Frankly Speaking, the newsletter for The White Feathers Group, By Karim Lilani, Chairman
I have been contemplating writing this article for several years now, but never got around to it due to many preoccupations. Being a Financial, Legal and Contracts Advisor to successful Groups I have made it a point now to share my rich and extensive knowledge. It’s been more than 35 years now that I have been in the Middle East, seeing it transformed from a frontier region to a developing one, pushing ahead to the next level. Being a student of the Financial “Arts” my whole life, it is now time to start repayments, in terms of advice, in terms of guidance, in terms of profit.
Frankly Speaking is something that resonates with my personality, telling it as it is, even if it isn’t liked by all, though I sincerely hope you will find benefit in this newsletter. Since I first arrived in the Middle East in 1979, we have seen several business cycles through which many companies have risen, and many succumbed. However, those companies that have adopted “good” ( explained later ) policies have lasted and thrived. It is these policies that help companies become stronger for longer through tough times, tough times that may be upon us.
Since the last recession or rather “crash” of 2009, several companies have managed to grow phenomenally, but many that had expanded or leveraged out of expectation or greed failed or are unstable and likely to fall anytime in the current recessionary trend. One staple question I ask before proceeding with any CEO of a company – “What is more important financially, profit or cash flow?” and 90% reply the former, which is very valid, but when compared to the latter we all know that without cash there is no survival.
We all know that good times and bad times don’t last forever and this brings me to the core message of my letter, how to do well in both cycles? Business and risks go hand in hand, but smart business and smart risk, is something which now more than ever should be foremost in the minds of all businessmen. But what is “smart risk?” I define “smart risk” to be the core of any successful business operation, it means how to anticipate realistically and control or reduce the downside variables.
While the slump in oil prices since 2015, has seen most companies tied up in the fallout of the risks taken, the so called “smart risk” adopters have been able to stay out of trouble and will see opportunities in the pains of the other business. Whilst most company CEOs I have met are complaining and explaining to me the record adverse financial mess they are facing in the current scenario, such as banks pulling out, receivables mounting, unpaid creditors growing, cost of business rising, margins declining, etc., there are a few who have told me I need to hire salesmen as I see growth potentials!!
In the following articles, we shall dwell on “smart risk” concepts, such as prudent and sound financial policies from choosing clients to managing risks while examining every aspect of finance as it relates to business. We will try to make you understand how finance affects you, very much like seeing a clothing item, neatly folded in an apparel store versus putting it on a mannequin. Its all about perspective, how you see the world. We shall see you next month with another letter, In Sha Allah