2023 Middle East Impact Report
Business
Our Deloitte Middle East practitioners implemented strategies which contribute to a meaningful future. We continued to draw upon and build capabilities throughout 2023 to work alongside our clients to deliver solutions with impact.
The Deloitte AI Institute Middle East: Shaping the future of artificial intelligence (AI)
Deloitte Middle East continues to work on creating lasting impact by envisioning better futures and creating industry-defining innovations that will allow business leaders to drive change with lasting value.
The Deloitte AI Institute Middle East (AIIME), which launched on 18 May 2023, represents innovation and knowledge in artificial intelligence (AI) in the Middle East. With a solid commitment to research, collaboration, and the advancement of AI technologies, the AIIME is driving change and fostering a dynamic ecosystem.
Educating the market and research initiatives
One of the fundamental objectives of the AIIME is to educate the market by providing a research-based perspective on the current state of AI and its future trajectory. By offering a comprehensive understanding of AI's potential, the AIIME empowers organizations to make informed decisions regarding AI adoption and integration. These initiatives provide a deeper understanding of AI's impact on various industries and the opportunities and challenges that lie ahead.
Collaboration and ecosystem building
The institute's impact extends well beyond research, as it actively collaborates with academia, policymakers, and startups. This collaborative approach serves as a catalyst for the growth of AI in the Middle East. By working with educational institutions, the institute supports the development of a skilled AI workforce, and by engaging with policymakers to help shape AI regulations and policies, the deployment of responsible and ethical AI is enabled. Collaborations with startups also facilitate innovation and entrepreneurship in the AI sector.
The institute also hosts events and conferences across the globe, providing a platform for AI visionaries to share their insights. These events initiate discussions, foster knowledge exchange, and drive innovation in the AI space.
The AIIME leaves a significant mark on the AI landscape through its publications as well. Leading industry thinkers at Deloitte Middle East contribute to publications that shape AI conversation in the region. These publications encompass a wide range of topics, from AI strategy to best practices, serving as a valuable resource for organizations seeking to harness the power of AI.
AlNair: Accelerating generative AI implementation
A standout initiative of the AIIME is AlNair, an accelerator solution designed to fast-track the implementation of generative AI. Leveraging large language models (LLMs), AINair offers a seamless and natural conversational experience, emulating human-like interaction. This cutting-edge technology can be tailored to specific organizational data for specific use cases, such as an advanced knowledge base or a personalized virtual assistant, enhancing the efficiency of business operations.
What sets AlNair apart is its flexibility. It can be securely installed and operationalized in a preferred environment, either on-premises or in the cloud, ensuring flexibility and control over data security. This program not only fosters innovation but also contributes to economic growth in the region.
The AIIME stands as a center of excellence in the field of AI. Through its commitment to research, collaboration, and innovation, the institute is shaping the future of AI in the Middle East and driving meaningful change.
Developing KSA’s railway sector: Saudi Arabia Railways
The transport infrastructure across GCC countries is rapidly evolving. Saudi Arabia’s ambitious National Transport and Logistics Strategy reveals how important a robust transportation network is to achieve the goals of the National Vision 2030. A safe, reliable, and efficient transport system will improve citizens’ quality of life, bolstering domestic and foreign trade growth as well as diversification.
Saudi Arabia Railways (SAR) is a key contributor to the development of Saudi Arabia’s transportation network. As a developer and operator of railways, SAR comes with a series of important responsibilities such as enhancing the system’s capacity and efficiency, delivering major expansion projects, and ensuring its services run safely and on time.
Over the past five years, Deloitte Middle East has been offering a wide range of financial advisory support to SAR, assisting in its efforts to promote railway infrastructure and demonstrating the sustainable advantages that this mode of transportation can offer.
Projects at scale
SAR is responsible for critical infrastructure projects of considerable scale and high interdependence. Even a minor error in the assessment and planning of these projects could lead to significant ramifications for both subsequent and parallel projects.
By leveraging its expertise in the global and regional transport sectors, along with strategic planning and financial assessment capabilities, Deloitte Middle East has provided robust financial advisory support to SAR, which has decreased the cycle time during major capital project planning and funding phases. Given the magnitude and complexity of the projects under consideration, saving even a single month of time can reduce costs significantly and deliver increased capacity and efficiency sooner.
Commercialization
Like many organizations in KSA, SAR’s historical constituent organizations (the Saudi Railway Company and Saudi Railways Organization) were established to develop and operate specific projects; commercial expansion and diversification were not priorities.
With national strategies driving state-owned organizations to transition into commercial entities, SAR has focused on prioritizing the diversification and expansion of its offerings. Deloitte Middle East has collaborated with SAR to pinpoint new and under-served market segments.
Well-considered and balanced agreements are key to the long-term financial sustainability of KSA’s transport sector. Railway services will be significantly more appealing to both passengers and freight users, consequently reducing the volume of cars and trucks on the road.
Private sector involvement
Alongside its emphasis on commercialization, SAR is also interested in engaging the private sector. The technology, expertise, and investment that private participants can contribute have the potential to decrease the level of state funding required, and importantly, increase the pace of sector development. Passengers and freight customers will benefit from more competitive prices and a direct impact on the quality of life.
Deloitte Middle East has played a pivotal role in SAR’s engagement with a wide range of private sector participants looking to invest in the sector. Timely and well-balanced commercial advice has enabled SAR to establish meaningful public-private partnerships, while ensuring that all interests are protected.
channels by stc and Deloitte Middle East: A successful journey of governance, risk, and compliance (GRC) enablement
Supply chain is an essential component of all businesses – one which has been affected by many disruptions and advancements over the past couple of decades. Globally, the telecom industry has also seen a shift in strategy from traditional sales and logistics to more dynamic and agile delivery models. An efficient and robust supply chain has become a critical success factor for global telecom companies.
According to the stc annual report, in 2017, stc made a strategic decision to acquire 100% of channels by stc shares (previously known as SaleCo) to manage the sales and distribution of its products, with a focus on exploring business opportunities beyond traditional telco voice-based services. This move has proven to be immensely successful, becoming a role model for information and communication technology (ICT) innovation within the region.
To meet regulatory requirements and comply with stc group compliance standards, channels by stc established a governance, risk, and compliance (GRC) department. The GRC management had a vision to create a mature GRC function well integrated with business stakeholders, supporting them in business initiatives and serving as a role model for GRC within the stc Group. Some key challenges included:
- Only a basic functional structure was in place to support an effective GRC agenda, while most of the enterprise risk management (ERM) and compliance activities were being managed by the business owners in silos
- Lack of trained resources with the required skill set and high iteration rates resulted in challenges meeting stakeholder requirements and conducting activities required to support the operational aspects of GRC
- Lack of cultural acceptance and limited awareness of GRC across the organization and most of the functions working in silos
- The need to drive the shift from a traditional telecom mindset to the retail and digital business from the GRC perspective
- Adapting to the changing operating model and digital transformation as the organization grew.
channels by stc partnered with Deloitte Middle East in this journey and worked together on many important initiatives to support the successful GRC services agenda. Deloitte Middle East and the channels by stc GRC team engaged with multiple stakeholders in the organization to establish and develop the GRC program. Some of the key successful initiatives in the past five years included:
With these initiatives, channels by stc has established a modern GRC function with well-defined processes, planned activities, and regular reporting to the management, audit, and risk committee, as well as the board of directors (BoD). Some of the value additions of these initiatives include:
- Compliance to the regulatory requirements
- Overall increase in the maturity of the governance, ERM, compliance and business continuity functions
- Better visibility and recognition across the stc group
- Coordination and alignment with internal audit and senior leadership
channels by stc GRC was able to mitigate the challenges faced by a growing organization and supported the stc group in achieving its strategic objectives from a retail and logistics standpoint. It enabled a safe, risk-free, and regulatory compliant environment for business stakeholders to outgrow their business operations. channels by stc GRC has set a clear example of how a startup company should build, sustain, and thrive its GRC initiatives by gradually strengthening a second line of defense in an agile and adaptive environment.
Navigating the transition: Impact of the UAE corporate tax landscape
At Deloitte Middle East, we are committed to supporting our clients and business partners during these challenging times. In order to navigate the evolving landscape, businesses need to be resilient in managing immediate impacts, while also preparing for the future.
2023 marked a significant change for the United Arab Emirates (UAE) with the introduction of its first-ever corporate tax (CT) regime. The timing of the UAE CT Law also coincided with developments related to the global minimum tax (Pillar Two) at the Organisation for Economic Cooperation and Development (OECD) level. This shift in the region's fiscal landscape required the highest levels of adaptability, foresight, and strategic planning from businesses operating across various industries and locations in the UAE.
At the forefront of this transition, Deloitte Middle East has been instrumental in guiding businesses and clients, with comprehensive support interpreting the implications of this tax overhaul.
To address the need for a structured transition, Deloitte Middle East developed a systematic four-phased strategy; this included Impact Assessment, Detailed Assessment Design and Planning, Implementation Support, and Post-Implementation Support. Each phase intended to help businesses achieve 'day one' readiness tailored to their unique needs.
Leveraging an in-depth understanding of the UAE market, immediate impact assessments were delivered to Deloitte Middle East’s diverse clientele. Simultaneously, the new CT regulations were integrated into advisory services, offering bespoke solutions to multinational corporations across diverse sectors.
Committed to keeping the business community informed, Deloitte Middle East created a CT survey, providing essential insights on the current stance of businesses. While most survey participants were from businesses based in the UAE, a significant number came from other regions as well.
In addition, a dedicated CT webpage was established and a FAQ document was compiled to address new CT regime queries. Specifically designed for businesses in the UAE, it answers questions on topics such as the CT rate, CT period, and UAE Free Zones.
The team organized a CT conference in both Dubai and Abu Dhabi and hosted twelve webinars which drew over a thousand attendees for each, primarily from the Middle East.
Deloitte Middle East remains steadfast in the mission to facilitate a seamless transition for businesses, ensuring compliance and optimized operations in light of the new CT regime. To reinforce support, the team of tax specialists is expanding and enhancing its resources with plans for additional industry-centric webinars and live conferences throughout the Emirates.
Road to financial transformation: Driving enterprise value amid disruption
In the last few years, the Kingdom of Saudi Arabia has witnessed exponential growth. The Kingdom’s Vision 2030, which aims to achieve increased economic, social, and cultural diversification, has already made its mark throughout the country. Major investments and emphasis are being placed on the economic and financial sectors; these important changes and reforms are empowering financial institutions across the Kingdom by reimagining their operating models, improving their supporting functions, and solving their financial concerns.
The journey
One particular bank within the Kingdom wanted to improve its existing operating model by optimizing its efficiency. Deloitte Middle East assessed the financial institution’s model, people, processes, and technology by providing support and reshaping the way in which its branches operated.
A few years ago, the bank began operations with a single branch, and over time, expanded significantly with 27 additional branches around the country. While the bank had a head office, its branches held all the decision-making power and functioned as standalone entities. The head office’s sole role was to manage the payroll and issue internal regulations.
A flaw in the institution’s financial operations began to appear, which was due to weak governance and a lack of control over the bank’s overall operations. This resulted from decentralizing power and allowing the branches to manage most of the operations. The financial systems and structure also lacked important integrations and controls to support diversified operations. Operating with a decentralized model, the branches could receive funds, disburse, collect, and manage cash and liquidity without involvement from head office. They were also handling their financial reporting independently using a decentralized chart of accounts, which increased the risk of financial misrepresentations. The decentralization hence brought about the below challenges:
From a decentralized to a centralized model
To improve operations, the bank decided to transition from a decentralized model to a centralized one, thus reinforcing a level of governance. From redesigning the bank’s financial operations and procedures, such as loan disbursement, loan collection, disbursement of trusts, and transaction booking and reporting, to ensuring that the transformation was in line with the desired target operating model, Deloitte Middle East provided the expertise and direction for a smooth financial transition.
Building a strong foundation
To enhance the bank’s processes and transition to a centralized model, Deloitte Middle East conducted a thorough assessment of the existing financial operations. This involved identifying specific challenges and recommending solutions at various levels. These recommendations focused on improving the organization’s operating model, financial data and chart of accounts structure, policies, procedures, and most importantly, the financial system’s limitations and controls. Following Deloitte Middle East’s assessments, the bank was able to clearly identify the areas that needed improvement, aligning with their centralization journey. These areas included, but were not limited to, succession planning, general ledger (GL) reconciliation, GL consolidation, and internal controls over financial reporting.
Building on that assessment, Deloitte Middle East supported the bank by:
A new model of operation
Deloitte Middle East’s guidance and support had a significant impact on the bank’s operations. The move to a centralized system allowed for further governance and control over the bank’s operations and accounts through reassessing roles and responsibilities, user accesses, and authorities across all departments; this enhanced accountability, supervision, and transparency. Centralizing financial procedures allowed for better cash management, providing greater control over cash flow and treasury functions. Enhancing the existing system allowed for easier integration with new internal and external systems, such as the ERP integration with the core banking system and B2B integrations with counterparty banks.
Deloitte Middle East’s long-term impact
Once the assessment and design had been successfully implemented, the team turned its focus to system implementation, which was led by the bank’s IT team. Deloitte Middle East’s commitment to supporting the bank in its financial transformation goes beyond implementation. The ongoing efforts include conducting user acceptance testing before the go-live date and quality checking post the go-live date.
The organization, with Deloitte Middle East’s constant guidance, is now empowered to rectify certain issues that were already existent within their current system and data. Furthermore, the bank’s customer and financial data will now be accurately reflected and considerably enhance its data migration processes during ERP and loan management system implementations.
The bank’s transformational journey has improved its financial and management reporting, allowing it to adhere to reporting requirements set by the National Development Fund. The bank will also now be able to accelerate its credit procedures, optimize costs, reduce operational risks and losses, and therefore further extend its financing facilities.
Jordan Digital Center: Expansion in the digital and technology realm
The launching of the Jordan Digital Center (JDC), the third Deloitte Digital Center in the region, was a strategic move this past year towards Deloitte Middle East Consulting's growth plans. Offering clients a range of technology solutions, such as digital transformation, data and analytics, human capital, enterprise resource planning (ERP), advertising, marketing, and e-commerce, the JDC has expanded Deloitte Middle East’s presence in the digital and technology space within the region.
The JDC has also focused on recruiting and nurturing local and international talent. The launching of this center has renewed Deloitte Middle East’s commitment to the future of Jordan and its youth by providing opportunities for learning, development, and growth in order to help develop the skills and knowledge necessary to succeed in the digital age.
This state-of-the-art digital center has proven to represent an exciting opportunity for growth for the regional business ecosystem. Over the next few years, the JDC is expected to become home to more than 350 professionals who will play an active role in the work Deloitte Middle East is doing for some of the most iconic projects taking place across our key regional markets.
This center has enhanced our offerings of high-quality professional services and will enable Deloitte Middle East to continue to provide world-class business solutions to a wider range of clients across the region.
Audit committee governance: Delving into oversight responsibilities
During this past year, Deloitte Middle East has remained committed to helping audit committee members stay informed by providing the latest in guidance tools and resources from specialists on audit committee-relevant issues. We have proudly worked with several audit committees throughout the region during 2023 and continue to successfully do so.
Having a thorough understanding of what effective corporate governance practices encompass is just as crucial for private businesses as it is for listed companies, particularly as they consider their long-term strategy. And while private companies may not be as accountable to many public shareholders compared to listed companies, the value of effective corporate governance cannot be disregarded.
Audit committees are tasked with a wide array of governance responsibilities and their role is continually evolving. To aid in this progression, Deloitte Middle East has outlined four key areas that audit committees should consider when shaping their charter to support sustainable growth and develop the maturity of corporate governance within privately held companies and groups.
Financial reporting and controls
The fundamental purpose of the audit committee within a company is to exercise oversight over financial reporting procedures, internal controls, and adherence to laws and regulations. Accomplishing this responsibility requires a good understanding of the business, strategy, and associated areas linked to financial reporting and internal controls. This entails working closely with management, external auditors, and internal auditors to gather extensive knowledge about the company's financial reporting processes, key judgements and estimates, and internal controls.
Risk oversight
The rapid expansion of regulations and emerging challenges across the Middle East has led to a sharp increase in the list of risks faced by companies both regionally and globally, most notably recent corporate tax regimes that have been introduced across the region. Amidst these changes, the role of the audit committee has become notably more crucial, prompting audit committees to ensure they are abreast of all regulatory changes in the jurisdiction in which the company or group operates.
Audit and management
One of the primary responsibilities of the audit committee is to ensure adherence to the auditor independence rule, ensuring that any non-audit services provided by the auditor do not compromise their independence. It's important to establish transparent expectations about the manner and frequency of communication, as well as the exchange of insights. Holding regular meetings with the external auditor enables the audit committee to be aware of regulatory changes they should probe, new developments in the business impacting the audit, and maintaining these consistent conversations beyond official audit committee sessions which can foster productive engagement.
Ethics and compliance
For a company to cultivate a culture that embraces ethics and compliance, it is important for employees, officers, and directors to have an in-depth understanding of the code of ethics. That is why it is necessary to incorporate effective communication and comprehensive training to foster such an environment. The committee should schedule periodic executive meetings with those entrusted with ethics and compliance oversight. Working closely with management, they should ensure the company's code of ethics or conduct is in harmony with the relevant regulations. Attention should
be directed towards the potential risk of management overriding controls as
well as the mechanisms in place for mitigating such risks.
Continuous support
Deloitte Middle East continues to work with several audit committees, sharing insights such as the Audit Committee Guide and other briefs to support audit committees across the Middle East in understanding not only their scope of responsibilities but also emerging issues. Additionally, we have organized audit committee governance labs for non-listed companies. These sessions aim to assist audit committees in drawing up their charters and establishing an annual agenda that prioritizes the frequency of discussions on key areas. This initiative supports them in developing and implementing a future-ready governance framework to evolve effectively.
Stakeholders rely on key judgements and estimates used to report the financial impact of transactions as they make investment decisions. The board depend on their insights and recommendations as they consider the company’s risk landscape. Broader stakeholder groups, including regulators, management, employees, customers, and vendors, look to the audit committee to promote a culture of governance and compliance that can
protect the company and enable it to thrive – which will only continue to
become more important to support the significant growth opportunities being witnessed as a result of the ongoing transformation and growth across the Middle East region.
