< Previous10 CEO MIDDLE EAST APRIL 2023 n today’s rapidly evolving business landscape, inves- tors and analysts require timely and precise information to make intelligent investment decisions. Earnings calls, an indispensable com- ponent of investor relations, provide a platform for company executives to share financial results and strate- gic insights with the market. These calls — essentially consisting of an earnings presentation and a Q&A ses- sion — offer an opportunity for senior management to demonstrate trans- parency, accountability, and leader- ship, which enhances their reputation and builds investor confidence. However, a common refrain is that earnings calls are a waste of time and can backfire if they are not managed professionally. The reasons for this are: Earnings calls require a significant amount of time from senior executives and IR teams mainly because they are not planned and executed efficiently. They can be overly focused on financial metrics, which may not pro- vide a complete picture of a company’s overall performance and prospects, leading to a narrow and myopic view of the company’s strategy and outlook. Earnings calls can cause stress for executives, who may feel pressure to meet expectations and portray the company’s performance in a positive light, leading to a culture of “spin” that ultimately damages the company’s repu- tation and management’s credibility. Leading organisations however recognise quarterly earnings calls are not merely an investor relations requirement but a highly efficient tool to build and maintain trusted relationships with capital market participants. These calls offer an op- portunity to communicate the com- pany’s progress on corporate strategy, financial performance, and guidance on future expectations. Based on our experience working with some of the largest listed companies in the GCC region, we provide some guidelines to It’s time to transform earnings calls into a valuable experience for analysts and investors THE ART OF THE EARNINGS CALLS Advisor. With proper guidelines, companies can transform their earnings calls into a valuable experience for both analysts and investors, Schutzmann says ECONOMY BY OLIVER SCHUTZMANN, CEO OF IRIDIUM ADVISORS I APRIL 2023 CEO MIDDLE EAST 11 ECONOMY Planning. Management should consider how their strategic responses to short-term challenges will relate to their long-term vision for the company maximise the value of earnings calls for all parties involved. Planning, preparation, and process are paramount In developed markets, companies typi- cally publish their earnings calendar a year in advance, including the dates of their quarterly earnings calls. This gives executives, analysts, and investors suf- ficient time to plan their schedules and ensures that the date for the earnings call can be blocked off in advance. By doing so, companies can help to ensure maximum participation and engage- ment from analysts and investors. Unfortunately, most companies start their quarterly earnings call preparation process too late, wait- ing for internal approval of financial results before preparing their earn- ings cycle materials. However, weeks before the call, it is essential to have a thorough understanding of the finan- cial results, strategic plans, and any other relevant information. Companies should already have a clear message that they want to convey to investors and prepare responses to potential questions that may arise during the call, beginning even before the com- pany finalises its financial results. The process for a successful earn- ings call starts with building a strong and cohesive narrative that aligns with the expectations of the audience. This requires a deep understanding of what investors and analysts want to know, as well as a thorough review of relevant financial, strategic, and operational data and trends. During the call, senior management should be able to provide clear interpretations of this information in the context of both the current market dynamics and the com- petitive landscape. It is also necessary to prepare responses to the most likely questions that may arise during the call, and to anticipate and prepare for unexpected queries because answer- ing questions with ‘no comment’ can shatter trust. from their counterparts by departing from the outdated practice of using the earnings call to merely repeat what has already been provided in financial statements and press releases. Instead, they augment the value of this infor- mation by speaking candidly about underlying drivers and outlining how these facts and figures are shaping future strategy. Management should consider how their strategic responses to short-term challenges will relate to their long-term vision for the compa- ny. They should also preempt concerns and address them during the manage- ment presentation, rather than waiting for analysts to pose a difficult question during the Q&A session. Pragmatism trumps optimism In their efforts to impress inves- tors, many organisations make the mistake of using their management presentation to highlight past ac- complishments and downplay risks. While their intention of sweeping aside details about potential threats is to convey healthy optimism and dispel doubt, they only postpone the inevitable, leading to highly charged and confrontational Q&A sessions. To successfully engage with investors is Being underprepared at an inher- ently judgmental forum is a recipe for disaster. Failing to demonstrate command of facts and figures will lead to questioning the competence of the entire management team. Facts alone are useless A key objective of a successful earn- ings call is to inspire others to believe, as you do, in the company’s future potential. This cannot be achieved by facts and figures alone; telling the company’s story in an informative and engaging way can capture the atten- tion of analysts and investors. This is where the most respected executives distinguish themselves “BEING UNDERPREPARED AT AN INHERENTLY JUDGMENTAL FORUM IS A RECIPE FOR DISASTER”12 CEO MIDDLE EAST APRIL 2023 ECONOMY to draw a distinction between public relations (PR) and investor relations (IR) and recognise that a smoke and mirrors approach and appearing ‘over-bullish’ erodes trust when it contrasts with market expectations. This danger becomes outsized in challenging market conditions. Investors know that even the most prudent businesses are not immune to the impact of externalities like wars, pandemics, and macroeconomic chal- lenges. So, pretending that everything is hunky-dory is simply not credible. In fact, analysts and investors will respond positively to leaders who have a firm grasp of the challenges they face and can present realistic ways in which their organisation will navigate these challenges. Investors will warm to a can-do attitude that exhibits realism and pragmatism. The earnings Persuasion. Leaders must exhibit both pragmatism and candor, making the earnings call a primary vehicle for building trust with the investment community “COMPANIES MUST BE TRANSPARENT AND FORTHCOMING IN THEIR COMMUNICATIONS” APRIL 2023 CEO MIDDLE EAST 13 ECONOMY fectively engage with investors, senior management should prioritise linguis- tic precision over flowery language and vague descriptors. This distinction between IR and PR is crucial, as overly optimistic, or contrived language can erode trust with the investment com- munity. Instead, personal anecdotes and metaphors can be used to bring topics to life and help investors better understand the company’s message. Recent advancements in natu- ral language processing algorithms have made the choice of words and manner of speech even more decisive. These AI tools are capable of cross- correlating language with data points to determine if the management’s confidence and sentiment aligns with the narrative and financial results presented. Companies that recognise the opportunity presented by earnings calls can utilise these tools, such as Iridium’s Quant-Lens NLP platform for Earnings Calls, during rehearsals and post-event, to fine-tune their narrative and delivery, optimising the call’s potential impact. Earning success Ultimately, a successful earnings call involves hosting an insightful call that engages analysts and investors on an emotional level. Leaders must exhibit both pragmatism and candor, mak- ing the earnings call a primary vehicle for building trust with the investment community. To earn the confidence of investors, companies must be trans- parent and forthcoming in their com- munications, as well as understand what investors want to know and how they want to hear it. By following these guidelines, com- panies can transform their earnings calls into a valuable experience for both analysts and investors. This can help build trust, convey a compelling narrative, and inspire confidence in the future of the company, ultimately providing a strategic advantage in a competitive marketplace. $14.66BN The recorded net interest income of the 20 largest GCC banks in the third quarter of 2022, according to S&P Global call is the venue to demonstrate all of this and more — it is a forum where knowledge is exchanged in a way that maintains confidence that invested funds are in the right hands. Words inspire action The language used in an earnings call can greatly impact its success, often equally as important as performance data and market conditions. To ef-14 CEO MIDDLE EAST APRIL 2023 iversification is a crucial aspect of trading and invest- ing that helps reduce risk and increase the likelihood of achieving long-term financial success. It involves spreading investments across different asset classes, industries, and geograph- fied portfolio can potentially generate more stable returns, protect capital, and create a better risk-award ratio for investors. Thus, diversification is a fundamental strategy for achieving long- term financial goals for all investors regardless of their level of experience. But as with many things, this is easier said than done. So how do we put this into practice? Here are a few tips: What is a well-diversified portfolio? Nasdaq defines it as a portfolio that in- cludes a variety of securities so that the weight of any security is small. The risk of a well-diversified portfolio closely approximates the systematic risk of the overall market, and the unsystematic risk of each security has been diversi- fied out of the portfolio. This means that a diversified portfolio should not be a list of assets picked randomly. It is not enough to simply pick and choose any invest- ments. A well-diversified portfolio should typically include a variety of securities to help reduce individual se- curity risks and align to the systematic risk posed by the overall market. In short, building a well-diversified portfolio starts with choosing your investments across a broad mix of asset classes, so that the risks come at differ- ent scales and intervals depending on the chosen assets. To take advantage of the benefits of diversification, aim for a variety of asset classes: • Stocks, also known as equities; allow you to have partial ownership of a company • Bonds, also known as fixed- income securities or debt instruments: where you lend money to a company or government in exchange for regular interest payments • Alternative investments: Those that have a lower correlation to the stock market (real estate, commodities, hedge funds, crypto) When your investments have a low correlation to each other, a healthy Tips on diversifying investment portfolios to mitigate risks and maximising returns THE CASE FOR DIVERSIFICATION Sound advice. Diversification is a crucial aspect of trading that should not be overlooked, Masry believes INVESTMENT D BY AMR MASRY, DIRECTOR OF SALES AT AMANA ical regions, rather than concentrating them in a single area. Diversification enables investors to avoid the pitfalls of putting all their eggs in one basket and helps minimise the impact of adverse events that may occur in a particular market. A well-diversi- APRIL 2023 CEO MIDDLE EAST 15 INVESTMENT Stocks. Building a well-diversified portfolio starts with choosing your investments across a broad mix of asset classes level of diversification will result in one asset’s poor performance being com- pensated by the stronger performance of a another one, thus potentially reducing overall risk over time. How you split your investments between assets is called asset alloca- tion. Your allocation should be based on factors like your financial goals, time horizon and risk tolerance. Investors with a high appetite for risk and/or a longer time to stay invested can benefit from a more aggressive asset allocation. Consider investing in an ETF Should you be short on time to research individual stocks, you might consider adding passively managed funds to your portfolio, like exchange-traded funds (ETFs). An ETF provides a basket of securities that can help do the diversification job for you, especially if you combine several ETFs that are not correlated to each other. There are many types of ETFs that cover equities, bonds, commodities and even curren- cies. Adding even a single ETF to your portfolio can significantly diversify your portfolio. ETFs also tend to have lower fees compared to mutual funds. Regularly rebalance your portfolio Investing is an ongoing process that requires intentional adjustments over time. Once you have your ideal asset mix, commit to maintaining it with regular check-ups and rebalancing. Over time, the weighting of each asset class will change based on the return of your investments. This alters the risk profile of your portfolio, making rebal- ancing an important part of managing your investments. It is helpful to periodically compare where you started with where you are now, and determine whether the perfor- mance aligns with your long term goals. Once that’s done, you should make sure your exposure to certain asset classes is within the risk levels you had envisioned. If not, rebalance any asset that has drifted away from your desired Investing puts your money to work for you, helping you build wealth over time and reducing the impact of infla- tion. The earlier you start, the longer you can have the power of compound- ing help you reach your goals. More importantly, building a diversified port- folio will cultivate financial discipline, a habit of saving, and a deeper under- standing of investment instruments. Regional advantage The recent success of IPOs in the Dubai Financial Market and Abu Dhabi Ex- change Securities has brought to fore a wide choice of MENA-based financial instruments for investors to choose from. These include listed equities, derivatives, ETFs, and Bonds. Today, novice investors in the UAE can choose from multiple providers to begin their journey. To sum up, diversification is a crucial aspect of trading that should not be over- looked. It involves spreading investments across different asset classes, sectors, and markets, to minimise risk and increase the potential for long-term gains. By diversifying, traders can protect their portfolios from market volatility and re- duce their exposure to any one particular investment, nevertheless, investors need to keep building their knowledge of the many instruments available and choose ones that help support their goals. “INVESTING PUTS YOUR MONEY TO WORK FOR YOU, HELPING YOU BUILD WEALTH OVER TIME AND REDUCING THE IMPACT OF INFLATION” asset allocation. Here are a few portfo- lio examples illustrating various asset mixes depending on different goals and time horizons: • Conservative portfolio: 20 percent stocks, 50 percent bonds, 30 percent short-term investments. • Balanced portfolio: 50 percent stocks, 40 percent bonds, 10 percent short-term investments. • Growth portfolio: 70 percent stocks, 25 percent bonds 5 percent short-term investments.16 CEO MIDDLE EAST APRIL 2023 he concept of real estate in the metaverse, or virtual worlds, has been gaining trac- tion in recent years, especially with the rise of blockchain technology and the increasing popularity of virtual gaming and social media platforms. While owning virtual property may seem far- fetched, it could become a new invest- ment opportunity for savvy investors, with several unique benefits including: • High potential returns: Virtual worlds are growing, and as more people flock to these spaces for entertain- ment, social interaction, and even work, demand for virtual real estate will continue skyrocketing. This could lead to a significant increase in the value of virtual property, providing investors with significant upside potential. • Low cost of entry: Unlike tradi- tional real estate, where the cost of buying property can be prohibitively high, you can buy virtual property for significantly less. This makes it an ac- cessible investment opportunity for a broader audience, including those who might not have the resources to invest in physical real estate. • High liquidity: Partly because of the lower prices and high demand, this superactive market offers much higher liquidity than physical real estate. This means you can sell your metaverse estate far more quickly and efficiently than real-world properties. • Diversification: Instead of think- ing either/or, investors must think about building a portfolio of assets. These could include metaverse real estate. In a well-diversified portfolio, this could reduce risk and increase the potential return. • Quicker development. Develop- ing physical real estate to increase its market value can take months or even years. Building an immersive metaverse experience on top of your virtual land can happen in weeks or days. Consequently, you can increase its value and appeal to brands, organi- sations, and celebrities. Is it all just hype or is there a real investment to be had in the virtual world? IS REAL ESTATE IN THE METAVERSE A REAL INVESTMENT? Virtual assets. Huber says Metaverse platforms continue to gain popularity, and demand for virtual property is growing INVESTMENT T BY SAMUEL HUBER, CEO OF LANDVAULT APRIL 2023 CEO MIDDLE EAST 17 INVESTMENT Metaverse is here. Virtual real estate can be a lucrative and exciting opportunity, provided investors do their due diligence • Renting: You can rent virtual real estate and earn passive income. Metaverse platforms continue to gain popularity, and demand for virtual property is growing. This presents a unique opportunity for investors to earn passive income by renting out their virtual real estate to interested businesses or individuals wanting to create virtual experiences. However, there are also some risks associated with investing in metaverse real estate. One of the biggest concerns is the volatility of the market and the lack of regulation in virtual worlds. Unlike traditional real estate, which is governed by a well-established legal framework, virtual property is not subject to the same level of regulation. This means that there is a greater risk of fraud, and investors could lose their investment if the metaverse platform where they invested collapses. Another concern is the lack of a proven track record for metaverse real tunities objectively. This is where land discovery tools come in - It provides unique insights and analysis of virtual real estate, allowing investors to make informed decisions based on objective data across platforms. Given the UAE’s construction industry continuing to boom with revenue set to surpass $37bn by 2024, displaying the highest level of real estate transactions in a while, together with blockchain-based vir- tual real estate prices having grown by 879 percent, having a great piece of land, established with age, and near high-profile plots, will always hold value. In closing, metaverse real estate presents a unique investment oppor- tunity for those looking to earn passive income or build a portfolio of virtual assets. With the right tools and analy- sis, virtual real estate can be a lucrative and exciting opportunity, provided investors do their due diligence. “METAVERSE REAL ESTATE PRESENTS A UNIQUE INVESTMENT OPPORTUNITY FOR THOSE LOOKING TO BUILD A PORTFOLIO OF VIRTUAL ASSETS” estate. While there are many successful platforms, there is no guarantee that this will continue in the future. So there is a risk that the virtual property could lose value if the platform fails to attract new users. However, you can significantly mitigate these risks by assessing oppor-18 CEO MIDDLE EAST APRIL 2023 opportunity for professionals across a wide spectrum of industries in the rap- idly transforming country. Crown Prince Mohammed bin Salman Al Saud has called the Middle East “the new Europe”. As the region’s biggest economy, Saudi Arabia does represent an unexpected bright spot in an otherwise still-doomy global outlook. It is on course to be the fastest grow- ing G20 economy in 2022 and 2023, with expected GDP increases of around 8.5 percent and 6 percent respectively, driven by healthy output in both the oil and non-oil sectors. The latter economy grew 6 percent in Q3 2022. The country is in the midst of reinvention on a level rarely seen in today’s world, backed by $620bn worth of resources in the form of the Public In- vestment Fund (PIF). At the heart of this is Vision 2030, an economic and social modernisation programme now entering its seventh year. Vision 2030 rests on multiple indus- trial and infrastructural pillars. It aims to diversify revenue streams by developing new sectors such as tourism, renewable energy and entertainment, as well as innovating more established ones such as finance and healthcare. Having only opened the door to lei- sure travellers in 2019, Saudi Arabia sees tourism becoming the biggest source of private sector job creation to the tune of 1 million new jobs over the next decade and accounting for 10 percent of GDP by attracting a targeted 100 million foreign visitors annually. The proposed King Salman Airport in Riyadh, scheduled for completion in 2027, will have six runways in anticipation of the kingdom becoming a top-five global destination. The strategy to achieve this incor- porates both past and future. On the one hand is a push to open up heritage sites to the public. On the other are initiatives such as Neom, the wildly ambitious futuristic city and travel destination in the desert of Tabuk province, and the Red Sea Project, a similarly bold undertaking combining No other country in the region or world is going through the same period of expansion and excitement like Saudi Arabia SAUDI ARABIA: LAND OF CAREER OPPORTUNITIES Employment. Turk believes Saudi tourism will become the biggest source of private sector job creation over the next decade LEADERSHIP BY MOHAMAD TURK, PARTNER IN HEIDRICK & STRUGGLES’ DUBAI OFFICE AND MEMBER OF THE GLOBAL INDUSTRIAL PRACTICE half-trillion-dollar sustainable megacity in the desert widely seen as one of the world’s most complex construction projects. A new integrated economic zone that offers tax-free operations for up to 50 years and aims to turn an oil-rich kingdom into the Middle East’s leading logistics hub. A A plan to build one of the world’s largest airports, capable of handling up to 185 million travellers a year, part of a trillion- dollar bet on becoming a top tourism destination. The scale of ambition of these, just some of the projects currently underway in Saudi Arabia, speaks to the scale of APRIL 2023 CEO MIDDLE EAST 19 LEADERSHIP Promising sector. Saudi Arabia aims to attract 100 million foreign visitors a year by 2030 luxury and eco travel on the country’s western coast. While oil remains key to the economy, Saudi Arabia aims to gener- ate half its electricity through renewable energy sources including solar and wind by 2030. The country’s geography and climate is in its favour, with abundant empty space and sun. Green hydrogen is seen as a further opportunity. Together with the UAE, the country aims to generate at least a quarter of global exports. International partnerships are an important part of the plan, and by December 2022 Saudi Arabia had signed 34 investment deals relating to energy and technology with China alone. Other efforts within Vision 2030 include transforming the financial market into an advanced capital market, as well as embracing fintech innovation (the Saudi Central Bank licensed 18 such companies in 2021); sweeping health- care reform that includes the expansion of digital health solutions; a national industrial development and logistics program designed to establish Saudi Arabia as an industrial leader and global logistics hub and attract foreign invest- ment. An example within this is the development of an electric vehicle brand, Ceer, in a joint-venture between the PIF and Foxconn, which is expected to create some 30,000 jobs. In parallel, the creation of the Saudi Special Economic Zone in Riyadh gives multinational companies a strong incen- tive to establish their regional headquar- ters in the country. A number of financial sector companies have recently entered Saudi Arabia or increased their presence there, including BlackRock, JP Morgan Chase, HSBC and Citigroup, attracted by investment opportunities in sectors earmarked as part of Vision 2030 such as renewable energy and infrastructure. Then there is unprecedented focus on soft power. With a vision of turning the country into a regional media hub, the government has allocated $64bn to a fledgling film industry and asked that it turns out 100-odd films by 2030. There support and ideological commitment make this realistic. To be sure, there are major challenges to overcome, not least the fact that industries such as tour- ism, entertainment and automotive are almost entirely new to the kingdom. The learning curve will be steep, and there is an obvious need for experienced interna- tional talent. In terms of skillsets, management and P&L leadership, specifically in the context of these nascent industries, as well as areas such as mining and avia- tion, are in urgent demand. Outcomes will largely hinge on the ability to assem- ble highly functional teams, and to build high-level relationships to navigate both the industry platforms and public sector. Qualities such as agility–which Heidrick & Struggles’ defines as key skills in a crisis: adaptability, resilience, learning and foresight–and entrepreneurial spirit are equally important given the scope and speed of the market’s transforma- tion. Without the latter in particular, the vision will struggle to come to fruition. While in-market talent can deliver on these needs to some extent, the expat community is likely to grow dramatically in the coming decade. The government is accommodating this in several ways. It has changed regulations to make it easier for high-calibre professionals to relocate with their families either on a permanent or temporary basis without the need for a local sponsor. Its invest- ment in infrastructure development, which includes education, healthcare and aviation among other areas, also bodes well for general quality of life. Moves to establish new flight routes means Saudi Arabia will connect to 250 global destinations by 2030. From a talent perspective, the pace of development is both daunt- ing and thrilling. It offers the chance to build companies, and in some cases the country, from the ground up. For those with ambition and adventurous- ness in equal measure, Saudi Arabia is currently a land of opportunity like no other on the planet. “SAUDI ARABIA AIMS TO GENERATE HALF ITS ELECTRICITY THROUGH RENEWABLE ENERGY SOURCES BY 2030” is also increased appetite for live music and sporting entertainment. Saudi Ara- bia plays host to the Gulf’s biggest music festival, which includes a host of inter- national stars. The LIV Golf tournament has made the country a key player in a sport with soaring global popularity. And there is even unofficial talk of bidding to host the 2030 FIFA World Cup alongside Egypt and Greece. In almost every project currently underway, Saudi Arabia aims to be a world-leading force. Massive financial Next >