Business Interview: ‘Good corporate governance will benefit SMEs in Oman’
In an exclusive interview with Muscat Daily, Yasmine Omari, executive director of the Pearl Initiative, who was in Oman recently to conduct a workshop on promoting corporate governance, spoke about how adopting corporate governance best practices will benefit small and medium enterprises (SMEs) in the country.
She said SMEs can be benefited by following corporate governance principals as it will bring efficiency in operations and could also help them in getting investments in the long run.
Can you tell briefly about the Pearl Initiative?
The Pearl Initiative is a non-profit organisation established in 2010 in New York, US. We initially operated out of there before moving to the Gulf region. This organisation was set up with a mission and an objective to promote values such as corporate governance, transparency and accountability in business practices in the private sector across the Gulf region. The other primary reason for incorporating this organisation was to promote the private sector’s contribution to the overall economy in the region.
What was your main purpose of coming to Oman?
We have visited Oman to conduct a workshop organised in collaboration with International Finance Corporation (IFC) and Zubair SEC. We believe SMEs are the key stakeholders in most economic development planning of a country. The objective of the workshop was to promote resilience of SMEs in Oman through implementation of better corporate governance practices.
Corporate governance is not taken seriously by SMEs in this region. Do you think these enterprises have resources and willingness to adopt best practices for corporate governance?
If you are working in this region, you will see that there are many prominent family businesses, which are controlled and promoted by family means only. Most family businesses in actual sense are an extension of works started by individual founders. The main reason why corporate governance principals are not followed very strictly here is that an individual founder of a business believes that running and promoting that particular organisation is his own responsibility. The founders believe that taking any decision related to their business is their own personal choice.
One thing I would like to add here is that we set up this organisation as we believe there would be a value addition in their businesses if they adopt certain global best practices. Moreover, there are enormous benefits for SMEs if they adopt these standards of corporate governance as they will get better returns on investments and their operations will become more efficient. While I admit that it is difficult to convey this message to them (SMEs), once they realise the importance and value proposition of corporate governance, they will adopt it. I think there is a misconception in the region that corporate governance is just a set of rules and restrictions in the way of operating business. Another big misconception is that by delegating power to anyone, the owner of the business may lose control, authority or power over his business. So, when you can translate and convey those benefits to stakeholders, they will welcome the propositions.
Most small and medium firms have modest operations with limited understanding of complex corporate terms and methods. How are you going to convey these messages to them?
Before joining the Peal Initiative, I was working as a consultant for Deloitte and have a fair idea about the working of family-owned businesses in the region and particularly Oman. To make them aware about the benefits of following the global corporate best practices, is more like a cultural transition. There are two ways from which people look at corporate governance practices, it is either regulated by the government, imposed by authorities or self motivated. So, what we are doing is that neither we are advocating government interference nor we are lobbying for a policy change. We are taking the second way, i.e. to make businesses aware about the value addition to their operations by following the corporate governance principals. Our model is to operate through partner companies, we have around 40 companies (all operating in the region). The idea is to create a community by sharing experiences, ideas and issues. So essentially it is going to be a case of businesses explaining business to others.
How has been your experience working with SMEs in Oman?
Our experience in Oman shows that SMEs across the region are same in almost everything. They are worried about how to manage cash, stay afloat and ensure that revenues streams don’t dry up. The basic operating ecosystem remains same for the whole of GCC and MENA region.
For instance, in every country there are some prominent business houses and they work with small players. Most SMEs exist in the region by providing supplies to these prominent business houses. So these prominent businesses work with their supply chains to improve the standard of governance. Basically what we do is that we explain to them that ‘your chances of obtaining a funding, or investments are higher if you follow some standard practices. Any investor would first look at the management and systems in practice in a company before making an investment in that company. Same is true for talent management also. If we can convey our message in a meaningful manner, I am sure SMEs will understand and adopt corporate governance as it will be beneficial for them.
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