatory point of view, but from the pure business point of view as well. Corporate Governance provides a company with a stable base from which to carry out its operations with clearly defined roles, authorities and necessary checks and balances. As such, corporate governance is a practical business tool and an integral component of a successful business. Better business performance leads to better return on investment, making corporate governance fundamental for investors. Corporate governance also provides for more transparency, accountability and higher standards of disclosure on which wise investors base their investment decisions. Companies that are highly transparent and attach considerable importance to good corporate governance standards invariably command a high premium in the capital markets because the investment appraisal exercise of such companies becomes more reliable and meaningful.
Corporate governance in group companies, or “subsidiary governance”, is emerging as one of the key topics in the theory and practice of corporate governance. Much has been written about the application of good corporate governance at the helm of an organisation.
The reality is that corporate governance challenges are far wider and more complex in most corporations with subsidiary networks. It is no longer sufficient to view corporate governance as simply the way in which the board at headquarters operates. Subsidiaries are a common feature of modern-day business structures, as corporations operate across multiple jurisdictions and business areas. Recent scandals clearly demonstrate that if subsidiary governance is not adequately addressed, it can have a disproportionate impact on the group as a whole.
In simple terms, subsidiary governance relates to how corporate governance principles can be cascaded, consistently and effectively, down to the level of subsidiaries. It is also about balancing group business objectives while recognizing the independence of subsidiaries.
Corporate governance has traditionally been associated with large, predominately listed, companies. There is, however, a growing acknowledgment that corporate governance can play a crucial role to support the growth and sustainability of Small and Medium-sized Enterprises (SMEs). In fact, corporate governance is the gate through which SMEs have to pass in order to grow or to be listed. Unlike shareholders in publicly listed companies, investors in SMEs and other non-listed companies have limited options of "voting with their feet" and selling their holdings if they are in disagreement with the company's policies and strategy. However, corporate governance is not only about investors and their protection, it is rather about leadership and performance. In a well-governed company, the framework provides clarity of roles and responsibilities within the company and ensures that resources are exclusively devoted to pursuing its defined goals.
The understanding and implementation of a good corporate governance framework presents SMEs a structured path to infusing better management practices, effective oversight and control mechanisms which lead to opportunities for growth, financing, exit strategies and improved performance.
Corporate governance of financial institutions is of paramount importance to the wider economy as well as the financial institutions themselves. There are two key differences that distinguish the governance of financial from that of the nonfinancial firms. Firstly, financial institutions have many more stakeholders than non-financial ones, and the interests of these stakeholders may diverge substantially from one another. Secondly, the business of financial institutions is opaque, increasingly complex and it can shift quickly, which places higher demands to their boards, executives and on key functions such as risk management.
Building on Hawkamah's policy work on the conventional banking sector as well as on Islamic finance, Hawkamah has developed services specifically tailored to the needs of the banking sector.
Governance in FOBs is both tricky and different from governance of other types of businesses. This is due mainly to the interface between the family and the business. Therefore, FOBs need both corporate governance as well as "family governance", which refers to the mechanisms governing the family's relationship with the business. It is evident that only the FOBs who are able to streamline the relationship between the family and the business go on beyond the 3rd generation.
Family businesses constitute the world's oldest and most dominant form of business organisations. They often enjoy many advantages over their non-family counterparts. Because of the family element, trust is likely to be more prevalent within the organisation and there is often a shared understanding of the common values.
Many family businesses also exhibit higher levels of commitment and loyalty to the business. However, the emotional bond that helps the family business strive, may also become the source of interference. The concern, particularly in later generations, is that the business of the family may interfere with the family business. The challenge for family businesses is how to preserve their inherent strengths, while minimising their inherent weaknesses, and preparing for future complexities is the key.
Family governance starts from the recognition that both the business and the family have their own needs and goals, which are sometimes contradictory, and the degree to which a firm is capable of balancing the contradictory demands of family and business determines its success.
In addition to the corporate governance advisory services offered to the business side, Hawkamah provides family governance advisory services.
State owned enterprises (SOEs) play a critical role in the economy of any country as they are often present in strategically important sectors such as banking, oil and energy, infrastructure, public utilities and telecommunications. These SOEs are the principal entities that deliver many social goods and services to ensure quality of life of the citizen. Better performing SOEs will result in improved macroeconomic as well as government fiscal performance. Thus, it is important for policy makers to ensure that these companies are well governed.