A low oil price, leading to muted government spending, global economic headwinds and new geopolitical instability in the region have created several challenges for corporate treasurers operating in the Middle East over the past year.

For Chris van Dijl, Founder at consultancy firm Cugavadi this has seen treasurers needing to approach their roles with their eyes open.

Incomings and outgoings

A direct consequence of the political and economic headwinds in the Middle East has been the shrinking of liquidity at financial institutions, leading to a stricter lending regime. “For the treasurer in the region this has meant that they have had to become creative in obtaining financing for their ongoing operations,” says van Dijl.

In many cases this has led to an inward focussed ‘living within your means’ approach. “Or in other words fund growth internally with an enhanced focus on cash forecasting and especially cash forecasting automation,” he says.

In addition to these funding issues, treasury departments have also been faced with a completely new challenge: VAT. “In a region where tax departments are virtually non-existent, in some cases, the treasurer has become tasked with preparing the organisation for the implementation of VAT in January 2018,” notes van Dijl.

Even if the treasurer is not responsible for tax, the implementation could lead to a burden on working capital requirements as VAT is transferrable to the Federal Tax Authority based on invoice date, rather than collection date.

“In a region that is notorious for stretching payment terms, this requires significant planning and cash flow forecasting analysis to ensure that funds remain available for business operations,” says van Dijl. “Again, sophisticated cash forecasting solutions have been looked at by several organisations.”

<span “>Managing the political storm

One of the biggest political events this year was the sudden blockage of Qatar by several countries in the region. For treasurers this highlighted that instant and real-time access to cash balances and positions is vital in today’s ever-changing environment, notes van Dijl.

“Treasurers were involved in the initial risk assessment as well as immediate action by moving funds back to the centre: moving funds back into Qatar for Qatari companies and out of Qatar for non-Qatari companies,” he says. “As supply routes had to be sourced into Qatar, treasurers were also involved in establishing trade finance arrangements for these new trade relationships.”

Because of these challenges, real-time visibility and access to positions and exposures have once again become very important and some organisations have taken the initiative to consider treasury management systems with daily MT940 reporting capabilities, centralisation of treasury operations and/or implementation of in-house banking solutions.

Eyes on the road ahead

What treasurers in the region have shown in the past year is that flexibility and keeping an open mind is a very important professional trait, says van Dijl. “Especially during times of change and uncertainty, the treasurer needs to be even closer to commercial operations in order to support operations and ensure that it’s business as usual.”