Mortgage and real estate sectors can pioneer new rules
Sound corporate governance must be the foundation of the region's mortgage sector, according to Richard Arlove, CEO and Director of ABAX Group, with offices in Bahrain and the UAE. Speaking ahead of the upcoming GCC Mortgage Summit in the Kingdom (June 2-3 2010), Arlove, suggested that the surge in the region's development fuelled by the heady oil prices of this decade caught the region's public and private sector by surprise, resulting in unprecedented growth stacked on loose foundations.
"The more an organisation grows, the more accountable it becomes. The region's sharp growth across all sectors means that by default it must become more transparent.
"In this part of the world, we have not nurtured a culture of corporate disclosure, or even personal wealth disclosure. Times have changed, and events have changed times. A significant number of organisations have reached the size and complexity that justifies good Corporate Governance," Arlove noted.
He stressed that the upswing in the number of listed companies places another demand on to governance and risk management.
"Good Corporate Governance practices will reflect positively on the region's bourses and listed companies, especially those linked to the real estate market, given that real estate is a catalyst for economic growth.
He said the heavy real estate debt and fraud must be stamped out and that corporate governance and strict compliance is the answer
"We have a golden opportunity for the financing and real estate sectors to lead the way to a well governed economy."
He highlighted that the banking industry, and the non-banking financial institutions (NBFI'S) particularly must up the ante, especially where lending practice are concerned.
"Corporate Governance should not be seen as a cost but an investment in sound corporate practices that can save a corporation millions in reputational risks.
"The risk of fraud, malpractice and general risk mitigation – even across loan defaults, can be minimised by more that 50 per cent through Corporate Governance practices," he observed.
"These days, stake holders, governments and potential investors want the comfort of such practices. Indeed, they will soon be a staple requirement and we must take bold steps to ensure that we are in good shape."
He said that Corporate Governance is a source of competitive advantage and a growth driver and stressed that the cost of no Corporate Governance is huge and may not only affect future economic growth, but also perception.
"Every business small or big should practice Corporate Governance for a healthy and sustained growth, and SMEs would be particularly wise to become early adopters."
He also urged governments to take the lead. "Corporate Governance should be practiced by all corporates, private, public as well as government bodies.
"Compliance is seen as a very important element when attracting and retaining FDI (Foreign Direct Investment)."
Arlove said that compliance makes sense for two reasons. One, it gives internal confidence that no undue risks are being taken. Second, the business can better stand the test of scrutiny by law, stakeholders, potential investors and society at large.
"If the GCC really wants to nurture sustainable international investors, corporate governance and anti money laundering procedures should be adopted," he concluded.
The GCC Mortgage Summit will run for two days (June 2-3 2010) in Bahrain. Arlove will present his take on the role of risk and governance to more than 100 companies from across the GCC and international markets.