Year Deloitte entered the Kuwaiti market1949
Corporate governanceNovember 19, 2015
Rami Wadie, corporate governance and enterprise risk services partner at Deloitte, talks to TOGY about the dangers of declining standards in new markets, cyber threats to oil refineries and how localisation can add value to an international company. The multinational auditing and tax consulting firm is working with the GCC as a growth market due to the region’s $172 billion in total contracts for 2015.
What strategies can international energy firms adopt to maintain their corporate standards while adapting to local business practices?
In general, increased transparency on bids would provide a clearer picture for new international entries to Kuwait’s energy industry, especially when it comes to tenders on large projects. This level of clarity has not been a problem for Kuwait Petroleum Corporation subsidiaries and large international companies.
However, this can be a challenge for small and medium-sized enterprises as they look to promote leading practices such as codes of conduct and proper training in a highly competitive market, where an ethical shortcut might seem like an attractive option to ensure they land a big contract.
Thankfully, the high global standards of international companies are bringing new discipline to the market, forcing other firms to improve their own internal practices and ways of doing business. Corporate codes are increasing in Kuwait to be on par with the rest of the region, notably Saudi Arabia and the UAE, so the country has recognised the need for this in the local market.
Along with the Kuwaiti Capital Markets Authority, which has brought discipline to the market, giving more confidence to international and regional investors to come and place their trust in the local economy. Kuwait is making the right reforms at the right time.
What factors have contributed to tighter information security in the GCC’s oil industry?
In 2014, oil companies in the region such as Kuwait National Petroleum Company, Kuwait Oil Company and Saudi Aramco were under large-scale information security cyber attacks. All of the major regional oil and gas companies have been fending off these hackers, so improving their infrastructure and focusing on information security and data protection have become important priorities.
In Kuwait companies are now more aware of online security and investing in it. An area that is gaining attention is the classification of data that is internal to the company and data that is public and the systems to maintain this privacy. This will be an area of focus for the coming two to three years because of what businesses, oil- and gas-related or not, are facing globally regarding information security.
What are the biggest trends in Kuwait’s oil industry going forward from 2020?
The requirement of increased participation of Kuwaitis in the business sector will be a major trend in the years ahead, which can be a very good thing if it is done right. This will require monetary investment in not just people and training, but also investment of time in ensuring the correct career path for the skills available.
A part of this trend is for locals to go from the public to the private sector, so they also need to be brought up to par regarding expectations and compensation. The oil and gas industry in Kuwait still commands the most power in regard to knowledge, experience and growth for local workers. If Kuwaitis move to the private sector, it should be done in co-ordination with the oil and gas industry to make sure that there is a flow of resources between the two sectors.
Corporate governance and risk are integrated with this localisation movement. Personnel need to know what is expected of them and how they will be rewarded. Corporate governance and risk management should be given more importance going forward because international companies are held accountable for the actions of their local employees.
Creating a business environment that is conducive to reporting conflicts of interest, among other concerns, allows people to speak up if they believe something is wrong. Implementation of these whistle-blowing systems and procedures should become a priority for companies operating in the Kuwaiti market.
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