arab sprin - deloitte · news reports on the ‘arab spring’ were focused ... will proceed with a...

6 | Fall 2012 | A Middle East Point of View

News reports on the ‘Arab Spring’ were focusedon the political and social revolutions shakingthe foundations of some of the largest Arabcountries. Transformational changes across theregion were covered from a human standpoint –as regimes toppled, crowds chanted and chaostook over the streets. However, most newscameras failed to pan left or right and shed somelight on the businesses that were affected as aresult of these uprisings.

Arab Sprinimpact of the uprisi

A Middle East Point of View | Fall 2012 | 7

Arab Spring

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Hundreds, if not thousands of businesses throughoutthe Middle East were impacted, directly and indirectly,as a result of the transformative changes taking place.Companies found themselves, for the first time, withouta contingency plan.

As a result, immediate, short- and long-term changes arebeing anticipated. The World Economic Forum GlobalCompetitiveness Report for 2011-2012 highlighted thatdue to the turbulence that has impacted the Middle Eastand North Africa region over the past few years there will be a great impact on national competitiveness. Theforecast is that these repercussions will worsen thecompetitiveness gap between the Gulf CooperationCouncil economies and the rest of the region.

Deloitte experts from across the Middle East were askedto share their first-hand experience in dealing with theunforeseen. This is what they had to say.

Omar Fahoum, chairman and chief executive of Deloitte Middle East Q. As the chairman and chief executive of Deloitte

Middle East, overseeing over 15 countries must be agreat challenge in itself, even in peaceful times.However, many companies have had to formulatecontingency plans on the spot to ensure businesscontinuity. What is your take on this?

A. I don’t view that we at Deloitte have had to make“contingency” plans as such as that implies a dilutionof presence or even exit from the market, whichcertainly does not apply to us. We have been presentin the region for over 85 years and are an integralpart of the countries and economies we reside in.Nevertheless, the events in various countries in theregion over the last 18 months have beentransformative in many ways. In some cases, theywere somewhat disruptive though I would say that in retrospect, not for very long periods. The primaryconsideration for us during that period was (andremains) the safety of our people. Fortunately, wehave not had any incident. We ensure their safetyand have designated responsible leaders for eachgroup within a practice or country.

The other main consideration for Deloitte isminimizing any disruption to our client service.Naturally, this is not always within our control asclients have differing plans and arrangements thatimpact our service delivery capabilities. Again, andoverwhelmingly, we have not had serious delays ordisruptions. In many cases, our people worked fromhome and thanks to communications andtechnology, we were able to deliver on ourcommitments. I don’t mean to make this sound easyas it certainly is not and the credit really goes to ourpeople who have demonstrated tremendouscommitment and loyalty and a sense of purposethrough trying times.

“We have not had serious delays ordisruptions. In many cases, our peopleworked from home and thanks tocommunications and technology, we were able to deliver on ourcommitments. I don’t mean to makethis sound easy as it certainly is notand the credit really goes to our peoplewho have demonstrated tremendouscommitment and loyalty and a senseof purpose through trying times”

Omar Fahoum


Q. What about companies that do not have a regionalscope or who have not been here for as long asDeloitte Middle East has? On a market by marketbasis, what measures have you taken as a result ofthe changes impacting the region and the countriesin which you operate? Based on your assessment,what can you share with readers on how the firmreacted during these times?

A. I would say the biggest business challenge we face isnot dealing with change but rather, dealing with“uncertainty.” No matter what analyses are in place,markets and people act differently from one place toanother. In our case, it was assuming an“anticipatory” posture to try and see what impact theevents were likely to have on our business. Thesemeasures included continuous contact with clientsand regulators and recalibrating our plansaccordingly. In some cases, it was the extent, timingand pace of regulatory and legal changes affectingthe business environment that proved to be beyondanyone’s ability to predict or anticipate. Markets donot necessarily react or behave as we expect and Irecall that in one market, at the height of streetdisturbances, tensions and demonstrations, we hadour best month not only in revenues but surprisingly,in cash collections.

In short, our approach has been to engage ourclients at all times, anticipate the impact of events ontheir business and ours and put measures in place toaddress new challenges that were inevitably comingour way.

Rob O’Hanlon, ME Audit leader, Deloitte Middle EastQ. You have represented Deloitte in South Sudan, Libya

and Yemen, which are some of the countries mostimpacted by turmoil and instability in the past coupleof years. What has your experience taught you aboutdealing with crisis situations? What measures did youhave to take to ensure people safety and businesscontinuity, before, during and after the uprisings?

A. In 1987 I went to join the Deloitte office in Namibia,a country that was drawing an end to a prolonged

civil war. For a 22-year old professional, thatenvironment, in the company of many experiencedDeloitte colleagues, provided a wonderful learningopportunity for how to operate in challengingcircumstances. Those basic lessons learned thenremain at the heart of my philosophy today and canbe summarized as follows:1. Communities in all environments, no matter howchallenging, are looking to be treated with respect– provided we remember that rule and abide by itwe will be accepted by them.

2. We at Deloitte have skills that are often notavailable in troubled economies. We should neverunderestimate the value we are able to add. Thevalue is magnified when clients can see us activelyoperating on the ground and sharing thehardships with them and not advising from afar.

3. Our young people are incredibly resourceful. If wegive them guidance and freedom to innovate, acrisis situation can quickly turn into anopportunity.

In Yemen we experienced incredibly turbulent timesduring 2011. With the majority of our team beingYemeni, we were able to place significant reliance on their guidance as to when to slow our businessdown and when to speed it up, when our expatriatestaff should be present and when they shouldn’t and when we should be moving around Sana’a andwhen we shouldn’t. This knowledge, combined withstrong and clear leadership from our local partner,Dr. Hajar, and our Director of Audit, Imran Farooq,meant everyone was clear on what was expected ofthem and who they should turn to for support whentimes were particularly troubling.

“I would say the biggest businesschallenge we face is not dealing withchange but rather, dealing with“uncertainty”

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Omar Fahoum


In South Sudan we face very different challenges inthe world’s newest country. There, Alfred Strolla andBrad Holliday are building a practice at a rate that isoutpacing the development of the country itself.While the positive mood of this new country isextremely supportive, the team deals with unusualissues every day from malaria scares to electricityshortages. Having the right infrastructure in placealong with Alfred’s long-standing relationships withleaders in the country has proved indispensable toenabling our people to focus on their clients and inthis regard this firm is seen as a role model to manyfledgling businesses. It is no wonder that despite theextremely limited infrastructure of the country (e.g.the tar roads remain rare!) the engagement index ofour staff in the Juba office was amongst the highestin the recent Middle East Firm People Survey – thesepeople thrive on a unique challenge.

In Libya we face a whole new set of challenges as we explore a market where Deloitte has never had apresence. However, already we are finding that ourbrand is known and respected. If we remain faithfulto the values that the brand represents it is clear thatthe people of Libya will embrace us and provide thesupport we need as we aim to recruit, train anddevelop young Libyans in the years ahead. We will proceed with a mix of caution and genuineexcitement as we learn how to present ourselves inthis new market that offers us so much opportunityto make a real difference in the rebirth of a proudnation.

In all of these areas, the safety of our people isparamount and it is critical that we follow the bestavailable guidance in this respect. Having a ME FirmSecurity Officer and resources he can draw on isextremely important to me personally. However, ontop of those structures, we have to overlay a gooddose of common sense and be ready to step backrather than take unnecessary risks. Our people arethe heart of our business, if we look after them andplace reliance on their integrity and ingenuity we andthe challenged communities we serve can all achieveour goals regardless of the constant changes that lifepresents us with.

Roger Nasr, Deloitte Bahrain office managingpartnerQ. Although the full results of the Arab Spring will take

years to manifest, immediate repercussions havealready been felt. In your viewpoint, how wasBahrain’s financial capital status impacted in theMiddle East as a result of the Arab Spring?

A. Unsurprisingly, the Arab Spring in general, and theunrest that erupted in March and April 2011 inBahrain in particular, have threatened Bahrain’sambitions to maintain its position as the leadingregional financial center since the 1970s. The currentturmoil has given an edge to other new competinghubs in the Gulf in their bid to lure internationalfinancial institutions to their shores. Furthermore,Bahrain's financial sector, which accounts for about aquarter of the country’s Gross Domestic Product, hasbeen only slowly picking up from the global financialcrisis and a regional property crash as well as thecrisis faced by two regional conglomerates whichaffected, directly and indirectly, a large number ofbanks in Bahrain and the Middle East.

The impact of the crisis was mainly manifested by:• The three international rating agenciesdowngrading the short- and long-term rating ofBahraini banks in 2011 and reaffirming this ratingin 2012.

• The relocation of some international banks thatused to have their regional headquarters inBahrain – although in some cases this decision hadbeen made prior to the unrest and for operationalreasons only.

“We will proceed with a mix ofcaution and genuine excitement as welearn how to present ourselves in thisnew market that offers us so muchopportunity to make a real differencein the rebirth of a proud nation”

Rob O’Hanlon


• The banking activity has been negatively impactedby the drop in growth in GDP to 2.2% in 2011. Theeconomy suffered an estimated loss of USD1.5-2bnas a result of the unrest. Businesses mainly in thetrade and hospitality sector suffered from the effectof a decreasing number of tourists and thecancellation of certain major events such as theFormula 1 race in 2011.

• A severe stagnation and drop in the real estatemarket which impacted the rental and propertymarket and put on hold many private projectsunder construction. The banking sector, andspecifically Islamic banks, being highly exposed tothis sector, were hit hard, which affected theirresults due to the need for more provisions againstthe troubled debts and the investment portfolio.

However, the Bahrain Financial sector showed strongresilience to the crisis and started picking up from thesecond half of 2012, among the main reasons are theimprovement of some economic indicators with GDPgrowing by 2.4% in the first half of 2012 as well asthe accelerated and expanding government spendingand projects in different sectors but specifically inaffordable or subsidized housing and infrastructure(roads, bridges….). This is mainly fueled by theincreasing oil and gas production capacity and prices,a sector which still represents more than 70% ofgovernment revenues. On top of that, the firsttangible step regarding Bahrain receiving thepromised USD10bn GCC grant over 10 years tofinance housing and infrastructure projects was thesignature of an agreement on 3 September 2012stipulating that Kuwait provide its share of USD2.5bn;these funds will play an increasingly important role indriving economic growth. In particular, GCC moneywill help fund projects without straining publicfinances. In addition, GCC private investments willhopefully follow and will provide further materialsupport to the economy. Worth noting are some ofthe inherent strengths of the Bahraini financial sector,which is reflected in Bahrain attracting again newinternational and regional financial institutions on thegrounds of the main comparative advantagesincluding a well-regulated, tax–free environment, thesize and geographical location as a gate to the bigSaudi market, the cheaper operating environment

and the availability of skilled local talent and thecontinuous efforts of the Central Bank of Bahrain –which managed to reposition Bahrain as an Islamicfinance and insurance hub and home to the mainIslamic Finance Institutions – as well as being a keymarket for the funds industry.

The above factors, along with the efforts to ease andsolve the political conflict, will help Bahrain’sdiversified economy and well-established financialsector to pick up quickly and resume its uptrend.

Kamel Saleh, Deloitte Egypt office managingpartnerQ. As the Deloitte Egypt managing partner – the

country with the largest population in the MiddleEast – business was surely greatly impacted. Theuprisings were not just about transformationalregime changes that the people were calling for, butfor greater economic and social issues. What impactwill these transformational changes have on theEgyptian economy in your opinion? What can thepublic and private sector do to move forward?

A. The fundamentals of the Egyptian economy are stillsound and intact, despite the economic impact ofthe revolution and the turmoil that was experiencedover the past twenty months.

We predict that the economy is on its way back toachieve reasonable growth rates of up to five percentfairly soon. Egypt, with a population of 85 million,

“The Bahrain Financial sector showedstrong resilience to the crisis and startedpicking up from the second half of2012, among the main reasons are theimprovement of some economicindicators with GDP growing by 2.4%”

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Roger Nasr

has sizable local demand for its own production. Thecountry is still very competitive in terms of its exportsand labor costs and energy costs. In addition, Egyptwill still be able to attract tourists once stabilityreturns.

I believe that the new government will have to workon three main areas.

First they must rebuild investor confidence in termsof the stability of the economic, legal and politicalenvironment.

Second they need to act fast in addressing thebiggest problem in Egypt’s economy, namely,unemployment.

Third, the new government needs to carefullymanage society’s expectations post-revolution. Somepeople are expecting unrealistically quickimprovements in the economic situation and thebiggest danger is promising things that cannot bedelivered.

Moving forward, the Egyptian people would not be infavor of further privatizations in the short-term andthey would not accept any close relations between thebusiness community and politicians. That is somethingthat has been severely criticized in the past.

Tariq Ajmal, partner in charge of TechnologyServices at Deloitte Middle EastQ. In your viewpoint, is the IT infrastructure of

businesses in the Arab region ready to be exposed to risk? Do you believe companies are ready andsecure from an IT perspective? In general, do you see companies across the Middle East as havingsufficient disaster recovery, business continuity andcrisis management planning, to respond to the ArabSpring uprisings? What tips can you share with us for companies to guard their IT infrastructure fromunexpected events?

A. Organizations in the Arab World, and certainly manyacross the globe, are exposed to various IT risks andnone more serious than the cyber security risk. Thiswas evidenced recently by successful cyber attacks inthe region, which left some key organizations withtheir systems down and loss of data. If this canhappen to mature organizations, then we can saythat the majority of organizations are certainly notready nor secured.

Unfortunately, most organizations treat security as atechnical discipline. They ignore the overall securitymanagement, which is a set of continuous andintegrated security processes to monitor, assess andimprove the security posture of an organization. Forthe most part Senior Management also does notunderstand the security challenges and thereforeprovides limited support to information securityfunctions.

One important thing that has come out as result ofrecent attacks is that finally cyber security has grabbedthe attention of senior management. We are seeingheightened interest from the Boards, CEOs and RiskManagement functions in understanding theirorganizational capabilities and whether they caneither prevent, or at least respond, to such attacks.So hopefully, now and going forward, security will betreated as a business issue rather than just an IT issue.

“The fundamentals of the Egyptianeconomy are still sound and intact,despite the economic impact of therevolution and the turmoil that wasexperienced over the past twentymonths.”


Kamel Saleh


As for business continuity and disaster recovery (DR),we have seen increased focus and investment in thelast couple of years as evidenced from many bigorganizations taking a more formal approach toimplementing end-to-end business continuity anddisaster recovery programs and many hiring dedicatedBusiness Communication Managers. Though, stillmost organizations have a long way to go to reach astage beyond having just a documented plan mainlyfocusing on IT to looking at business continuity as a holistic approach incorporating people, facilities,equipment and suppliers’ recovery as well as crisismanagement plans that are regularly tested.

In the face of cyber attacks, business continuity anddisaster recovery has already taken an immediateinterest with many organizations revisiting both theircrisis management plans and IT DR capabilities. This is a good starting point to ensure that even iforganizations are not able to prevent cyber attacks,they are at least able to respond to such events andrecover their systems quickly, thus minimizing theimpact on business. Most mature organizations dohave reasonable IT DR capability in the form ofbackups and hot/cold sites focusing on key businessapplications and file servers. However, in mostinstances end user data is not included in IT DRplanning and backup is left to end users. This canexpose organizations significantly as a lot of keyinformation resides in PCs. Hence as a quick steporganizations should look at this aspect and plan with users to either store all critical information onnetwork drives, or implement automated PC backupsolutions to enable speedy recovery if any of the PCsare hit by data loss.

Information Security is not one size fits all hence it is important that organizations perform a riskassessment. Only when they have fully understoodtheir assets, the risks that threaten them and howthese fit into the overall threat landscape can theydetermine the level of menace they need to defendagainst and where they draw the line to focus onlimiting the impact of a successful attack. Once riskassessment has been done then, using the results,

organizations should plan for governance structuresto both, enhance and maintain, its preventative anddetective security capabilities. This would include:• Continuous investment in controls that protecttheir digital assets.

• Leveraging the threat intelligence that is availableto understand the internal and external threats tothe organization.

• Developing the ability to rapidly respond to anincident in order to limit any adverse impact on theorganization.

by Omar Fahoum, chairman and chief executive of Deloitte Middle East, Rob O’Hanlon, ME Auditleader, Deloitte Middle East, Roger Nasr, DeloitteBahrain office managing partner, Kamel Saleh, DeloitteEgypt office managing partner, and Tariq Ajmal,partner in charge of Technology Services at DeloitteMiddle East

“We are seeing heightened interest from the Boards, CEOs and RiskManagement functions in understandingtheir organizational capabilities andwhether they can either prevent, or atleast respond, to such attacks. Sohopefully, now and going forward,security will be treated as a businessissue rather than just an IT issue.”

Arab Spring

Tariq Ajmal

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