In an age of digital disruption, finance leaders are using a combination of technology and new ways of working to drastically improve the accuracy of forecasts and reduce cycle times, leading to a more effective, efficient and less costly finance function.
The finance functions of companies that are unprepared in terms of processes, organisation, technologies and regulatory obligations will face challenges in meeting business and legal requirements in the coming years.
As businesses in the Middle East region undertake their finance transformation journeys, there are a number of internal and external aspects of the business that need to be taken into consideration. These include business finance (management information and insight, business planning and management, performance management, driving decisions), digitisation, regulatory requirements, corporate governance, cost optimisation, people management and process improvements, among others.
Digitisation for recovery
Advancement in digital technology offers CFOs new options in data management, not least as a response to the challenges and restrictions posed by Covid-19, where digitisation is playing a vital role in business recovery.
However, for many organisations, digital finance transformation remains an emerging concept. Reaping the benefits requires a whole-ecosystem approach that encompasses digital infrastructure, platforms, skills and applications across the finance function, while ensuring the protection of data and aiming for a truly inclusive finance function.
Businesses are increasingly eager to embrace accounting software that provides seamless, comprehensive data in a single tool. The best known example of this, cloud accounting, is now used widely among Middle East businesses, including small and medium-sized enterprises (SMEs).
Reaping the digital benefits requires an approach that encompasses infrastructure, platforms, skills and applications across the finance function
Recent regional initiatives, such as Bahrain’s ‘cloud-first’ policy, the emergence of innovative startups and the willingness of fast-growing SMEs to adopt emerging technology, are bringing cloud computing to the fore in the Middle East.
The past year has also seen data centres from major players – including Microsoft, Amazon Web Services, Oracle and IBM – crop up across the Middle East, adding to the existing cloud presence of Alibaba and SAP. A key development came in March 2020, when Google Cloud Platform announced the signing of a strategic collaboration agreement with the Qatar Free Zones Authority (QFZA) to launch its first region in the Middle East.
Regulation issues
With technology changing the environment at such a rapid pace, there is pressure on governments to keep up and pass relevant legislation. Regulatory changes are sweeping across the business landscape, imposing complex demands on businesses to interpret and adhere to them.
Internal control over financial reporting (ICFR) is an example: in Abu Dhabi, government entities are required to implement an ICFR framework, while in Qatar, all companies listed on the Qatar Stock Exchange are obliged to comply, in addition to reviews performed by independent auditors.
Being digitally active and capable is important to regulators for a number of reasons. For example:
- Driving a cashless digital economy – regulators are encouraging financial institutions to adopt digitisation for both transparency and convenience. For example, many banks in the Middle East and North Africa region have brought in new payment options like tap-to-pay, mobile wallets and online payment platforms, while Saudi Arabia and Egypt have introduced their Mada and Meeza debit card schemes, so reducing reliance on cash.
- Easier reporting – as reporting to regulators becomes more complex and costly, standardised digital filing has huge benefits not just for companies but for regulators, as it enhances their ability to validate financial data. The XBRL business reporting standard is now either mandated or in use in regulatory filing programmes in jurisdictions including the UAE, Abu Dhabi, Qatar and Jordan.
Best foot forward
The path to digital finance transformation is an iterative multi-step process supported by long-term strategy and driven by the right data for transparency. It cannot be achieved overnight and requires extensive cooperation among market participants, regulators and technologists. However, organisations that are prepared to commit will reap the benefits.
Digital starting points
The following are some of the enablers required for digital services to flourish:
- Good-quality data – with digitisation, regulators can build a robust data platform that is more granular and provides the necessary flexibility to integrate, store and quickly access all regulatory data and enhance financial insights.
- Innovation and efficiency – regulators and central banks should consider aiming to promote cross-industry and cross-border collaboration, and leverage innovation in order to streamline compliance, operational efficiency and the establishment of standards.
- Future agile workforce – a workforce with the right skills in the right places to keep pace with continuously evolving digital technologies and to increase productivity is pivotal to digital transformation.
