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PPublished by oDeloitte & Toucihe (M.nE.) and distributet d to thoughto leaders across f the region | SVpring 2018 iew
The disruption... …And how to deal Yours if you can Home delivery Regulating cryptocurrency with it afford it Potential for e-commerce Business Continuity Dubai’s housing market in the region Management We are 25! Deloitte | A Middle East Point of View - Spring 2018 |
Spring 2018 Middle East Point of View Published by Deloitte & Touche (M.E.) www.deloitte.com/middleeast 2 Deloitte | A Middle East Point of View - Spring 2018 | Editorial
A word from the editorial team
It is, undeniably, the age of woman. appropriate talent solutions, not only to From their side, Nipun Srivastava maintain a motivated workforce internally and Saad Qureshi counsel that It has been over 45 years since Helen but also to address their citizens’ needs,” cryptocurrencies are still “highly volatile.” Reddy famously sang “I am woman, hear he continues. In their article Regulating cryptocurrencies , me roar.” Now women from all industries, they outline some of the challenges from the movie studios in Hollywood to Ziad Haddad takes the other viewpoint regarding the adoption of the boardrooms of the Arab world, have when it comes to Business Continuity cryptocurrencies and some of the done just that. And the world has had no Management i.e. the ability of an ways forward in regulating them. choice but to stand up and listen. organization to maintain essential functions during, and after a disaster has In my own article charting the last eight But as any woman will tell you, she could occurred, seeing it not only as a necessity years and celebrating our 25 th issue, I not fulfil her true potential without the but as a system that, “when properly mention that some of our perennial right partner. Sometimes this partner is implemented […] not only affects strategy features include the construction and the person you live with, sometimes it is but also protects all the processes of high property sector in Dubai and this issue your mentor, and sometimes it is your value to the organization.” Read more on is no exception. Martin Cooper, in his workplace, or even anyone in a position the subject in his article Business article The development of Dubai’s to offer you support. continuity: a different perspective . affordable housing sector , addresses We are proud, in this 25 th issue, to be some of the challenges facing this But sometimes what is called for is covering Deloitte’s own champions of vital yet troubled sector. not continuity, rather, disruption. women’s rights and gender equality. In a E-commerce has drastically changed the We are very proud to have come this special insert, Rana Salhab, David Sproul global retail market say Anish Mehta and far with you, dear reader, and hope that and Emma Codd, recipients of the 2017 Sachin Bhanvari in their article, Going you have been enjoying reading our Financial Times’ HERoes award for digital: the next frontier for Middle East magazine as much as we have enjoyed champions of women in business, weigh retail . “But this megatrend,” they say, producing it. Here’s to the next 25! in on what it takes to empower women “which has transformed the dynamics in the workplace: the differences in the of consumer behavior and business Middle East and Europe, and gender models in retail, remains untapped in ME PoV editorial team pay gap. the Middle East and offers huge There is no doubt that changes in the potential for industry players.” cultural landscape will eventually affect Who says disruption, says fintech, and changes in the workplace. That is who says fintech, says cryptocurrency. In precisely what Ghassan Turqieh says in the first of our two enlightening articles his article Agile in the public sector in which on this digital evolution, Rajeev Patel and he posits that change in the public sector Uthman Al-Basri caution that “failure to is not a choice, but a necessity. “Leaders address it early, can trounce even the need to consider modernizing their most dominant of companies […] The use approach to managing the day-to-day of blockchain technology has enabled the business,” he says. “Moreover, particularly rapid ascent of cryptocurrencies such as in Saudi Arabia, women are becoming Bitcoin into public discourse, igniting a increasingly involved, heavily encouraged frenzy of interest while creating and expected to participate in the fundamental challenges to regulators workforce. These dynamics will inevitably and money markets.” In their article on drive public sector leaders to modernize, fintech, they warn readers not to “remain embrace changes and deploy analogue in a digital world.”
03 Deloitte | A Middle East Point of View - Spring 2018 | Contents
Contents
06 We are 25! Rana Hanna
FT HERoes award 32 Rana Ghandour Salhab on gender equality in the Middle East Deloitte | A Middle East Point of View - Spring 2018 | Contents
10 16 20 26 Agile in the public sector Business continuity Going digital Fintech Ghassan Turqieh, A different perspective The next frontier for Don’t be analogue in Hanna Aoun and Elie Nasr Ziad El Haddad and Middle East retail a digital world Naji Zoghbi Anish Mehta and Rajeev Patel and Sachin Bhandari Uthman Al-Basri
FT HERoes award FT HERoes award 38 42 48 52 David Sproul on Emma Codd on Regulating The development of gender equality gender pay gap cryptocurrencies Dubai’s affordable Nipun Srivastava and housing sector Saad Qureshi Martin Cooper
05 Deloitte | A Middle East Point of View - Spring 2018 | 25th issue
06 Deloitte | A Middle East Point of View - Spring 2018 | 25th issue
We are 25!
07 Deloitte | A Middle East Point of View - Spring 2018 | 25th issue
Since that first issue, the Eight years and twenty-five issues ago, Dubai 2020 was a decade away, the Middle East Point of View magazine borrowing money was probably easier world has done a triple was conceived. The mandate: to create and the Arab Spring had yet to bloom. somersault, flipped on a magazine that conveys “uninhibited and independent views and opinions” And the world probably seemed a lot its axis twice and was on the region’s issues of most concern, less scary. You probably still had to head spewed out of a financial especially as regards regulation, towards a brick-and-mortar building to vortex from which it is environment and sustainability, fiscal make a banking transaction. Today, as a reform and corporate governance. company, as an individual, as a bank or still reeling. even a public sector entity, you have to The first issue rolled hot off the press watch your every move, make sure your in the spring of 2010, entitled “On the present is compliant and your future is region’s burning issues.” These included mapped out and the ever-accelerating corporate restructuring, fraud, rise of rate of change accounted for. Big or the CFO, business intelligence, risk small, incorporated or family-owned, management in the construction you have to work harder to retain talent business, taxation, telecoms, corporate (these millennials are hard to please but responsibility and sustainability. they are talented!), your C-Suite has to keep up to speed with issues that may At the time, Facebook was only a virtual seem beyond their grasp and, assuming yearbook, Airbnb had just launched and you’re in the Gulf, you have to budget Uber had yet to be born. To many people, for VAT. the cloud was still a mass of condensed water vapor floating high in the sky. You’ve come a long way. Sometimes it would release raindrops. Smartphones were not yet a “necessity.” Since that first issue, what was then And we’re not even mentioning considered a disruption is now simply a Instagram. way of life. As a reader, chances are you are either on Facebook, have taken an We’ve come a long way. Uber at least once and stayed in an Airbnb listed property. If not, you’re Now and then resisting change quite well! But perhaps Since that first issue, the world has done most of your files are in the clouds a triple somersault, flipped on its axis without you even knowing. twice and was spewed out of a financial vortex from which it is still reeling. Through it all, Middle East Point of View Meanwhile in the Middle East, housing was present, shedding light and prices in Dubai soared, crude oil prices translating these changes with objectivity tanked, and political upheaval ran hand- and a poised, even manner, an insider in-hand with the imperative to compete look from the people directly implicated in, and conform to, a technological world in these changes. advancing at a rapidly alarming rate. Naturally, there are recurring themes: When we first launched, if you were living IFRS, risk and compliance, technology, in the Gulf you were paying no taxes, family business and real estate are some
08 Deloitte | A Middle East Point of View - Spring 2018 | 25th issue
of our perennial features. Then there as verbs (“ping” anyone?) and of are those issues where we peak more acronyms turning into words—such as closely at issues dear to our hearts, like GIFify (Graphics Interchange Format, in education or Islamic finance. We also case you were wondering.) We now have country specials like Malta, Iraq accept disruption as a given, we just and Qatar. concentrate on how to deal with it.
But challenge ourselves we must and Perhaps one of the things we will say rest on our laurels we must not. So about today is that we started talking sometimes we also delve into stories about succession. Be it family businesses as explorers, with topics as Wikileaks, or huge multi-national companies like Virtual Reality and Big Data. Saudi Aramco, business in the Middle East is starting to plan for the future. Now then So what about the next twenty-five And for the next eight years and twenty- issues? Where might we all be then? If five issues, Middle East Point of View will there is one thing we have learnt in the be there to analyze it. last eight years is that unpredictability is the only predicate, and that anything can And you will probably be reading it on happen. In fact, we even devoted our the windshield of your self-driving car. Summer 2017 issue to the subject. by Rana Hanna , Editor, Middle East Point We are lucky to be living in an age of of View magazine revolutions. We get to witness change as it happens, live it and be part of it. As the world turns around, however, we also get We are lucky to be living in an age of to feel the jitters that pierce us as the ground shakes under our feet. revolutions. We get to witness change My personal prediction is that the world as it happens, live it and be part of it. will not slow down, the jitters will continue and the huge earthly engine will As the world turns around, however, continue to spin with ever-increasing speed. We will not rest. But we will adapt, we also get to feel the jitters that like we always have. The brain is a marvelous organ. pierce us as the ground shakes Then and now under our feet. So what will we say about today in our 50th issue? Will we still be debating the viability of cryptocurrencies? Will we be communicating in words or emojis? Today we speak of agility in the workplace, and of Fintech. We live in the era of compound words, of nouns acting
09 Deloitte | A Middle East Point of View - Spring 2018 | Agility
Agile in the public sector
10 Deloitte | A Middle East Point of View - Spring 2018 | Agility
11 Deloitte | A Middle East Point of View - Spring 2018 | Agility
Globally, the public t is not the strongest of the species Innovation Strategy prioritize digital that survive, nor the most intelligent, technology as one of the top seven sector is undergoing but the one most responsive to national sectors. In Saudi Arabia, Digital I 1 radical digital reforms change. Gazelles, known for their agility Transformation is a top-four priority in rather than their strength, are able to the National Transformation Plan (NTP) and transformations as a survive by evading predator attacks. They 2020. 2 result of increasing costs are born with physical characteristics that and budget pressures, enable them to switch rapidly from a rest Key attributes of agile organizations state to an escaping and evading state Agile organizations have certain the changing needs of when risks and changes are detected and attributes that allow them to meet citizens and most adapt quickly to their new surroundings. market demands and adjust to trends Agile organizations share strong and ongoing internal and external importantly, the rise of similarities with gazelles; they have challenges. They have an embedded new technological particular characteristics and attributes culture that focuses on strategic thinking, breakthroughs and that allow them to change or adapt in exploration of innovations and changes, response to changes in the market and adaptability and proactivity. 3 They disruptions. react successfully to the rise of new understand technological advancements, competitors and disruptive innovations. embrace disruption and build on it to More recently, organizational agility has provide better solutions to their reached a new level of importance in the customers. public sector especially in light of the rapid ongoing technological In addition, teams in agile organizations developments that are changing both the are structured differently compared to corporate and public landscapes in many traditional hierarchical organizations; they ways. Will public sector organizations be are cross-functional, share a strong able to embrace organizational agility? purpose, commit to each other to deliver, and can deliver end-to-end business Key drivers for the rise of agile value. Cross-functional team members organizations in the public sector retain their autonomy in their respective The rise of agile organizations in the area of focus and set their own work public sector is driven by the need to pace and supervise their own activities. face, adapt to, and embrace the fast- However, they are expected to moving changes that are affecting the collaborate and leverage from each sector and how it serves its citizens. other’s skillsets to achieve the desirable Globally, the public sector is undergoing outcomes. As a matter of fact, Spotify, radical digital reforms and one of the world’s leading music transformations as a result of increasing streaming services that has more than 60 costs and budget pressures, the million active users in over 60 countries is changing needs of citizens and most an example of companies that “have importantly, the rise of new technological grown up in the digital age and designed breakthroughs and disruptions. their organizations to be nimble while placing the customer at the center of all Regionally, similar trends apply, more so product decisions. They accomplish this for countries where less dependence on by unleashing powerful teams of oil is the target. For example, The UAE ICT employees that work cross-functionally to 2021 Strategy and UAE National achieve clear outcomes.” 4
12 Deloitte | A Middle East Point of View - Spring 2018 | Agility
Moreover, those teams have distinct communication rules. Rather than setting Acquiring attributes of agile rigid communication processes and policies, they promote communication organizations will most likely enable channels that drive knowledge-sharing, teamwork and radical transparency. the public sector to adapt to changing These channels enable the fast and efficient flow of information and help the dynamics and offer value-added organization adapt to changes and constantly improve. Social media, for services to their citizens. Adjusting instance, is now, more than ever, being used as a main tool to facilitate fast and rapidly to citizens’ demands, providing prompt communication among teams. By simply creating a WhatsApp group, solutions to their different concerns messages reach team members anytime, anywhere around the world. The speed and shaping public needs in at which messages can be conveyed allows for fast action and reduced the long run are all priorities for turnaround times in addressing potential issues. public entities.
To also achieve agility, the decision- 5 making authority shall be not centralized How can the public sector acquire will grow. In fact, estimates show that in one individual; it shall be distributed agile attributes? from 2016 to 2021, 3.2 billion chip-based across the different laterals and verticals Acquiring attributes of agile organizations National e-IDs will be issued by 103 in the organization. Leaders are not will most likely enable the public sector countries while 485 million National ID involved in the day-to-day operations, to adapt to changing dynamics and offer cards that integrate biometrics into they are strategy- and vision-focused and value-added services to their citizens. non-chip based card programs will be 6 customer-centric. They emphasize the Adjusting rapidly to citizens’ demands, delivered by 33 countries. The largest need to broaden their professional providing solutions to their different scheme so far is in India, which has network and leverage it to deliver value- concerns and shaping public needs in collected facial, fingerprint and iris data added outcomes to their customers. the long run are all priorities for public for one billion registrants. Such Their involvement in the day-to-day entities. technology could be used as an business is mainly limited to enabling additional way of accessing services teams to succeed by coaching, guiding The technological landscape such as tax payments, medical records 5 and mentoring team members rather As digital transformation initiatives are or even e-voting on mobiles. than controlling and directing them. being implemented as part of national “Effective leaders in this new model visions to enhance citizens’ journey, Indoor digital navigation will become should be able to think beyond individual governments have started embedding significantly more commonplace over functions; operate without command and technologies in their operational the next five years. Satellite navigations control behavior; create diversity; landscape. It is predicted that the active systems have revolutionized how people stimulate collaboration; while coaching base of fingerprint reader-equipped find places. Being able to use a employees and enabling teams to devices will top one billion in 2018, and smartphone to navigate buildings could succeed.” 4 that the number of countries using be particularly useful to the public biometrics in national identity schemes sector. 5 Patients, visitors and staff
13 Deloitte | A Middle East Point of View - Spring 2018 | Agility
In forming transient could move more effectively around The structural landscape sprawling facilities like hospitals. Having permanent cross-functional cross-functional teams Employees in major public sector offices teams in a public sector organization and adopting a flexible could save time finding free desks, can be challenging given the nature of meeting rooms or each other. And the the industry. However, transient cross- design at the “edges,” emergency services could quickly functional teams can be formed in these public sector pinpoint individuals in need of help. types of organizations and utilized via organizations will exhibit, tactical interventions aimed at ultimately Public sector organizations in the GCC serving stakeholders’ needs. Based on to a certain extent, agile have started to build on technological the particularities of each initiative, organizational traits. advancement and innovation; digital temporary cross-functional teams can transformation initiatives are already in be formed from employees assuming place but fast-developing technologies parallel responsibilities: one related to such as biometrics, indoor navigation the initiative in play and the second or even self-driving cars could have related to the individual’s original particularly profound consequences for day-to-day job. the citizens they serve. Governments would eventually face the inevitable Nevertheless, establishing such cross- need to rapidly and efficiently integrate functional capabilities could be deemed technological innovations into the core complex given the nature of public sector of their operations to have better visibility organizations. Similar restructuring on their citizens’ needs and to ensure a initiatives could be perceived as response aligned with changing market farfetched, especially at the core of the dynamics. operation. Flexible design, however, could be introduced and incubated In surveys and interviews conducted by on the “edges” of the organization Deloitte with government leaders and most threatened by disruption, while officials across several countries, 75 protecting the stable and successful percent of the respondents considered “core”. Efforts to redesign organizations that digital technologies are disrupting would be protective of the core while the public sector. 7 Public sector allowing the organization to tackle new organizations are put in a position where initiatives and innovative ideas on its embracing technological advancement is edge. 4 a must to be able to respond to citizens’ needs. In leveraging agile organizations’ As mentioned earlier, a key attribute of attributes in general and understanding agile organizations is cross-functional technological advancement in particular, teams. In forming transient cross- public sector organizations will be able functional teams and adopting a flexible to capitalize and build on technology design at the “edges,” public sector and innovation to better respond to organizations will exhibit, to a certain citizens’ demands related to quality, extent, agile organizational traits. In diversification, ease and speed of leveraging those attributes, public sector services. organizations will be better positioned to respond faster to citizens’ changing
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needs. They will ensure an efficient flow perceived as completely agile might be moved too slowly.” 3 Will the public sector of information and a faster decision- unrealistic for public sector organizations adopt organization agility to cope with making process, as well as promote given the internal and external factors the fast-moving pace achieved by quality services and tailored solutions to that come into play, but by adopting privately owned businesses? meet citizens’ needs and expectations. some agile traits, these organizations could view changes as opportunities, by Ghassan Turqieh , Partner and The cultural landscape not as pitfalls. In the private sector, Human Capital Leader, Hanna Aoun, Changes in the national cultural some companies are able to capitalize Manager, and Elie Nasr , Business landscape are also rapidly reflecting on on innovation, improve their Analyst, Consulting, Deloitte, Middle East the internal cultures of organizations. performance and record major Leaders need to consider modernizing successes. Toyota, Apple, General their approach to managing the day-to- Electric, Home Depot, Google, Whole Endnotes day business. According to United Foods, Starbucks, FedEx, Netflix, and Ritz 1. Leon C. Megginson, Professor of Management and Marketing at Louisiana State University at Nations statistics in 2017, 43 percent of Carlton are all leading companies in their Baton Rouge (in a 1963 speech on Charles the GCC population is currently under respective industries. 3 They all exhibit Darwin’s ‘The Origin of Species’) the age of 30. 8 Moreover, particularly common traits that are attributes of 2. Deloitte National Transformation in the Middle East A Digital Journey in Saudi Arabia, women are becoming the agile organization. Leveraging agile 3. Abe Harraf, Professor University of Northern increasingly involved, heavily encouraged characteristics already acquired in the Colorado Kaylynn Tate, Research Assistant and expected to participate in the private sector and even exploring public- University of Northern Colorado, Attributes of workforce. These dynamics will inevitably private partnerships opportunities, would Agile Organizations 4. Deloitte POV, Unlocking the flexible drive public sector leaders to modernize, pave the way for enhanced focus on organization, 2016 embrace changes and deploy “public customer” or citizen experience 5. Deloitte Tech predictions 2017 for the public appropriate talent solutions, not only to by responding faster to changing needs sector maintain a motivated workforce internally and providing improved and tailored 6. The Global National eID Industry Report, 2017 7. Deloitte Insights, The journey to government’s but also to address their citizens’ needs. solutions. John Chambers, former Cisco digital transformation, 2015 Leadership training programs, workforce CEO once said: “Without exception, all of 8. Department of Economic and Social Affairs, planning and succession management my biggest mistakes occurred because I Population Division, United Nations, World are potential solutions for answering Population Prospects, June 2017 these changes. Leveraging talent solutions would contribute to shaping To be perceived as completely agile a workforce of public servants ready to embrace the changing cultural dynamics; might be unrealistic for public sector a workforce that has the ability to rapidly understand citizens’ changing needs organizations given the internal and and utilize proper technological advancements to better serve them. external factors that come into play, Conclusion but by adopting some agile traits, Successful and valued public sector organizations are the ones that possess these organizations could view attributes and characteristics that enable them to respond rapidly and defiantly changes as opportunities, not as to the ever-changing needs of citizens and adapt to the constantly evolving pitfalls. socioeconomic environment. To be
15 Deloitte | A Middle East Point of View - Spring 2018 | Business continuity
Business continuity A different perspective Business Continuity Management (BCM)—the ability of an organization to maintain essential functions during, and after a disaster has occurred—should not be perceived as a compliance requirement only. When properly implemented, it is a system that not only affects strategy, but also protects all the processes of high value to the organization.
16 Deloitte | A Middle East Point of View - Spring 2018 | Business continuity
17 Deloitte | A Middle East Point of View - Spring 2018 | Business continuity
Organizations around magine being able to focus solely on time and probably when least expected. your organization’s strategic growth Organizations should understand the the world are now Iwithout having to worry about external critical operations driving their business, recognizing the threats. Global financial crises, political and their respective vulnerabilities, in tension, pandemic outbreaks, terrorism, order to develop the right strategies and importance of a Business cyber-attacks and natural hazards have ensure continuity, stability and business Continuity Management become part of the business lexicon sustainability. There are various key system to help them regardless of sector or location and have organizational benefits to business increased the level of uncertainty and continuity within the organization: navigate turbulent fear that now govern many businesses. waters. Organizations around the world are now • Overview of the time-critical recognizing the importance of a Business activities and the threats landscape Continuity Management system to help The two pillars of an effective business them navigate turbulent waters, as well continuity management system are the as its effectiveness as a first step towards Business Impact Analysis (BIA) and the Organizational Resilience—the ability of Threat Risk Assessment (TRA.) BIA an organization to anticipate, prepare for, consists of providing detailed and respond and adapt to incremental information about the minimum change and sudden disruptions in order requirements (in terms of facilities, to survive and prosper. personnel, equipment, dependencies, vital documents and technology) of The Gulf countries in particular have every activity deemed time-critical. TRA started to develop tailor-made standards presents an in-depth analysis of the in alignment with the International threats that could have a drastic impact Organization for Standardization (ISO)— on the organization and the likelihood such as NCEMA 7000-2015 in the United of it happening. This analysis phase Arab Emirates (UAE) and SAMA BCM provides an overview of the Framework 2017 in Saudi Arabia—and organization’s critical activities and implementing them across government resources and helps evaluate recovery entities, especially critical national priorities and assess any threat leading infrastructure, effectively creating an to business disruption. immune system protecting the country’s reputation and the safety of its In addition, this analysis helps top population. management better understand the functionality of the organization and The question that often arises is: why reconsider what actually are its time- invest so much effort and time in a critical activities and resources in system perceived as corrective and that order to develop an accurate and requires a significant amount of comprehensive investment strategy. resources, not only to implement but to keep running? • Enhance image and confidence of stakeholders Three compelling reasons Communication during a crisis is a key While it is true that a functional and element to recover and maintain a good effective Business Continuity reputation. As part of the BCM system, Management system will require ongoing Crisis Communications, by the right time and effort, especially from top person at the right time and through management, past experience has shown the right channels, are essential to that incidents can, and will occur at any address the interested stakeholders
18 Deloitte | A Middle East Point of View - Spring 2018 | Business continuity
and prevent rumors or leaks of that a large proportion of insurers (83.3 confidential information. A business percent) “would provide a discount or continuity plan will define the improved insurance terms to a business communications flow and assign the interruption policy if a business various roles of who will contact continuity plan were in place.” employees’ families, address the media (and what to say,) notify interested Every organization needs a source of parties, as well as how employees will assurance, especially for the external act under media pressure. An effective stakeholders, in order to grow and Business Continuity framework helps survive. The importance of business address the different stakeholder continuity resides in providing effective concerns in a confident manner to recovery strategies and a strong brand provide the required assurance and image, facilitating the strategic objective help build the trust relationship through of achieving a resilient organization. each phase of the response and Once Business Continuity is established, recovery by conveying the accurate unlimited options to maintain and information to the relevant sources. As improve the system are available to a result, organizations will benefit from reach the required maturity level and a strong brand and image that reflects drive the organization towards the confidence and skill of top resilience. One of the most effective management to overcoming the solutions would certainly be unexpected. automation: reducing human effort and human error to a minimum by keeping • Return on investment even without the system accurately up-to-date. any crisis occurring Implementing recovery strategies is by Ziad El Haddad , Principal, and imperative to a successful Business Naji Zoghbi , Business Analyst, Risk Continuity Management system, but Advisory, Deloitte, Middle East it is also an expensive part, due to the required investment of time, money and technology. However, without An effective Business Continuity well-defined and tested strategies, recovering the resources during a framework helps address the different crisis—whether the impact is on personnel, equipment, technology stakeholder concerns in a confident or supply chain—will exponentially increase the cost, as compared with manner to provide the required a preventive recovery strategy, due to the short notice and the urgency of assurance and help build the trust investment in previously untested strategies that may turn out to be relationship through each phase of the ineffective. In addition, establishing a Business Continuity Management response and recovery by conveying system will either lower the organization’s insurance cost or allow it the accurate information to the to upgrade to premium policies without additional cost. A joint survey by the relevant sources. British Insurance Brokers’ Association (BIBA) and the Cabinet Office revealed
19 Deloitte | A Middle East Point of View - Spring 2018 | E-commerce
Going digital The next frontier for Middle East retail The proliferation of e-commerce has drastically changed the global retail market. But this megatrend, which has transformed the dynamics of consumer behavior and business models in retail, remains untapped in the Middle East and offers huge potential for industry players.
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21 Deloitte | A Middle East Point of View - Spring 2018 | E-commerce
The regional retail ajor drivers of e-commerce According to Forbes Middle East and growth in the Middle East, Marmore MENA Intelligence, online sales market is on the verge Mespecially in the Gulf region, in the Middle East are estimated to of a digital disruption, would be a high spending potential— account for only 2 percent of the overall owing to a high per capita income— retail sales, much lower than the 15 with industry players developed transport logistics networks, percent in developed markets: the undergoing a structural rising internet penetration levels and a untapped potential for e-commerce shift from traditional in- growing tech-savvy youth population. players is huge. The presence of just a few players makes store concept to online the market an attractive destination for The regional retail market is on the channel through the e-commerce investment. With market verge of a digital disruption, with industry barriers easing—improved infrastructure, players undergoing a structural shift from adoption of digital ease of obtaining licenses and better traditional in-store concept to online technologies. warehousing facilities—and high channel through the adoption of digital investment potential, the region’s technologies. The overall brand strategy e-commerce market looks poised for would be to establish a strong strong growth. omnichannel presence to offer a seamless consumer experience. Shift from traditional brick-and mortar-model to e-commerce Figure 1: Internet Penetration by Country, Currently, only 15 percent of businesses June 2017 in the Middle East have an online presence and almost 90 percent of Bahrain 98.0% the online purchases in the region are Qatar 94.3% shipped from abroad, according to UAE 90.6% technology research company Gartner. Jordan 80.0% This trend is expected to reverse soon Kuwait 78.4% with the launch of Noon.com, a large regional e-commerce player, the entry Lebanon 76.1% of major international players, such as Saudi Arabia 73.8% Amazon (through the acquisition of Souq.com), and by increasing technology Source: Internet World Stats adoption.
Total Internet Active social Mobile Active mobile population users media users subscriptions social users
246 147 93 312 83 million million million million million Urbanization: Penetration: Penetration: vs. Population: Penetration: 68% 60% 38% 127% 34%
22 Deloitte | A Middle East Point of View - Spring 2018 | E-commerce
Moreover, the region has seen Even traditional brick-and-mortar E-commerce players in the Middle tremendous growth in internet retailers are now focusing on providing East and consolidation in the connectivity in recent years, with their customers with an additional industry penetration exceeding 90 percent in online retail platform to augment their Amazon acquired Dubai-based Souq.com Qatar, Bahrain, and the UAE. As per the revenues. For instance, Carrefour and in 2017, which had over 50 million findings of a Hootsuite and We Are Social Lulu Group, two of the largest retailers customers and operations in all GCC study and Internet World Stats, the in the Middle East, launched online states, positioning itself as a major Middle East accounted for 3.8 percent shopping portals in the UAE. e-commerce player in the region. With of the global internet-using population the Amazon Prime membership in place, as of June 2017 at 147 million users, an Figure 3: E-commerce market size the company is looking to attract more increase of 15 percent from 128 million by country (%) customers in the future. In addition, in users in 2016. The region’s current late 2017, Amazon announced the launch 33.9% 33.2% internet penetration rate is 60 percent, 33.4% of its AWS Data Center in Bahrain as part well above the global average of 51.7 of its market expansion plan for the percent. Such a lucrative consumer base 2016e 2021f region. presents huge potential for e-commerce $22.4 bn $48.8 bn players looking to foray into the region’s Noon.com was launched in October 43.6% e-commerce market. 2017 as a regional rival to Amazon. The 32.7% 23.2% US$1 billion e-commerce platform based Rising e-commerce revenue UAE Saudi Arabia Others out of Saudi Arabia was founded by The region’s online sales revenues have Mohamed Alabbar, Chairman of Emaar. been increasing consistently. In 2016, the Source: BMI Research Similar to Amazon, a tech fund led by revenue was US$22.4 billion, up 24.4 Mohamed Alabbar acquired UAE-based percent from US$18 billion in 2015. The On the products front, the clothing and JadoPado.com in May 2017 prior to the market forecast is to reach US$48.8 footwear, and consumer electronics and launch of Noon.com. billion in 2021, at a compound aggregate media segments led the online shopping growth rate (CAGR) of 16.9 percent category in 2015 with the grocery Other notable e-commerce players during 2016-2021. The UAE is expected category at the bottom as most people include Namshi.com, ebay, Ali Express, to lead the market, followed by Saudi prefer buying groceries in stores. This Nahel.com, Ubuy.com, Aido.com, Arabia and Qatar. These countries are trend is expected to continue in the Awok.com, Mumzworld.com, and the expected to jointly account for more future as well. In the UAE, the airline and number is only expected to grow. than 50 percent of the forecast revenue hotel reservations category leads, Moreover, traditional retail chains are in 2021. followed by clothing and footwear, and on their way to transitioning to the consumer electronics and media. e-commerce model to serve both
Figure 2: Middle East e-commerce market online and traditional customers. size ($bn) Shopping goes mobile As the trend of shopping on mobile Initiatives to support the future gathers pace, due to the increase in of e-commerce % 9 .3 R: 1 smartphone use and technological E-governance initiatives CAG advancement, regional players have As part of the announced e-governance launched mobile applications in order to initiatives, local governments were in attract more customers. Ikea introduced the process of integrating paper-based its mobile app in 2013 and Souq.com information services such as launched Arabic and English versions of passports/visa issuance, vehicle its app in 2014. As mobile technology licensing, logistics tracking and utilities 4 5 e f f f f f 1 1 6 7 8 9 0 1 0 0 1 1 1 1 2 2 2 2 0 0 0 0 0 0 advances in terms of ease-of-shopping billing/payments and migrating to 2 2 2 2 2 2 and offering more secure payment the online platform, where they are Source: BMI Research options, more consumers are likely to integrated with standardized or universal gravitate towards e-commerce and online payment platforms. These m-commerce. platforms tend to form the basis for
23 Deloitte | A Middle East Point of View - Spring 2018 | E-commerce
online shopping systems, guaranteeing 2016. The recent improvement in The key catalyst for a risk-free experience for consumers. gateway security, along with reliable and Government-led digitization initiatives free shipping methods, have largely strong growth of the are expected to further boost the persuaded many buyers to purchase e-commerce market in the future. products from outside the region. regional e-commerce market would be a shift E-commerce hub establishment Effect of social media on e-commerce in the UAE E-shopping behavior is influenced by in the cultural mindset. The UAE government set up a duty-free products/brands reviews from social Can e-commerce act as e-commerce hub Matajircom in 2014, as media platforms. Currently, 93 million an initiative to work closely with local and people, 63.3 percent of the region’s an alternative to the international companies. It is aimed to internet-using population, were active on traditional shopping position Dubai as a global e-commerce social media. At 99 percent, Qatar and marketplace by bringing local and the UAE lead the region’s social media experience? international markets closer. penetration rate (the UAE with 9.2 million users and Qatar with 2.4 million users.) Innovation in e-commerce Digital adoption and transformation Though social media penetration in Saudi payments space The combination of factors such as high Arabia is low, it is growing at a rate of 73 Though the majority of payments for adoption of mobile devices, the readiness percent year-on-year, far exceeding the online purchases in the region are of the population to adopt new global average of 21 percent. Social currently made through cash on delivery, technology, and digitization initiatives media platforms such as Facebook, this could change soon. A growing from local governments have positioned Twitter and Instagram play an important m-commerce market and digitization the region for a digital transformation. As role in influencing buying behavior. initiatives by governments are expected per consultants Accenture’s technology Positive brand/product reviews drive to transform the region’s payment outlook, the technologies that will sales. E-commerce players can leverage ecosystem, leading to increased use of reshape the region into a digital economy this platform to drive sales further. online payment systems, such as digital include Internet of Me, Outcome wallets and netbanking. For example, to Economy, Platform Revolution, Intelligent Technology advancement support digital payment services, the Enterprise, and Workforce Reimagined. Though the Middle East e-commerce Central Bank of the UAE has issued a market is still untapped, the technology regulatory framework for electronic E-commerce trends trends that influence the global payment systems. Shift towards localization e-commerce market are expected to Retailers have realized that language and be introduced in compliance with local Challenges localization are extremely important regulations. The trends include use of Clogged logistics factors to be considered when entering chatbots, artificial intelligence (AI), and The high trade barriers in the region act overseas markets. Luxury brands such as Big Data for customer interactions, as a blockage for logistics and online Burberry, Dolce & Gabbana, and jewelry wearables and mobile devices for retailers to ship products. These barriers retailer Blue Nile have launched Arabic payments, same-day delivery, and affect small e-commerce players due to language sites aimed at experimental usage of drones for delivery. high tariffs, changing regulations and shoppers in the UAE, with content-based volatile currency exchange rates. advertising in Arabic as well. These Digitization in food delivery initiatives will attract more local The region’s online food delivery service Payment systems and delivery customers who have avoided e-shopping sector is growing due to digital evolution. The region has low credit card owing to language barriers. Even the restaurants that have been penetration. Moreover, as per an A.T. operating for years now rely on online Kearney study, buyers made 60-70 Cross-border e-commerce services for a significant chunk of their percent of their e-commerce payments A large chunk of online shoppers in the business. UberEats, Deliveroo and online through cash on delivery due to a lack of Middle East have begun accepting cross- platforms such as MakeMyMeal are trust in online payment systems and border products. Online shoppers in the generating a majority of their business internet frauds. UAE made 58 percent of their online through online channels. purchases from overseas vendors in
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As the region lacks postal codes, the last- mile delivery system is severely affected. Interview with Mr. Madhava M S product, then instead of purchasing it Also, the limited number of orders will Rao, Chief Information Officer, at that store, finds the same product result in high costs for last-mile delivery. Lulu Group International online and buys it for a better price. Why e-commerce? The rise of m-commerce has spurred Impact of Value Added Tax (VAT) Businesses today are seeking ways showrooming growth as well. Retailers in the GCC to adopt the changes of consumer’s present in all the channels have The implementation of VAT in the demanding preferences in an significant brand advantage over UAE and Saudi Arabia, the leading effective and robust manner. With others. e-commerce markets in the region, is the spread of disruptive technologies, expected to impact buyers as well as customers today expect retailers to Opportunity to retailers businesses. On the consumer front, as provide the most personalized With a presence across different most online purchases are shipped shopping experience. Multi-channel engagement points, retailers gain from outside the region, tax would be retailing offers plenty of opportunities opportunities to understand applicable not only on goods but also for retailers by offering unique consumer behavior with better data on services. On the business front, as insights into customer preferences. collection and insights, which helps the tax system is new in the region, the drive sales and profits. This not only companies must introduce effective VAT Where is m-commerce now? helps in gaining consumer loyalty compliance systems, which would lead The simple answer is mostly but also to drive efficiencies and to higher costs. As more countries everywhere. With boom in enhanced productivity from the introduce VAT, e-commerce players need smartphone and tablets, the m- employees who can benefit from the to be prepared to comply in a manner commerce has grown rapidly and new innovative technology and serve such that additional costs are not passed retailers present in this channel have the customers better. By committing on to customers. significantly gained share in their resources and investment on new online sales. And you cannot look initiatives, retailers can be more What about the future? at m-commerce today without transparent and consistent across all The key catalyst for strong growth of addressing “showrooming”, it is when customer queries thereby improving the regional e-commerce market would a customer goes into the traditional the brand recall value and customer be a shift in the cultural mindset. Can brick-and-mortar store to check out a perception. e-commerce act as an alternative to the traditional shopping experience? Or will both the in-store and digital commerce channels complement each other and It would be interesting to see what to grow? strategies major players deploy to It would be interesting to see what strategies major players deploy to overcome the cultural barriers. But overcome the cultural barriers. But one thing is for sure, e-commerce in the one thing is for sure, e-commerce Middle East is here to stay and grow. in the Middle East is here to stay by Anish Mehta , Director, and Sachin Bhandari , Senior Manager, Deloitte, UAE and grow.
25 Deloitte | A Middle East Point of View - Spring 2018 | Fintech
Fintech Don’t be analogue in a digital world
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27 Deloitte | A Middle East Point of View - Spring 2018 | Fintech
The rise of fintech The fast-growing payments arena, embryonic stage and has yet to cause the Financial technology (fintech) is previously a formidable forte of banks, tremors that have impacted players in revolutionizing the banking landscape the is now under attack with entrants such mature markets. same way Uber has disrupted the taxi as Apply Pay and Samsung Pay vying for industry and Airbnb has shaken up the market share. The use of blockchain Lending and saving segments carry hospitality sector. This digital evolution, technology has enabled the rapid ascent higher barriers to entry as they invoke and failure to address it early, can of cryptocurrencies such as Bitcoin into regulatory hurdles and require strong trounce even the most dominant of public discourse, igniting a frenzy of balance sheets. Banks in the region also companies. Kodak’s refusal to support interest while creating fundamental tend to be backed by governments and digital, and its subsequent demise, is a challenges to regulators and money influential stakeholders, dampening the cautionary tale for any company and a markets. development of some start-ups within sign to innovative start-ups that even the this area of the banking ecosystem. most monolithic corporations can become vulnerable. In the past few years, The payments and remittance models fintech has emerged have been the most exposed and at the Fintech refers to technology-enabled heart of this disruption as they remain products and services that improve as one of the primary the least capital intensive and most traditional financial services. They are challengers and technologically intensive. The GCC often faster, cheaper, more convenient boasts one of the highest smartphone or more accessible, and in most cases, disruptors of the once- penetration levels and is characterized by they are developed by start-ups. traditional banking a youthful population, providing further industry. impetus to the rise in digital payments. In the past few years, fintech has emerged as one of the primary Embracing fintech challengers and disruptors of the once- Stock trading apps and Robo-Advisors While regional banks recognize the traditional banking industry. Innovative are challenging traditional investment disruptive influence of fintech on their banking services that offer increased and wealth management models, industry, many lack a sense of urgency efficiency and lower costs have helped creating margin pressures and forcing and indeed, lag behind peers within the propel the rise of fintech in a global banks to re-think strategies. region. industry that has amassed over US$100 billion in investments. A backdrop of Such competitors no longer require the Those that have adopted a proactive smartphone proliferation, technology- bricks-and-mortar footprints, nor do they outlook are partnering with start-ups reliant consumers and easing of some need to provide the same depth of that provide fintech solutions such as regulatory barriers have also paved the products and services. New entrants can payment gateways and remittance way for growth, which has seen the unbundle a formerly interlocked segment solutions, while other, larger banks are number of fintech pioneers grow to over of the banking ecosystem in a bid to allocating capital to explore potential one thousand companies in 2017. redistribute the vast profit pools available investments in the start-up space. in the industry. The disruption Across the GCC, banks in the United Arab At the forefront of this disruption are Regional impact Emirates (UAE) have taken the lead in agile innovations such as peer-to-peer Fintech disruption in advanced financial embracing fintech. Emirates NBD, for lending and crowdfunding, that are hubs such as London (widely considered example, has positioned itself as a threatening to render some traditional the fintech capital) has permeated the technology leader, launching the banking services obsolete as they provide banking ecosystem. In the GCC, fintech Emirates NBD Future Lab and alternative lending platforms and widen has made steady advancements and announcing its commitment to invest access to capital. alarmed incumbents but remains at an AED1 billion in the space. Its subsidiary,
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Emirates Islamic Bank, ascribes to a vision of “digitize or die”, being the first Islamic As investment continues and Bank in the UAE to support both, Apple Pay and Samsung Pay. traditional policies governing the
Mashreq Bank has gone one step financial services sector evolve to further and developed Mashreq Pay, an organically developed mobile wallet capture new technologies, fintech that can be used to make purchases. The bank also launched the region’s first is likely to flourish in the region. digital-only bank, Mashreq Neo–and has begun to utilize robotics to manage The UAE Central Bank and the Saudi disruption by gaining a lead on their accounts. Arabian Monetary Authority announced peers and investing in technology plans to use blockchain technology to platforms, talent, in-house technology Elsewhere in the GCC, Riyad Bank issue a digital currency accepted in cross- incubators, accelerators and forged launched the first contactless payment border transactions between the two partnerships with fintech companies. method in Saudi Arabia, a country where countries. cash has long been the primary payment Incumbents can ill-afford to dismiss method. The future for GCC banks the rise of fintech from their strategic As investment continues and traditional priorities, and those that continue to Within Islamic Banking, a sector that is policies governing the financial services rely on their name or size alone may often incorrectly perceived as being sector evolve to capture new experience margin pressures, loss of slower to engage in technologies, leading technologies, fintech is likely to flourish market share, and ultimately, the banks have begun to respond to the in the region. Disruption will not be a discontinuation of business lines as fintech disruption and are intent on one-time event but rather a continuous they lose viability in the face of lower capitalizing from this burgeoning sector. pressure to innovate that will shape cost fintech solutions. In Bahrain, a major player in the region’s customer behavior, business models and Islamic Banking sector, three banks the long-term structure of the industry. Closing thoughts announced in December 2017 the The most successful banks will be those While the fintech evolution in some establishment of a company dedicated that can adapt and stay abreast of trends advanced economies is reaching tipping to research and development of as the financial services environment point, the extent of disruption to GCC Sharia-compliant fintech products. evolves. banks has been less pronounced thus far. However, the pace of disruption is Regulatory participation Although many players have made likely to accelerate as a combination of The importance of fintech has certainly progress in responding to the disruption, rising investments and cross-industry not gone unnoticed by regulators. In the the pace of change has been slow and partnerships fuel the rise of fintech and UAE, the Dubai International Financial there remain obstacles to growth in the its acceptance as a credible component Centre launched the FinTech Hive in shape of a lack of skilled IT workers of the banking ecosystem. Banks should 2017, an accelerator program that along with continued underspend on act now and shift their strategic focus in provides a platform to nascent technology. Other banks that have long order to remain competitive with faster technology firms, with similar initiatives recognized the risks of fintech to their moving new entrants. in Bahrain and Abu Dhabi. The Dubai businesses have been slow to innovate Financial Services Authority is also in owing to internal bureaucracy. by Rajeev Patel , Director and Uthman the process of rolling out a supervisory Al-Basri , Manager, Financial Advisory, environment to aid the development of Banks that will be least impacted by this Deloitte, Middle East fintech. sea of change will have embraced the
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30 Deloitte | A Middle East Point of View - Spring 2018 | Diversity
FT HERoes award In September 2017, Financial Times , in association with HERoes, a gender equality initiative, named three Deloitte leaders on their 2017 “Champions of Women in Business” lists. We asked Rana Ghandour Salhab, David Sproul and Emma Codd to share their views about gender parity and women in business initiatives and challenges.
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32 Deloitte | A Middle East Point of View - Spring 2018 | Diversity
Rana Ghandour Salhab on gender equality in the Middle East
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There are many talented There is little doubt that gender There are many talented and qualified parity and pay gap are headline- women in the region and we need to and qualified women in making news today. Where does the help this talent rise up to the challenge the region and we need Arab world stand? and grasp the opportunities offered by Women in the Arab world are making businesses. There is a need to create a to help this talent rise great strides in commerce and industry cultural shift, so that recognizing women up to the challenge and and are advancing as entrepreneurs, for their potential is not hindered by grasp the opportunities due to rising access to education— subconscious biases, or driven only by where women now outnumber men in the desire to show an increase in figures. offered by businesses. universities in many Arab countries—and Organizations need to recognize the There is a need to create opportunities provided by the knowledge added value of female talent in the economy and digital platforms. Female Arab world to the economy as a whole a cultural shift, so that entrepreneurs in the region are also and to their business, and invest in their recognizing women for growing in number and influence thanks attraction, recruitment, development, their potential is not to an encouraging startup environment. and retention. The role of men and of Many business incubators and leadership commitment and inclusive hindered by accelerators have started up in major leadership, in particular, are crucial to subconscious biases, cities across the region in the last three this process. years as well as across organizations or driven only by the and recognition and award programs It seems wherever we look, the desire to show an specifically targeting women. situation is not rosier. With so few women in key leadership positions in increase in figures. I want to stress that empowering women the West, who should we learn from? is a game changer for our region, and it What should we emulate? is governments and organizations that Yes that’s true. When asked whether they need to take heed of that. At 26 percent, believe women are treated unfairly in the the figure for female labor participation workplace because of their gender, both in the Middle East North Africa region is women and men across the world had one of the lowest in the world. Even when similar perceptions of stereotyping and women are hired, there is high attrition bias. so that very few women reach senior level positions. In fact, men occupy an The biggest barriers to women’s access overwhelming 98.5 percent of to leadership positions—and this is as boardroom seats in the region. true in the West as in the Middle East, the East, the South and everywhere—are This is beginning to change as more tied to a masculine corporate culture that Arab women, even in what is perceived is not sufficiently inclusive. Practices to be more traditional societies, are emanating from conscious and increasingly assuming ministerial, board unconscious biases result in failure to and chief executive positions, and a develop and promote women leaders, woman leads the capital market in one inadequate leadership accountability, of the GCC countries. However, the pace lack of women role models and lack of of change can, and should be, faster. adequate support, mentoring and benefits related to retaining women.
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What we need to emulate from the What is Deloitte doing? West are changing perceptions, tackling The most impactful thing Deloitte is doing stereotyping through awareness, learning to create an inclusive environment is and role modeling, in addition to the making leaders accountable: at Deloitte adoption of gender-blind laws, some of Middle East we introduced gender which we lack in our part of the world targets that are set by the Business and that continues to hinder gender leaders themselves. That is because the equality. We can also benefit from the business case must be articulated and tried and tested policies and practices leadership commitment should be made in the West that succeeded in allowing clear. Then it turns to the task of building women to participate in the economy and cascading accountability. and advance their careers while managing their demanding family roles.
Most importantly for us in the region is the participation of men in the dialogue. Men should stand up against all forms of gender discrimination and harassment and realize this is not only a women’s issue. It is their issue too; they cannot be passive observers.
Most importantly for us in the region is Another step Deloitte is taking is trying the participation of men in the dialogue. to limit the leakage on the corporate Men should stand up against all forms of highway. While the male/female ratio gender discrimination and harassment at the new hire level is increasingly close and realize this is not only a women’s to 50/50 in a number of our practices in issue. It is their issue too; they cannot the Arab region, the female leadership be passive observers. Gender parity pipeline leaks significantly. The practices improves GDP and the wellbeing of we are adopting to advance women into nations. leadership positions are the introduction of high potential development plans, mentoring programs, workplace flexibility
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policies, women networks and diversity In March 2018 we launched the Deloitte and inclusive leadership awareness Accelerator for Social Innovation in the workshops for current leaders. Middle East (DASI), a program that is tailored to Arab entrepreneurs and social Deloitte is also active as a champion of businesses with full or partial female women in our communities. We believe ownership and management. It covers in an integrated, holistic diversity and 14 Middle Eastern countries and is inclusion strategy that expands beyond designed to combat the region’s social our internal practices. We advocate that challenges by aiding small to medium- diversity in the boardroom and in senior sized social enterprises grow through roles is a competitive business tool. We customized Deloitte support packs, offer external collaboration for mentoring mentorship and skills development and support and our partners sit on valued at over US$100,000. This is just governmental, business and NGO one of our programs under WorldClass, advisory councils for women our global social impact initiative to empowerment across the region. We empower 50 million people to succeed offer advice, support and thought in the rapidly changing global economy. By stepping off the corporate ladder women create an absence of female role models in the workplace, which itself stands in the way of gender diversity.
leadership studies. In collaboration You have always been an advocate of with the 30% Club—GCC chapter—we women helping themselves and each published a research study on the other. Where should they start? perceptions of both, national and expat What advice you would offer these leaders in the Arab world towards the women looking to step up the progress of women to senior corporate ladder? management and board-level positions, I think the one place they should start in order to drive the dialogue and is not stepping off the corporate ladder. creation of solutions. Women who step off the corporate
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ladder because of obstacles in advancing noted: there is no return for blending in For women to be their careers risk being trapped in a the background. Differentiate yourself vicious cycle: they are lauded for sticking and get noted. successful they must to their beliefs, but by going “off-balance simultaneously present sheet,” they make it harder to achieve And lastly, assess social and business gender parity in the executive ranks. situations in flexing your style and themselves as self- actions between good female attributes confident and dominant Also, by stepping off the corporate ladder of team work and empathy and what is while tempering these women create an absence of female role traditionally known as “masculine traits” models in the workplace, which itself — defined as aggressiveness, qualities with displays stands in the way of gender diversity. assertiveness, and confidence. Research of communal suggests that for women to be successful Women who face this decision should they must simultaneously present characteristics. demand a more inclusive environment themselves as self-confident and that offers both flexibility and a level dominant while tempering these playing field. However, flexibility does qualities with displays of communal not mean one size fits all, and who best characteristics. The combination of these to tell corporations what flexibility is? The learned behavior patterns may be the women themselves. They should speak greatest determinant of workplace out and participate in offering creative success. solutions. by Rana Ghandour Salhab , Deloitte Therefore, my advice to women looking Middle East Managing Partner for Talent to make headway in their organization’s and Communications (recognized in hierarchical structure is, first, to make the the Top 10 Financial Times HERoes Global right choices at critical junctions in their Champions of Women in Business list) careers. Have a long-term view: that is, do not allow short-term considerations to affect your career in the long run. Look for a career not a job, a culture not a company, a future not a role.
Watch out for, and change, what I call Career Limiting Behaviors (CLBs) to Career Boosting Behaviors (CBBs). Promote your expertise and your accomplishments, as invisible work is not recognized. Men network and women cluster especially in business settings, so network smartly. Ask for what you want, be it a raise, a promotion, or a challenging assignment. Take risks and make sure your personal presence is
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38 Deloitte | A Middle East Point of View - Spring 2018 | Diversity
David Sproul on gender equality
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Our capacity to meet Why does gender equality matter to example is a greater gender imbalance you as Chief Executive of Deloitte at middle management levels and above, our clients’ evolving NWE? typically when women take time off to needs, to innovate and To be a successful firm, we need the start a family or start encountering other best people working for us, and the caring responsibilities. While there are to thrive in the long-term best people aren’t all male –it is really several factors at play here, the two main is dependent on our as simple as that. We therefore need to issues are undoubtedly work-life balance workforce being do everything we can to make sure we and career development. create an environment where everyone diverse. has equal opportunity to thrive and Action is taking place across NWE to succeed, regardless of their gender, or address these pain points and empower any other diversity aspect. Our capacity our people to balance their professional to meet our clients’ evolving needs, to and personal priorities: we’re rolling out innovate and to thrive in the long-term innovative agile working and return-to- is dependent on our workforce being work initiatives, targeted career diverse. development training, mentoring and coaching schemes for our high-potential I strongly believe that the responsibility female practitioners, and we’re improving for tackling this issue sits with leadership, recruitment processes and materials to not with Human Resources teams. address unconscious bias. Gender equality has been a personal priority for me for some time in the UK, Although progress is being made, and continues to be in my role as Chief achieving sustainable change takes Executive of Deloitte North West Europe. long-term commitment in building an And I am glad to say that everyone on environment that fosters true inclusion the NWE Executive feels equally strongly and promotes diversity as a strength in about this. Promoting gender diversity every dimension of our business. My is top of our Talent agenda and we have focus as Chief Executive is to create a set ourselves a target that by June 2020, culture that is underpinned by respect, 20 percent of our North West Europe where everyone in our firm is judged partners will be female. on the value they can–or could–bring.
What are the challenges you face in What is being done to reduce the making gender equality a reality for difficulties that women in Europe Deloitte North West Europe? And face when trying to compete in what what actions are you taking in are still male-dominated leadership response? platforms? We are a people business, and client In my role, I am privileged to have regular relationships are the bedrock of our conversations with many of our client success: our people at all grades are leaders and in other professional services passionate about giving their best to firms throughout Europe, and our firm our clients. But our focus on gender has works closely with organizations identified that there are some clear ‘pain dedicated to addressing gender points’ in our career life-cycle. One inequality in leadership.
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From these interactions, it is clear that most businesses in our region face the Promoting gender diversity is same challenge around lack of diversity at the top. Although the solutions will vary for each business depending on top of our Talent agenda and their culture, sector and other factors, we can learn from one another and we have set ourselves a target momentum is building to remove the corporate or cultural barriers that stand in the way of women achieving their that by June 2020, 20 percent leadership potential. of our North West Europe There is also increased transparency required by European governments on reporting standards, which I believe is partners will be female. a critical step in helping companies understand the scale of the challenge, measure their progress and take meaningful action. A prime example is the new regulation around reporting gender pay gaps in the UK: it has exposed some significant discrepancies– take the case of the BBC and its highest paid employees–and has caused some helpful public debate on causes and solutions.
Deloitte was one of the first large companies to voluntarily report our gender pay gap in the UK in 2015 before it was mandatory, and we have reported it annually ever since. (Editor’s note: see Emma Codd’s article on p. 36) Clients and other stakeholders come to us to discuss our experience and I am proud that we are being seen as taking the lead on diversity and equality. by David Sproul , Senior Partner and Chief Executive, Deloitte North West Europe and Deloitte UK (named as one of the FT HERoes Top 30 Male Champions of Women in Business in the UK)
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Emma Codd on gender pay gap
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43 Deloitte | A Middle East Point of View - Spring 2018 | Diversity
Increasing gender pay What is gender pay gap reporting? organizations. To this end, we have been Under new legislation that came into voluntarily reporting our gender pay gap gap transparency is force in April 2017, UK employers with in the UK since 2015, well before the new something we've taken more than 250 employees are now legislation came into force, and we also required to publish their gender pay worked closely with the UK’s Government a leading and visible gap on an annual basis. The gender pay Equalities Office to produce their 2016 position on for some gap serves to illustrate the percentage report Trailblazing Transparency: time in the UK. We difference between the average male Mending the Gap. Our focus on gender and female earnings within an pay gap transparency also led to us being believe it will play a organization as a whole. Thus, it is not a awarded the prestigious Business in the critical role in achieving measure of whether men and women are Community Transparency Award in 2016. paid the same for the same role (namely, greater gender balance equal pay, for which there has been As at 5 April 2017, our mean pay gap within organizations. legislation in place in the UK since 1970.) was 18.2 percent (median: 15.3 percent) and mean bonus gap was 50.9 percent The legislation is very prescriptive as to (median: 39.1 percent.) While the new the data that must be publicly reported regulations require a slightly different by employers, with a requirement to calculating methodology (and our calculate and report: previous reports did not include our • Their average gender pay gap bonus gap), when we use a like for like (both mean and median averages) calculation year on year we can see that • Their average gender bonus gap our gap is reducing. (both mean and median averages) • The proportion of men and women The analysis conducted in support of receiving bonuses our gender pay gap report showed the • The proportion of men and women clear cause of our gap, namely that in each quartile of the organization’s women hold significantly fewer senior pay structure positions within our firm than men. While women made up 43 percent of our It also requires that the data used for overall workforce in April 2017, only 18 calculations to be as at 5 April of the percent of our partners (those attracting reporting year, thus ensuring that each the highest levels of remuneration) were employer reporting is doing so at the female. Indeed, further analysis shows same point in time. that once this structural issue is removed our mean pay gap reduces to around You acknowledge that Deloitte UK 2.5 percent. has a gender pay gap and that the firm has “fully understood why we To close our gender pay gap we therefore have a gap” and that it is taking clear need to ensure that our most senior steps to close it –what are the main grades are balanced from a gender reasons for the firm’s gender pay gap perspective and we know this takes long- and what are the actions being taken term commitment and a sustained focus to close it? led by our firm’s leadership. Increasing gender pay gap transparency is something we've taken a leading and By the time we reported our gender pay visible position on for some time in the gap under the new legislation we were UK. We believe it will play a critical role in three years into a clear plan to improve achieving greater gender balance within gender balance that we had published to
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all our firm. We also had an existing target that we had set in 2012, namely Our data shows that our focus on that in 2020, 25 percent of our UK partners will be female. At the time this culture has had the most significant target was set this stood at 12 percent. impact on our numbers. Our people Our 2014 plan sets out the actions that we need to take to improve gender tell us that they now feel trusted to balance. It makes clear that success will only be achieved through a focus work in a way that is beneficial for on culture and targeted interventions. When devising the plan we conducted a both, themselves and the business, rigorous data analysis to identify our pain points: those points in our career lifecycle and are therefore able to balance that were adversely impacting our gender balance. We asked our female employees work and life. to tell us about the things that were affecting their experience with us. This resulted in us understanding, not only Our data shows that our focus on culture of the interventions that would make a has had the most significant impact on difference, but also that without a focus our numbers. Our people tell us that they on ensuring that we always provide an now feel trusted to work in a way that is inclusive culture underpinned by respect, beneficial for both, themselves and the where women are able to balance a business, and are therefore able to successful career with life outside work, balance work and life. They also tell us the interventions would have little that the environment within which they impact. work is truly inclusive.
Our plan sets out the areas on which we We know we’re moving in the right are focusing our efforts. These include: direction: the proportion of female • Ensuring that our recruiting processes, partners at Deloitte UK has increased marketing and targeting activities at from 12 percent in 2012 to 19 percent in entry level and experienced hire 2017. We are recruiting more women, recruitment successfully attract an both at entry level and experienced hire, equal share of women and men; and women are choosing to stay with us. • Ensuring that we are able to identify our high potential female talent and While we know that we have a long way then provide them with the sponsorship to go, we believe that we are focusing on and tailored development required; the right things to ensure that we really • Enabling women to re-enter the do achieve gender balance and therefore workplace after a career break of two fully close our gender pay gap. or more years through our Return to Work internship program; and by Emma Codd , Managing Partner for • Ensuring that primary carers (male Talent Deloitte North West Europe and and female) are provided with coaching Deloitte UK (named as one of FTHeroes support–and the support of their line Top 50 Female Champions of Women in manager–when coming back to work Business in the UK) from maternity/parental leave.
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47 Deloitte | A Middle East Point of View - Spring 2018 | Cryptocurrencies
Regulating cryptocurrencies
48 Deloitte | A Middle East Point of View - Spring 2018 | Cryptocurrencies
49 Deloitte | A Middle East Point of View - Spring 2018 | Cryptocurrencies
irtual currency (VC) and digital • Ethereum lost US$17.5 billion in market Challenges facing cryptocurrencies currency are a new class of digital value (50 percent from its peak) in only Speculation: Cryptocurrencies have V assets (money) that allow four weeks in July 2017. It has since no valuation basis, which has led to a borderless transactions. The number risen by almost four times its value to speculative bubble. In addition, the and valuation of virtual currencies has US$63.71 billion. severe volatility has led to a decrease risen to over 1,300 VCs with a total in the usage and acceptance of the market capitalization of over US$465 Given the increasing demand for, and cryptocurrencies as most buyers choose billion as of December 2017 (Figure 1). potential of cryptocurrencies, a number to retain their holding in the hope of of countries have passed regulations multiplying their values. However, the industry remains highly affecting these digital assets. In April volatile. Some instances of this volatility 2017, Japan recognized cryptocurrencies Control: Cryptocurrencies present a are: as a legal method of payment. In October bigger challenge to central banks and • Value of a Bitcoin has increased by 293 2017, Australia passed a law (to be governments as they can potentially percent in the last three months of applicable from July 2018) to remove compete with fiat money (paper money 2017 (October–December) and 17 a double taxation problem for those considered as legal tender by a percent in one day (11 December 2017) accepting digital currencies. Recently, government decree), which will impact to over US$18,000 after being launched the International Monetary Fund’s (IMF) their planning and monetary policy. on the Chicago Board Options Managing Director, Christine Lagarde, Exchange’s (CBOE) future exchange talked about the potential of virtual Jurisdiction: The openness and cross- market. currencies to replace traditional monies border nature of cryptocurrency in the coming decade. transactions and wallets presents a unique problem to central banks and governments in terms of jurisdiction and Figure 1: Market capitalization of virtual currencies regulation.
500 1,400 Criminal financial activity: The most 400 pressing cryptocurrency concern remains 900 ensuring financial integrity, specifically, 300 combating financial crime. The opacity of 200 most cryptocurrency networks presents 400 significant challenges for law 100 enforcement authorities.
0 (100 ) 2013 2014 2015 2016 2017 The Financial Action Task Force (FATF) has determined the anonymity and cross- Market cap (US$ bn) Number border reach of virtual currencies to be particularly concerning, with the points A major reason for the On the other hand a number of of intersection with a regulated regulators, including central banks, are fiat currency system posing the greatest volatility in the value of struggling to catch up and come to terms money laundering (ML)/terrorist cryptocurrencies has with this phenomenon, and are financing (TF) risk. been a lack of security. considering ways to evaluate and regulate cryptocurrencies to benefit from Hacking: A major reason for the volatility the opportunity and mitigate associated in the value of cryptocurrencies has been risks. a lack of security. There have been a number of incidents where hackers have stolen currencies worth millions of dollars.
50 Deloitte | A Middle East Point of View - Spring 2018 | Cryptocurrencies
Regulating cryptocurrencies–the way forward It is only a matter of time before the In light of these concerns, governments and regulators have taken steps to world embraces this technology and protect consumer interests and prevent financial crime activity. works to overcome its constraints.
In July 2014, the New York State Regulating access points: Adopting a holistic regulatory approach Department of Financial Services Cryptocurrency administrators and could help address issues around proposed Bit License, a comprehensive exchanges usually fall within covered jurisdiction. This would mean regulation of virtual currencies, after entities for the purpose of Anti-Money international coordination between gathering inputs from a comprehensive Laundering/Combating the Financing central banks and regulators to introduce community of bitcoin supporters and the of Terrorism (AML/CFT) preventive global standard regulations around financial industry. measures, while users usually do not. purchase, trade and acceptance of Regulators could make it mandatory by cryptocurrencies. However, much remains to be done by law for all cryptocurrency intermediaries the regulators in this area. We believe involved in currency transactions to have Conclusion there are two areas where central banks a compliance program, including AML, to Similar to how the Internet changed the and other regulators can play a direct implement preventive measures and way people carry out their daily activities, and active role in regulating report suspicious transactions. The law cryptocurrencies and blockchain cryptocurrencies: The area of introducing introduced should allow third parties platforms will likely have the same or endorsing a closed loop currency and approved by respective central banks to transformative impact. Although still regulating points of conversion as well as carry out verification activities to ensure evolving, they have already introduced intermediaries. they are up to the approved standards cheaper and quicker ways to carry out and to avoid any conflicts of interest. monetary transactions. It is only a matter Closed loop currency: Regulators could of time before the world embraces this look at introducing and/or endorsing a However, if cryptocurrencies become technology and works to overcome its cryptocurrency that could scale with so widespread that there is no longer constraints. demand. Such a cryptocurrency would a need for participants to cash out i.e. enable the regulator to monitor the end- convert the cryptocurrency into fiat Instead of pushing the cryptocurrencies to-end transaction process and manage money, it may be necessary to extend to the periphery of financial systems, the issues related to price stability, security regulations to other virtual network central banks and other regulators as and reliability that other cryptocurrencies participants, such as wallet service well as market authorities must play a face. providers and payment processors. leading role in making them mainstream. While challenges remain on jurisdiction In December 2017, the central banks Some jurisdictions, such as the United in light of the borderless nature of of the United Arab Emirates (UAE) and States, Germany, the UK and Canada, transactions, one way to overcome these Saudi Arabia announced plans to have taken steps to clarify the could be to regulate the points where introduce a pilot initiative to test a new applicability of existing AML/CFT cryptocurrency is exchanged for real cryptocurrency for cross-border obligations to certain VC businesses. money, goods or services. For this to payments between the two countries. Other jurisdictions, such as Italy, have happen, there should first be a taken a different approach by issuing comprehensive understanding of The People’s Bank of China recently warnings to their financial sectors on cryptocurrencies and a will to address announced that China has completed ML/TF risks posed by VC businesses, related concerns. trial runs on algorithms that will be used while China has gone as far as barring to supply a digital currency. The UK, the interaction between VCs and the by Nipun Srivastava , Director, and Sweden and Canada have also been formal financial sector. Saad Qureshi , Assistant Director, considering the adoption of digital Financial Advisory, Deloitte, Middle East currencies.
51 Deloitte | A Middle East Point of View - Spring 2018 | |Real Estate
The development of Dubai’s affordable housing sector
52 Deloitte | A Middle East Point of View - Spring 2018 | Real Estate
53 Deloitte | A Middle East Point of View - Spring 2018 | Real Estate
With the cost of living Introduction average residential sale price data from Residential development in Dubai has real estate market information service in Dubai rising at a rate increasingly focused on the mid-market company REIDIN, Dubai’s residential higher than wage sector in recent years. Developers have market experienced an average decline launched mid-market residential projects of approximately 15 percent from its inflation for many in locations that include Al Furjan, peak in Q3 2014. Between Q3 2016 workers, housing Dubailand, Dubai Production City, Dubai and Q3 2017, average sale prices for affordability is becoming South and Jumeirah Village Circle. In residential property in Dubai declined by addition to adding to the substantive approximately 2 percent, while average more of an issue. inventory of Dubai’s mid-market housing rents also declined by approximately 7 sector, certain residential developers in percent over the same period. the emirate have started to offer three to five-year phased payment plans in These declines were largely a result of an attempt to access this sector and, in low oil prices impacting government some cases, convert renters into buyers. spending and denting investor confidence, as well as a strong local But affordability remains an issue for currency reducing the purchasing power a number of residential households in of key international source markets, Dubai despite these developments. such as India, Russia and the UK. Data from global advisory firm Oxford Economics indicates that approximately With the cost of living in Dubai rising at 40 percent of Dubai’s households had a rate higher than wage inflation for a monthly income of approximately many workers, housing affordability is AED31,000 (or US$8,440) in 2017. The becoming more of an issue. Given that number of households within this income expatriates make up over 90 percent of category has almost doubled over the Dubai’s population, it is important that last ten years and is likely to continue to the emirate address this issue in order expand in the future. to remain competitive in attracting and retaining globally mobile workers. Affordable housing usually refers to housing costs that equate to Government policy and key approximately 30 percent or less of challenges total monthly household income. To The Dubai Land Department has approximately 40 percent of households indicated that new policies may be in Dubai, rents or mortgage repayments implemented in 2018 to support the are deemed affordable if they are less development of the mid-market than AED9,300 (US$2,532) per month— residential sector. The specific nature of or approximately AED112,000 (c. these policies has yet to be published, US$40,500) per year. but some of the key issues for consideration are outlined below. Is housing in Dubai becoming more affordable? Margins are typically low in the real estate From November 2014 to November development industry in Dubai in 2017, sale prices for residential property comparison with other industries. in Dubai experienced a decline. Based on
54 Deloitte | A Middle East Point of View - Spring 2018 | Real Estate
Combined with a number of relatively can put pressure on developers’ margins, fixed development costs such as land particularly when combined with high and infrastructure, these low margins infrastructure costs. often mean that developers in Dubai typically make more profit on luxury The proposed, but as yet unpublished, residential developments than on mid- government policies aimed at addressing market residences. the issue of affordable housing in Dubai will be welcome, as the emirate’s growing A key barrier to the development of middle class is likely to drive further Dubai’s mid-market sector is escalating demand for this type of residential land prices. According to data from development. The key challenge will REIDIN, the average price of land in Dubai be addressing the interests of all increased from AED327 (US$101) per sq. stakeholders, particularly residential ft.* in October 2015 to AED412 (US$112) developers, who will be reluctant to place per sq. ft. in October 2017. Combined further pressure on margins in an already with the decrease in residential sales challenging market. prices since Q3 2014, escalating land prices have put further pressure on by Martin Cooper , Director, Financial developers’ margins. Advisory, Deloitte, Middle East
In mature markets, the cost of land typically represents approximately Endnotes 15-25 percent of the end sale price of a * A square foot is 0.092 square meters residential project. In Dubai, at AED412 per sq. ft., this represents a significantly larger proportion of end sale prices for residential property. The Dubai Land Department has
Another barrier to the development indicated that new policies may be of Dubai’s mid-market sector is infrastructure costs. These costs, which implemented in 2018 to support include electricity, water, waste water, district cooling and roads, remain broadly the development of the mid-market static regardless of the type and specification of residential product residential sector. The specific nature developed. As such, developers can often drive higher margins from the of these policies has yet to be development of luxury residential property than projects that are marketed published. at the low to middle income brackets.
Conclusions Barriers to the development of Dubai’s mid-market sector, which include escalating land prices in central locations,
55 Deloitte | A Middle East Point of View - Spring 2018 | Publications
New thought leadership publications from Deloitte
ME PoV provides you with a selection of Deloitte’s most recent publications accessible on Deloitte.com
Tax Diversity
VAT in the financial Value Added Tax Preparing for VAT View from the top services and in the GCC in the GCC What business insurance industry Insights by industry Indirect Tax Survey executives really l Volume 3 2017 think about women leaders in the GCC
Financial Advisory Islamic Finance Risk
Regulatory Middle East Real Responsible Taking aim at value Barometer UAE 2017 Estate Predictions investment Avoid overconfidence Ensuring regulatory Dubai 2018 New thinking for and look again at risk resilience in financing renewable disruptive times energy
56 Deloitte | A Middle East Point of View - Spring 2018 | Publications
Middle East Deloitte Point of View Review
www.deloitte.com/middleeast
Life Sciences Deloitte Private Human Capital Retail and Health care
Next-generation Unlocking the flexible Global Powers of 2018 Global health family business organization Retailing 2018 care outlook leaders Original design for an The evolution of Ready to thrive in a uncertain future smart health care disruptive environment
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Connected Tracking the Beyond fintech How to flourish in The future of risk in customers trends 2018 Eight forces that an uncertain future financial services The transformation The top 10 issues are shifting the Open banking imperative for shaping mining in competitive utilities in a digitally the year ahead landscape disrupted world
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