< Previous10 CEO MIDDLE EAST 16–29 FEBRUARY 2024 n the UAE’s rapidly trans- forming business landscape, corporate governance has emerged as a crucial factor for long- term growth, both in terms of build- ing a multi-generational organisation ment, understanding and integrating corporate governance at every level has become not just a regulatory require- ment, but a strategic necessity. Its impact influences all aspects of a busi- ness, including planning, operational efficiency, legal compliance, ethical standards, environmental, social and governance (ESG) considerations, and overall sustainability. Put simply, it acts as an unofficial rulebook for how the company is run. Timely and holistic integration When setting up, most organisations start by identifying the vision, mission, and objectives and developing the business plan, which deals with finan- cial aspects, market segments, market- ing plans, and operations. Corporate governance is a big gap that often gets overlooked because it’s not consid- ered as an essential part of the broader picture. It’s viewed as a nice-to-have; a secondary priority that will be handled as the business grows. This approach is damaging and a short-sighted view of corporate governance can significantly limit your potential, as well as leave you susceptible to significant risk. That said, it’s never too late to analyse where you can improve and adopt best practices. The key is ensur- ing that governance isn’t seen sepa- rately to business strategy and opera- tions. Instead, it needs to be woven into the very fabric of your company’s decision-making processes and subject to continuous assessment. A robust corporate governance framework ensures that your activities align with your mission, vision, and goals, while being adaptable to market fluctuations and stakeholder expecta- tions. Creating that strategic level of corporate governance enables you to control how you communicate your val- ues to the market through your processes and actions, helping you to connect with the right partners and avoid unnecessary costs associated with failed collaborations or wrong hires within the organisation. Robust corporate governance is a strategic imperative for sustainable success IGNORE GOVERNANCE AT YOUR PERIL A robust corporate governance framework ensures that your activities align with your mission, vision, and goals, Balfaqeeh says GOVERNANCE BY FATIMA BALFAQEEH, MANAGING PARTNER OF BALFAQEEH ADVOCATES AND LEGAL CONSULTANCY I and achieving financial success. A strong corporate governance frame- work is also an important element of stability and preparedness in changing economic conditions. For CEOs and top-level manage-GOVERNANCE 16–29 FEBRUARY 2024 CEO MIDDLE EAST 11 Legal and ethical considerations Legal compliance is a critical aspect of corporate governance and the UAE has witnessed a number of recent changes to its regulatory scene. Companies must adhere to local and international laws, including those related to finan- cial disclosures, labour standards, and anti-corruption practices. The UAE’s legal framework to support corporate governance has evolved significantly over the last decade, leaning into best practices that include the introduction of VAT reporting, in addition to anti-money laundry annual reporting and declara- tions in certain sectors. We can only expect the regulatory environment to become more stringent. Beyond legal compliance, ethical business conduct is paramount. Ethi- cal governance fosters trust among stakeholders and protects your com- pany’s reputation. ESG and sustainability matters With the conclusion of COP28 at the end of 2023, the UAE showed the world that it is not only an advocate of sustainability but also a champion, and more policies are likely to be intro- duced to encourage more widespread adoption of ESG measures. In addition, ESG issues are becom- ing increasingly central to corporate governance. Investors and consumers alike demand greater transparency and responsibility in how companies ad- dress environmental sustainability, so- cial impact, and internal governance. Integrating ESG considerations into governance frameworks is not just a moral imperative but also a business one, as it can significantly impact the company’s long-term profitability and resilience. Common pitfalls in corporate governance Various challenges arise when trying to integrate and maintain an effective, individualised corporate governance 2. Foster a culture of ethics and trans- parency at all levels with clear guidelines for information management. 3. Ensure board diversity and expertise supported by regular training and evaluations. 4. Integrate ESG considerations into strategic decision-making. 5. Engage stakeholders in mean- ingful dialogue to ensure they under- stand the expectations, responsibilities, and value of good governance. By nature, the principles of cor- porate governance will always evolve alongside the needs of organisations, economies, and societies worldwide. This represents both a challenge and an opportunity for business leaders, especially in the UAE where regu- lations continue to increase as the landscape matures. By being open to change and embracing comprehen- sive, proactive governance practices, companies can not only meet regula- tory demands but also drive sustaina- ble growth and build a resilient future. Corporate governance, therefore, is not just a compliance issue but a strategic imperative that underpins every aspect of your business’ success in today’s dynamic world. programme. Common pitfalls include lack of board diversity, inadequate risk management, poor stakeholder com- munication, and insufficient attention to ESG issues. Identifying and address- ing these pitfalls is crucial for establish- ing a robust governance framework. In order to effect progress, there are certain basic steps can take to conduct the first gap analysis in your organisation. 1. Undertake regular governance audits to assess compliance and effec- tiveness, including how documents are held and kept up-to-date. “THE PRINCIPLES OF CORPORATE GOVERNANCE WILL ALWAYS EVOLVE ALONGSIDE THE NEEDS OF ORGANISATIONS, ECONOMIES AND SOCIETIES WORLDWIDE” Corporate governance is a big gap that often gets overlooked because it’s not considered as an essential part of the broader picture12 CEO MIDDLE EAST 16–29 FEBRUARY 2024 s a retailer, I’ve been told time and again that a customer’s per- ceptions are my reality. So, I’m a staunch believer in keeping one’s finger firmly on the pulse of consumer trends. That endeavour has enabled me to stay in sync with customer expectations. To my understanding, the most influential development in the GCC retail industry in recent years has been the heightened awareness among residents. That notion was supported by a recent Oliver Wyman study that revealed that GCC consumers’ expectations for tailored experiences are over 30 percent higher than those of their global counterparts. So, it is safe to say that consumers’ hyper-awareness is creating a need for superior retail experiences. As the idea of a “good retail experience” can vary from person to person, brands can- not adopt a one-size-fits-all approach As the idea of a “good retail experience” can vary from person to person, brands cannot adopt a one- size-fits-all approach to customer engagement SIX GCC RETAIL TRENDS IN 2024: DECODING HYPER- AWARE CONSUMERS; DELIVERING SUPERIOR EXPERIENCES In 2024, experience-led retailers in the GCC will be more inclined to leverage cutting-edge technologies and engage customers meaningfully across offline and online touchpoints RETAIL BY SHEHBAZ SHAIKH, CHIEF RETAIL OFFICER, REDTAG ARETAIL 16–29 FEBRUARY 2024 CEO MIDDLE EAST 13 to customer engagement. In 2024, experience-led retailers in the GCC will be more inclined to leverage cutting- edge technologies and engage custom- ers meaningfully across offline and online touchpoints. The following six trends summarise how those shifts will play out this year across GCC. 1. Omnichannel is the norm The study also touched upon the growth in omnichannel retail, correlating it with the findings that about 87 percent of GCC customers are using both online and offline avenues to shop. For retailers, such findings issue a clarion call to diver- sify their channels and ensure consistent experiences across physical and digital touchpoints. Hyper-aware customers often perform comparative analyses of the prices of the same product on the website and at the store, along with assessing applicable offers. Such customers value consistent experiences greatly. 2. In sync with the socioeconomic evolution The GCC retail industry is witnessing an influx of millennials and the younger generation, as well as the growing participation of women. Though these population subsets navigate both offline and online channels under different circumstances, their participation leans toward ecommerce and social media shopping. Women’s increasing work- force participation has understandably boosted consumer spending, which is expected to grow significantly in 2024. An insights survey in the UAE and KSA found that about 50 percent of high earners are spending over $1,000 monthly, on average, on fashion. Brands that tailor their rewards and loy- alty programmes to those demographi- cal factors can stay competitive. 3. Personalisation as per preferences Almost 100 percent internet and smart- phone penetration in the region has enabled customers to gain awareness of various product options and their price ERP software help retailers accurately forecast demand and optimise their inventories. At a time when customers are increasingly seeking quicker deliver- ies/exchanges/returns, insights-led retail operations are a bare necessity. 5. Increasing AI penetration in retail AI has found an admirer in GCC, as evidenced by a host of decisive national strategies and initiatives in recent months. The UAE National Strategy for AI 2031, which is intended to boost adoption and unlock positive outcomes, is a good ex- ample of that development. Concurrent- ly, retailers have deployed AI-powered virtual assistants and chatbots to provide on-demand customer services round the clock. According to a YouGov survey, only one in 10 UAE consumers does not find chatbots useful, in contrast to three globally. In 2024, the retail industry could devise more outcome-based AI strate- gies and launch initiatives such as facial recognition-based app authentication and self-check kiosks at stores. Irrespec- tive of the applications, the overarching trend is to institutionalise AI in retail operations by perceiving it as adaptive rather than disruptive. 6. The non-negotiable sustainability A comprehensive study revealed that 36 percent of young Emiratis have spent more to buy from a sustainable com- pany, indicating that the awareness of sustainability is translating to purchase behaviours. Similarly, 36 percent of Saudi respondents have boycotted a company for not behaving sustainably, and only 31 percent of MENA respond- ents believe that ‘green’ products are just as good as their regular alternatives. Go- ing forward, with regulations expected to increase, retailers are likely to make visible efforts, such as green labelling, to embrace sustainability and incentivise buyers. Understanding the expectations of eco-conscious generations like Gen Z and developing products will be criti- cal for brands hoping to stay competi- tive and relevant. points and form unique preferences. A good experience will largely revolve around brands’ ability to cater to customers’ unique preferences through personalised offers and recommenda- tions. In omnichannel retail and specifi- cally ecommerce, the timely delivery of such tailored experiences is possible only through customer data platforms and advanced analytics integrated with CRM tools. At physical stores, the pos- sibility of in-person communications allows brands to engage more effec- tively. REDTAG’s fashion stylists, who assist customers in choosing the most appropriate outfits based on body type and personal preferences, exemplify that unique opportunity at the stores. 4. Insights-led retail operations Retailers possess a repository of data, which has turned into a goldmine of opportunities following the emergence of cutting-edge AI analytics. In 2024, many are inclined to integrate data from across retail departments and create a single source of truth. The common-da- ta environments will reduce operational silos and provide teams with a compre- hensive view of a customer’s journey and shopping behaviour. Advanced analytics provides valuable insights to orchestrate personalised market- ing campaigns and enrich a customer’s brand experience. Operationally, such deep-learning models integrated with Understanding the expectations of eco-conscious generations and developing products will be critical for brands hoping to stay competitive, Shaikh says14 CEO MIDDLE EAST 16–29 FEBRUARY 2024 ill Gates once predicted, ‘Banking is necessary, banks are not.’ This rings especially true today as Gen Z and Millennials, wielding an estimated $44bn in spend- ing power, are redefining what bank- ing means. These generations, distinct in their approach to financial services, are increasingly distancing themselves from traditional banking norms and instead, are turning towards innova- tive, digital solutions. Their shifting preferences are creating a new financial paradigm, one that demands agility and a reimagined approach from traditional banking institutions. but are also being customised to meet the unique preferences of a digitally native clientele. It’s not just about digitising existing services; it’s about reimagining banking in a way that aligns with the lifestyle and expectations of modern consum- ers. This generation wants banking that fits their life. That means a mix of online services, physical branch access, and varied communication channels including digital assistants and in-app customer support. It’s something that can’t be overlooked, especially when considering this new generation’s growing financial influence. Millennials and Gen-Z: A financial force Millennials, who have now entered their prime working and spending years, are becoming a major economic force. They are poised to inherit ap- proximately $68 trillion from their Baby Boomer parents by the year 2030. Following closely, Gen-Z is on the brink of financial independence and is set to make a significant impact. By 2030, Gen-Z’s global spending power is expected to skyrocket to $33 trillion, making up 30 percent of the world’s income-earning adults. This substantial financial power puts these generations at the forefront of shaping consumer trends and finan- cial behaviours for the future. As such, banks must recognise the necessity of catering to this influential group. This new generation is character- ised by their aversion to commitment and their continuous search for better alternatives, which extends to their banking relationships. They are not hesitant to switch financial institutions if they encounter more appealing op- tions, even if they have engaged with a bank for significant financial decisions in the past. This behaviour highlights the critical need for banks to offer per- sonalised, flexible, user-friendly, and digital-first banking experiences. To effectively engage with these generations, banks must reimagine While embracing digital technology is a step in the right direction, it alone won’t ensure growth in the banking sector NEXT GEN BANKING: MEETING THE NEEDS OF A NEW GENERATION A 2020 study by Standard Chartered found that eight out of 10 of Millennials in the UAE struggle to meet their financial needs with their income alone, leading many to turn to credit cards BANKING BY KIM MEDINA, DIRECTOR OF LEGAL AND COMPLIANCE, KNIGHTSBRIDGE GROUP This is particularly true in the UAE, where the combination of a tech-savvy population and a forward-thinking financial sector makes it an essential component of continued success. Adapting to digital demands For the digitally-savvy younger gener- ations, the expectation is clear: Finan- cial services must offer the same level of immediacy and ease-of-use that they find in other digital platforms. This growing expectation means that financial services in the UAE are not only becoming more accessible via smartphones and online platforms BBANKING 16–29 FEBRUARY 2024 CEO MIDDLE EAST 15 their services to align with the modern lifestyle and expectations of these digitally savvy consumers. Catering to their preferences in banking is essential for retaining their business. Changing consumer preferences The banking preferences of younger generations, notably distinct from their older counterparts, showcase a clear trend towards digitalisation. This demographic, more inclined towards technology, exhibits a strong prefer- ence for digital banking solutions. Their approach is characterised by a desire for online and mobile banking platforms that offer convenience, speed, and accessibility – features that traditional banking often struggles to match. User-friendly interfaces, person- alised dashboards, and features like instant money transfers and bill pay- ments appeal to this generation’s need for efficiency and control. Contrary to older generations who may prioritise in-person interactions and the physical presence of banks, younger consumers favour the efficiency of digital services. The ease of conducting financial transactions from their smartphones or computers is a significant draw, reflecting their lifestyle that values im- mediacy and digital connectivity. Moreover, younger consumers are more open to exploring and adopting services from non-traditional finan- cial institutions, a key factor fuelling the UAE’s growing fintech scene, and behind the success of peer-to- Peer (P2P) lending platforms which democratise the lending process and provide more flexibility. This openness signifies a departure from the brand loyalty often seen in older generations, indicating a readiness to switch to alternatives that better align with their needs and expectations. Millennials and credit: A shift in attitudes The relationship between Millennials and credit is complex, especially when als in the UAE struggle to meet their financial needs with their income alone, leading many to turn to credit cards. The scenario in the UAE indicates a nuanced approach to credit among younger generations. While there is a segment that is financially cautious and debt-averse, a considerable number still rely on credit cards and loans to man- age their finances. These generations are still applying for credit cards as soon as they are eligible but are much more discerning than their parents in finding the best options available. This means that banks must rethink their strategy for attracting Millennial customers, focusing on offering value- added products tailored to their needs and preferences. That could be credit cards with zero percent on school fees, complimentary access to airport loung- es, or eco-friendly incentives such as rewards for contributing to environ- mental causes. The key to drawing in Millennials is to provide them with benefits and perks that resonate with their values and lifestyle choices. Meeting Gen Z’s needs: Engagement is the key While embracing digital technology is a step in the right direction, it alone won’t ensure growth in the banking sector. Keeping younger customers engaged demands an ongoing commitment to in- novate, personalise, and regularly update the digital banking experience.” The entry of Gen Z into the finan- cial market presents both significant opportunities and challenges for banks. This tech-savvy and financially con- scious generation is not only reshaping the landscape of consumer banking with their digital-first approach but also posing a challenge to traditional banking models. The banking industry must respond with agility, focusing on customer-centric and technologically sophisticated solutions if it’s to stay relevant and competitive in an increas- ingly digital financial world. compared across different regions like the UAE and the US. While credit card firms are keen to engage this demographic, they face the challenge of adapting to Millennials’ general aversion to debt. In the US, a significant trend has emerged showing Millennials’ cautious approach to credit. A 2020 TD Bank survey highlighted that 23 percent of Millennials in the US don’t own a credit card. This suggests a deliberate avoidance of debt, reinforced by a desire to manage finances responsibly. However, the situation in the UAE presents another narrative. Despite a global trend of debt avoidance among Millennials, economic realities in the UAE have led to a different response. A 2020 study by Standard Chartered found that eight out of 10 of Millenni- “BY 2030, GEN-Z’S GLOBAL SPENDING POWER IS EXPECTED TO SKYROCKET TO $33 TRILLION, MAKING UP 30 PERCENT OF THE WORLD’S INCOME- EARNING ADULTS” Medina says the entry of Gen Z into the financial market presents both significant opportunities and challenges for banks 16 CEO MIDDLE EAST 16–29 FEBRUARY 2024 COVER STORY AHMED FARID16–29 FEBRUARY 2024 CEO MIDDLE EAST 17 hmed Farid, the Chairman and CEO of Lakemore Part- ners, is far from your typical finance expert. Backed by 35 years of experience in investment management and treasury across the globe, Farid is at the forefront of a transformative movement that aims to reshape the future of regional markets. In a candid conversation with CEO Middle East, Farid delves into his journey, the origins of Lakemore Partners, its role in introducing Col- lateralised Loan Obligation (CLO) equities, and plans for further growth and innovation. Unveiling a vision Established in 2016, Lakemore Partners experienced rapid growth, spearheaded by Farid’s vision. With a team of 33 professionals spanning key financial hubs such as London, the US, Dubai, and Zurich, the company has made significant strides in the world of private credit. Pioneering CLO equities The idea to introduce CLO equities to regional markets arose from the need for stability in a volatile financial land- scape. While the CLO market remains predominantly US-centric, Farid and his team recognised the potential to bring this asset class to the region. “The CLO market is still predomi- nantly a US market. It has not really developed in the region yet and that’s when our idea started,” he says. With experience in investment management and treasury, coupled with a desire to reduce exposure to market volatility, Lakemore Partners conducted rigorous experimentation and found CLO equities to be the ideal solution. They tested, invested, and built a track record over time, show- casing the benefits and potential of this relatively complex asset class. Introducing a new and complex asset class to the region presented a challenge: Educating the investor base. Farid recognised the importance of In 2017, Lakemore Partners raised its first fund and is now working towards launching the sixth fund, reflecting their success and increasing investor confidence. Farid highlights the closure of fund five at $560m. “I would actually argue that we have been able to deliver equity returns for debt risk,” he says. “THE CLO MARKET IS STILL PREDOMINANTLY A US MARKET. IT HAS NOT REALLY DEVELOPED IN THE REGION YET AND THAT’S WHEN OUR IDEA STARTED” FUNDING GROWTH A Lakemore Partners Chairman and CEO Ahmed Farid talks pioneering CLO equities and shaping the future of regional markets WORDS BY NICOLE ABIGAEL COVER STORYCOVER STORY AHMED FARID 18 CEO MIDDLE EAST 16–29 FEBRUARY 2024 educating investors about the benefits and intricacies of CLO equities. The firm invested time and effort into this educational process, leverag- ing their first-mover advantage and practical track record to build con- fidence in the market. By clarifying CLO equities and highlighting their potential for high risk-adjusted returns, Lakemore Partners played a crucial role in driving demand and solidifying their position as a leader in the market. “I think the demand was driven mainly by people’s appetite into invest- ing in an asset class that de-risks their exposure to the conventional equity markets. As you know equity markets are quite volatile, if you move away from the equity market, then you get into the most stable part of the debt market which is the high investment grade and that does not offer an attrac- tive return,” Farid explains. “So, the best risk adjusted returns are presented in the CLO equity mar- ket and I think that’s really what drove the demand for it,” he adds. Meeting demand in economic downturns In times of economic downturns, in- vestors often seek stable alternatives to the inherently volatile equity markets. CLO equities have emerged as an at- tractive option, providing risk-adjusted returns that are not easily found in other asset classes. Lakemore Partners’ focus on counter-cyclical investments has positioned the organisaion as an partner of institutional investors during challenging economic periods. “We will not operate in markets that we do not understand. We have built our expertise and track record on the US credit markets. We will con- tinue to do that. The credit market is a huge market, it is much bigger than the equity market and therefore, we may find some other opportunities within that credit market that we can expand to in the future,” Farid explains. Journey of growth and global footprint The CEO’s journey with Lakemore Partners’ began with friends and family investments, gradually expanding to high-net-worth individuals. However, a significant shift occurred when 90 percent of their investor base transi- tioned to institutional investors. This transition has allowed the com- pany to become a well-known feeder of the CLO asset class into the professional market, expanding its reach and influ- ence. Looking ahead, Farid envisions further growth within the GCC market, recognising the immense potential in the credit market. With ambitious megapro- jects demanding alternative means of funding, the company aims to work with local strategic partners to replicate its model in the region, filling the gap Lakemore Partners’ focus on counter-cyclical investments has positioned the firm as an ideal partner of institutional investors during challenging economic periodsAHMED FARID COVER STORY 16–29 FEBRUARY 2024 CEO MIDDLE EAST 19 left by traditional banks to provide a new avenue for capital and accelerate growth in Saudi and the GCC. Sharia compliance and regional appeal Incorporating Sharia compliance in its operations proven to be appealing to both regional high-net-worth clients and Western investors. Offering Sharia- compliant structures, Farid believes, leads to an opening for a broader audi- ence, expanding the firm’s client base. Lakemore Partners ensures that all its funds align with these principles, adapting Sharia-compliant structures to the CLO market. This approach has allowed the company to cater to the unique needs of regional investors while maintaining their commitment to ethical investment practices. Distinctive strategy and supermajority control With the adoption of a distinctive CLO strategy, combined with a su- permajority control approach, Farid says that this resonates strongly with institutional investors. Differentiating themselves from passive investors, the company assumes a proactive role in structuring investments, develop- ing strategies, overseeing exits, and diversifying portfolios. This hands- on approach aims to build confidence in investors Lakemore Partners aims to con- tinue expanding its client base by diligently educating investors about the benefits and intricacies of the CLO asset class. Recognising the untapped potential in the market, the company believes that there is significant room for growth and aims to capitalise on this opportunity. Offering a glimpse into the future, Farid details plans to adapt its technology to the GCC market to further develop the CLO asset class and cater to the unique needs of regional investors. By leveraging technology and in- novation, this move intends to enhance the accessibility and efficiency of investing in CLO equities, contribut- ing to the growth and maturity of the regional market. Navigating volatile economic environments Lakemore Partners’ success in navi- gating through volatile economic environments can be attributed to their disciplined approach to risk manage- ment and their focus on counter-cycli- cal investments. By investing in CLO equities, which are backed by diversi- fied portfolio of senior secured loans, the company is able to mitigate risks and generate stable returns even when traditional equity markets experience downturns. This ability to provide stability and consistent performance has been a key driver in attracting institutional investors. Farid remains confident in the GCC investor market and foresees growth and opportunities in the region’s financial markets. He believes Lakemore Partners will continue to revolutionise the future of regional markets through their innovative ap- proach to private credit and the expan- sion of the CLO asset class. Farid continues to embody a pio- neering role with the aim to reshape the future of regional markets through the introduction of CLO equities. With a focus on stability, attractive risk- adjusted returns, and ethical investment practices, Lakemore Partners aims to position itself as a partner of choice for institutional investors. As the firm continue to expand their client base, educate investors, and adapt to the unique needs of the GCC market, Farid asserts that he remains committed to driving growth, innovation, and posi- tive change in the world of finance. Farid believes Lakemore Partners will continue to revolutionise the future of regional markets through their innovative approach to private credit $11.6bn Lakemore Partners have supermajority control exposure of $11.6bn with top-tier collateral managersNext >