The global financial crisis & the challenges of 2014…

As we have moved into 2014, it is interesting to reflect upon where the experience of the GFC (global financial crisis) and its aftermath has changed our outlook and behaviours. The GFC has in effect impacted all of us over the past six years and I suspect that the fallout and its effects will continue as well for some years to come.  In my opinion, the environment for business and banking has consequently changed pretty substantially. It has become very much more demanding, margins are under pressure, the velocity of business and the pace (aided by modern technology) is accelerating as we speak.

New competition at home and abroad is a constant factor. This does suggest to me that the assumptions we made about business models and management and leadership styles are probably, if not no longer fit for purpose, certainly worthy of review!

Successful companies of the future will have developed clear strategic plans, which are able to flex in the changing environment and are shared across the business by all members of the staff and management.  These plans will also reflect engagement with stakeholders at all levels.

There will be an expectation of greater engagement with communities (ie. Corporate Social Responsibility etc), there will also be an increasing need to align executive pay and remuneration with long term results of the business especially reflecting key performance indicators (KPIs) regarding community, staff and customers. Profit as such will cease to be the main determinant of remuneration.

The banks face particular challenges given that the regulators have finally woken up to the fact that they were asleep at the wicket in the boom years leading up to  2007, are now imposing stricter and stricter regimes on the banking system.

In the Gulf (GCC region) this is an interesting challenge because there has been a significant flight of capital (i.e liquidity) from Egypt, Syria and elsewhere as a result of the so called “Arab spring”. The very real danger is that pressure from the boards in our region and elsewhere will result in yet another round of over aggressive imprudent lending and the creation of yet another “asset bubble”.

Leadership then in the context of developing and implementing robust and sustainable strategies is absolutely vital. This is a difficult enough challenge for companies in many jurisdictions to face but in the GCC we also have the added dimension of third country nationals who tend to take (very naturally!) an extremely short term view of things – “who knows where I will be tomorrow”?!

Arguably there is a need for even more talented leadership in these circumstances where individuals have to accept the fact that their longevity in the role may be short term but commit themselves for the sake of the enterprise and their colleagues to the development of medium to long term plans that will see their companies build robustly for the future.

An added complication is the political environment in the region beyond the “Arab spring” one is faced with all the issues around Israel/Iran etc, again imposing very difficult challenges for leadership in business.

I believe firmly that companies, which will “win” in this rather more challenging environment will be those that properly engage with and empower their workforce across their businesses. The “Command and Control” model continues to prevail in many countries and those organisations, which actually truly engage with their people will certainly outperform.

A very interesting Article appeared in the HBR (Harvard Business Review) this month captioned “How Netflix reinvented HR”.  I am not sure that one needs to go quite as far as Netflix have done! However, there are very many key points made in the HBR article, which are worthy for note for business leaders.

Another dimension, which is happening as we speak is the impact of “Fracking” in the United States and the consequences of that country becoming progressively less dependant on Middle East oil and energy. This will undoubtedly drive political as well as commercial shifts as we go forward, it has been said that the United States will be self sufficient in Energy by 2020.

Clearly, business leaders will need to develop various scenarios about the future so that they’re not taken completely by surprise if the paradigm shifts!

I would take this opportunity of wishing all the readers best of success in 2014. Gulf Times

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